[Federal Register Volume 66, Number 23 (Friday, February 2, 2001)]
[Notices]
[Pages 8821-8822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2849]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43885; File No. SR-MSRB-00-02]


Self-Regulatory Organizations; Order Approving a Proposed Rule 
Change by the Municipal Securities Rulemaking Board Relating to Rules 
G-8 and G-38 and Form G-37/G-38

January 25, 2001.

I. Introduction

    On January 27, 2000, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') submitted to the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change amending Rule G-38, on 
consultants, Rule G-8, on books and records, and Section IV of Form G-
37/G-38 and the attachment page to the form. The Board filed Amendment 
No. 1 to the proposed rule change on November 15, 2000.\3\ The proposed 
rule change was published for comment in the Federal Register on 
November 22, 2000.\4\ The Commission received on the proposal. This 
order approves the proposal, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Board submitted a new Form 19b-4, which replaced the 
original filing (``Amending No. 1''). Specifically, Amendment No. 1 
amended MSRB Rules G-38 and G-8 to clarify that the name of the 
consultant is obtained from the consultant agreement. Amendment No. 
1 also revised the filing to include the statutory basis for the 
proposed rule change.
    \4\ Securities Exchange Act Release No. 43568 (Nov. 15, 2000), 
65 FR 70371.
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II. Description of the Proposal

    The Board believes that the current language of Rules G-38 and G-8 
and the formats of Form G-37/G-38, the attachment page, and the 
Instructions, are not as clear as they could be about the information 
required for identifying a consultant. The Board states that it has 
received inquiries from dealers that have indicated that there is 
confusion about certain information required to be reported in Section 
IV of Form G-37/G-38 as well as the attachment page to the form. The 
proposed rule change would amend Rule G-38 to remove the separate 
references to the consultant's company name from the requirements 
regarding the consultant agreement, the disclosure to issuers, and the 
disclosure to the Board. In addition, the proposed rule change would 
remove the requirement in Rule G-8 for dealers to maintain a separate 
record of the consultant's company name. The proposed rule change would 
also amend Rules G-8(a)(xviii)(A) and G-38(d) and (e) to add the phrase 
``pursuant to the Consultant Agreement'' after the consultant's 
name.\5\ The proposed rule change would also revise the formats of 
Section IV of Form G-37/G-38 and the attachment page to state ``Name of 
Consultant (pursuant to Consultant Agreement)'' and delete the 
reference to the ``Consultant Company Name.'' Thus, a dealer would 
provide the name of an individual, if the consultant is an individual, 
or of a company, if the consultant is a company, depending upon whether 
the dealer has entered into a consultant agreement with an individual 
or a company.
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    \5\ See Amendment No. 1, supra note 3.
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    Another area addressed by the proposed rule change concerns the 
role of the consultant. Pursuant to Rule G-38, a dealer is required to 
include within the consultant agreement the role of the consultant, to 
disclose this role to the issuer and to the Board and, pursuant to Rule 
G-8, to maintain a record of the role. The Instructions for Completing 
and Filing Form G-37/G-38 state that, in describing a consultant's 
role, a dealer should include the state or geographic area in which the 
consultant is working on behalf of the dealer. In addition, the Board 
issued a Question and Answer notice on Rule G-38 in which it stated 
that dealers must include the state or geographic area in which the 
consultant is working on behalf of the dealer.\6\
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    \6\ See Rule G-38 Question and Answer number 1 dated November 
18, 1996, MSRB Rule Book (January 1, 2000) at 210. The Rule G-38 
Questions and Answers are also posted on the Board's web site at 
www.msrb.org.
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder.\7\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 15B(b)(2)(C) \8\ of the Act. 
Section 15B(b)(2)(C) of the Act requires, among other things, that the 
rules of the Board be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market, and, in general, to protect investors and the public interest.
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    \7\ In approving this proposal, the Commission has considered 
the proposal rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78o-4(b)(2)(C).
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    The Commission believes that the proposed rule change should assist 
brokers, dealers and municipal securities dealers with complying with 
their obligations under MSRB Rules G-37/38 and Form G-37/38. 
Specifically, the Commission believes that the proposed rule change 
should make clear whether the individual consultant's or the consultant 
company's name must be disclosed on Form G-37/38. Under the proposed 
rule change a dealer must review its consultant agreement to determine 
whether its consultant is an individual or a company. If the consultant 
agreement is with an individual, then only the individual's name need 
be reported on the form and not a company name. Conversely, if the 
consultant agreement is with a company, only the company's name need be 
reported and not an individual's name. The Commission believes that 
deleting from Rule G-38 and Form G-37/38 references to ``consultant 
company name'' will eliminate existing ambiguities resulting from the 
requirement that information regarding both an individual and a company 
be provided.
    In addition, the Commission believes that amending Rules G-
8(a)(xviii)(A) and G-38(d)(e) to add the phrase ``pursuant to the 
Consultant Agreement'' after the consultant's name will make clear that 
dealers are to look to their consultant agreement in determining 
whether the consultant is an individual or a company. Furthermore, the 
Commission believes that revising Rules G-38 and G-8 to explicitly 
require reporting of the state or georgraphic area in which a 
consultant is working on behalf of a dealer will ensure that the Board 
receive this information that is currently required by the Instructions 
to Form G-37/38.
    Finally, the Commission notes that pursuant to recent amendments to 
Rules G-38, G-8, and G-37,\9\ If an individual is a consultant, the 
individual will relay to the dealer his or her reportable political 
contributions, reportable political party payments, and the reportable 
contributions and reportable payments of any political action committee 
(``PAC'') controlled by the

[[Page 8822]]

individual. If the consultant is a company, the company will relay its 
reportable contributions and reportable payments to the dealer, as well 
as those made by any partner, director, officer or employee of the 
consultant who communicates with issuers to obtain municipal securities 
business on behalf of the dealer, and any PAC controlled by the 
consultant or any partner, director, officer or employee of the 
consultant who communicates with issuers to obtain municipal securities 
business or behalf of the dealer. Dealers will report this contribution 
and payment information to the Board on Form G-37/G-38 by contributor 
category (i.e., company, individual, company controlled PAC, or 
individual controlled PAC).
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    \9\ See Securities Exchange Act Release No. 42205 (December 7, 
1999), 64 FR 69808 (December 14, 1999).
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IV. Conclusion

    It is Therefore Ordered, pursuant to Section 119(b)(2) \10\ of the 
Act, that the proposed rule change, as amended (SR-MSRB-00-02) is 
approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-2849 Filed 2-1-01; 8:45 am]
BILLING CODE 8010-01-M