[Federal Register Volume 63, Number 14 (Thursday, January 22, 1998)] [Notices] [Pages 3368-3370] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 98-1424] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-39545; File No. SR-MSRB-97-10] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Municipal Securities Rulemaking Board Relating to Forms G-36(OS) and G-36(ARD) and Recordkeeping, Operative on January 1, 1998 January 13, 1998. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November 26, 1997, the Municipal Securities Rulemaking Board (``Board'' or ``MSRB'') filed with the Securities and Exchange Commission (``Commission'' or ``SEC'') a proposed rule change (File No. SR-MSRB- 97-10). The proposed rule change is described in Items I, II, and III below, which Items have been prepared by the Board. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Board has filed with the Commission a proposed rule change consisting of revised Forms G-36(OS) and G-36(ARD) under rule G-36 and amendments to section (a)(xv) of rule G-8, on recordkeeping. The proposed rule change becomes operative on January 1, 1998. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Board included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The texts of these statements may be examined at the places specified in Item IV below. The Board has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Rule G-36 requires that a broker, dealer or municipal securities dealer acting as underwriter in a primary offering of municipal securities (with certain limited exceptions) send to the Board copies of the official statement and completed Form G-36(OS). If the securities advance refund an outstanding issue of municipal securities, rule G-36 requires that the underwriter also send to the Board copies of the advance refunding document and completed Form G-36(ARD). Forms G-36(OS) and G-36(ARD) are being revised to provide greater clarity to brokers, dealers and municipal securities dealers in the process of completing the forms as well as to provide additional information that would assist the enforcement agencies in their enforcement activities relating to rules G-36 and G-32. The revisions to Form G-36(OS) add the following new data elements: the date materials are received from the issuer, the date materials are sent to the Board, whether materials submitted consist of more than one document, the actual or expected date of delivery of securities to underwriters, whether the securities advance refund another issue, the SEC registration number, information regarding CUSIP-6 number assignments and the fax number of the preparer. The revisions to Form G-36(ARD) add the following new data elements: the date materials are received from the issuer, the date materials are sent to the Board, whether materials submitted consist of more than one document, the date of delivery of securities to underwriters, the SEC registration number and the fax number of the preparer. In addition, the layout of both forms is reorganized. Rule G-8(a)(xv) currently requires brokers, dealers and municipal securities dealers acting as underwriters in most primary offerings of municipal securities to maintain certain records relating to such primary offerings and the receipt and sending of materials as required under rule G-36. Rule G-8(a)(xv) is being amended to require such brokers, dealers and municipal securities dealers to record and maintain additional information regarding the date of delivery of the issue to the underwriters, as well as to retain a copy of the receipt of sending the required forms and documents to the Board and a copy of the forms and documents sent. The additional records required under the amended rule will assist the enforcement agencies in their enforcement activities relating to rule G-36. 2. Basis The Board believes the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act, which provides that the Board's rules shall: be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest. As discussed above, the Board believes that the proposed rule change will provide greater clarity to brokers, dealers and municipal securities dealers [[Page 3369]] in completing Forms G-36(OS) and G-36(ARD) and will provide additional information to the enforcement agencies that would assist them in their enforcement activities relating to rules G-36 and G-32. B. Self-Regulatory Organization's Statement on Burden on Competition The Board does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act since it would apply equally to all brokers, dealers and municipal securities dealers. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others In May 1997, the Board published a notice (``Notice'') that, among other things, urged brokers, dealers and municipal securities dealers to review their compliance procedures in connection with rules G-36 and G-32.