[Federal Register Volume 65, Number 56 (Wednesday, March 22, 2000)]
[Notices]
[Pages 15399-15401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7034]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42533; File No. SR-MSRB-00-04]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board Relating to Interpretation of Rule G-37 on Political 
Contributions and Prohibitions on Municipal Securities Business

March 15, 2000.
    On March 2, 2000, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') a proposed rule change, pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder.\2\ The proposed rule change is 
described in Items, I, II, and III below, which Items have been 
prepared by the Board. The purpose of the proposed rule change is to 
provide interpretive guidance concerning Rule G-37, on political 
contributions and prohibitions on municipal securities business. The 
Board has designated this proposed rule change as constituting a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the Board under 
Section 19(b)(3)(A) of the Act,\3\ which renders the proposed rule 
change effective upon receipt of this filing by the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).

---------------------------------------------------------------------------

[[Page 15400]]

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Board has filed a proposed rule change consisting of a notice 
of interpretation, in question-and-answer format, concerning Rule G-37 
(hereafter referred to as ``the proposed rule change''). The proposed 
rule change is as follows in italic:

SCOPE OF WAIVER PROVISION IN RULE G-37(i)

    Q: If an enforcement agency grants an exemption from a ban on 
municipal securities business pursuant to Rule G-37(i), may this 
exemption be applied retroactively so that any municipal securities 
business engaged in after the ban had gone into effect but prior to the 
date on which the exemption was granted would not be viewed as a Rule 
G-37 violation?
    A: Rule G-37(i) allows the enforcement agencies to exempt a dealer 
from a ban on municipal securities business. It is the Board's view 
that such an exemption is only effective as of the date of the 
exemption. Rule G-37(i) does not contain a provision allowing for the 
retroactive application of the exemption. Thus, a dealer would violate 
Rule G-37 if, prior to the date of the exemption, the dealer engaged in 
municipal securities business with an issuer while subject to a ban 
with this issuer because of a political contribution. As with any 
violation of a Board rule, the enforcement agencies have discretion in 
determining the type and extent of enforcement action appropriate for 
such violation, in light of the specific facts and circumstances. If an 
enforcement agency has granted an exemption to a dealer from the ban on 
municipal securities business, the facts and circumstances considered 
by such agency in granting the exemption could appropriately also be 
considered (together with any other relevant facts and circumstances) 
in determining what, if any, enforcement action should be taken against 
such dealer if it had engaged in municipal securities business after 
the ban on such business became effective but prior to the date on 
which the exemption was granted.
* * * * *

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 Section 
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
    On April 7, 1994, the Commission approved Board Rule G-37, on 
political contributions and prohibitions on municipal securities 
business.\4\ Since that time, the Board has received numerous inquiries 
concerning the application of the rule. In order to assist the 
municipal securities industry and, in particular, brokers, dealers, and 
municipal securities dealers in understanding and complying with the 
provisions of the rule, the Board published nine prior notices of 
interpretation which set forth, in question-and-answer format, general 
guidance on Rule G-37.\5\ In prior filings with the Commission, the 
Board stated that it will continue to monitor the application of Rule 
G-37 and, from time to time, will publish additional notices of 
interpretations, as necessary.\6\ Recently, the Board was asked about 
the scope of the waiver provision in Rule G-37(i). Accordingly, the 
Board is publishing this tenth set of questions and answers.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 33868, 59 FR 17621 
(April 13, 1994). The rule applies to contributions made on and 
after April 25, 1994.
    \5\ See MSRB Reports, Vol. 14, No. 3 (June 1994) at 11-16; Vol. 
14, No. 4 (Aug. 1994) at 27-31; Vol. 14, No. 5 (Dec. 1994) at 8; 
Vol. 15, No. 1 (April 1995) at 21; Vol. 15, No. 2 (July 1995) at 3-
4; Vol. 16, No. 1 (Jan. 1996) at 31; Vol. 16, No. 3 (Sept. 1996) at 
35-36; Vol. 17, No. 3 (Oct. 1997) at 11-12; and Vol. 18, No. 2 (Aug. 
1998) at 11-12. See also MSRB Rule Book (January 1, 2000) at 195-
204.
    \6\ See Securities Exchange Act Release No. 34161 (June 6, 1994, 
59 FR 30379 (June 13, 1994) (File No. SR-MSRB-94-6) and Securities 
Exchange Act Release No. 34603 (August 25, 1994), 59 FR 45049 
(August 31, 1994) (File No. SR-MSRB-94-15).
---------------------------------------------------------------------------

2. Basis
    The Board believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act,\7\ which requires, in pertinent part, 
that the Board's rules shall:

    \7\ 15 U.S.C. 78o-4(b)(2)(C).
---------------------------------------------------------------------------

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.

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 proposes of the Act since it applies 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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The Board has designated this proposed rule change as constituting 
a stated policy, practice, or interpretation with respect to the 
meaning, administration, or enforcement of an existing Board rule under 
Section 19(b)(3)(A) of the Act,\8\ which renders the proposed rule 
change effective upon receipt of this filing by the Commission.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. 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-
0609. 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-00-04 and should be 
submitted by April 12, 2000.


[[Page 15401]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-7034 Filed 3-21-00; 8:45 am]
BILLING CODE 8010-01-M