\1\ To assist the agencies charged with enforcing rules G-36 and G-32, the Board proposed in the Notice certain revisions to Forms G- 36(OS) and G-36(ARD). These revisions would require underwriters to include information regarding the dates underwriters receive official statements and advance refunding documents from issuers, the date of delivery of the issue to the underwriters, whether a new issue is an advance refunding and the date the documents are sent to the Board. In addition, the Board proposed an amendment to rule G-8(a)(xv) to require underwriters to record the date of delivery of the issue to the underwriters and to retain a copy of the receipt of sending the required forms and documents to the Board, as well as a copy of the forms and documents sent. --------------------------------------------------------------------------- \1\ ``Board Review of Underwriting Process,'' MSRB Reports, Vol. 17, No. 2 (June 1997) at 3-16. --------------------------------------------------------------------------- In response to its request for comments, the Board received comment letters addressing the proposed revisions to Forms G-36(OS) and G- 36(ARD) and the proposed amendments to rule G-8(a)(xv) from eight commentators. Several commentators state that they supported \2\ or did not oppose \3\ the proposed changes to Forms G-36(OS) and G-36(ARD) and the related change to rule G-8. One commentator \4\ supported the collection and retention of the additional information as a deterrent to issuers for the untimely provision of official statements to underwriters and as a source of information about the frequency and severity of any problem in the municipal market with the delivery of official statements and advance refunding documents. Another commentator \5\ stated that the proposal would evidence any late delivery by the issuer of official statements to underwriters. --------------------------------------------------------------------------- \2\ Goldman, Sachs & Co., Government Finance Officers Association (``GFOA''), Newman & Associates, Inc. and Rauscher Pierce Refsnes, Inc. (``Rauscher Pierce''). \3\ Lehman Brothers Inc. \4\ GFOA. \5\ Rauscher Pierce. --------------------------------------------------------------------------- NASD Regulation, Inc. suggested additional changes to the forms. It suggested that the forms include a clarifying statement which indicates whether the ``date of delivery'' is synonymous with ``settlement or closing date''; that a glossary or definition of terms be included as part of the forms, or alternatively, that the forms contain a reference to the appropriate rule or interpretation which provides appropriate definitions; that, in addition to the managing underwriter, the forms identify each syndicate member and percent participation, when applicable, to be used in compliance activities under rule G-37; and that when firms are identified by name on the forms they also be identified by their broker-dealer number or SEC-8 number. The Board has incorporated most of these suggestions in the revised forms. Information regarding syndicate members and participants was not included since this information would in several respects not be compatible with the type of information mandated by rule G-37 and would require that the forms be enlarged to three pages to add data elements that are entirely unrelated to rule G-36. Although another commentator \6\ did not specifically oppose the changes in the forms, it expressed some concern regarding the revisions by stating that the ``undisguised purpose'' of the proposed revisions to Forms G-36(OS) and G-36(ARD) was to require brokers, dealers and municipal securities dealers to advise the Board whenever a filing is late under rule G-36. The Board acknowledges that one of the stated purposes of the revisions to Forms G-36(OS) and G-36(ARD) is to assist the enforcement agencies in their enforcement activities. --------------------------------------------------------------------------- \6\ Smith Barney Inc. --------------------------------------------------------------------------- One commentator \7\ opposed the proposed amendments to rule G- 8(a)(xv), stating that it would increase the burden on brokers, dealers and municipal securities dealers without solving the underlying problem. The Board believes that the proposed amendments to rule G- 8(a)(xv) will at most constitute a negligible compliance burden while providing significant assistance to the enforcement agencies in their enforcement activities relating to rule G-36. --------------------------------------------------------------------------- \7\ Wachovia Bank, N.A. --------------------------------------------------------------------------- III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change: (i) does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; (iii) was provided to the Commission for its review at least five business days prior to the filing date; and (iv) does not become operative for at least thirty (30) days from the date of its filing, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder and become operative on January 1, 1998. At any time within sixty days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing will also be available for inspection and copying at the Board's principal offices. All submissions should refer to File No. SR-MSRB-97-10 and should be submitted by February 12, 1998. [[Page 3370]] For the Commission by the Division of Market Regulation, pursuant to delegated authority, 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. 98-1424 Filed 1-21-98; 8:45 am] BILLING CODE 8010-01-M