[Federal Register Volume 67, Number 54 (Wednesday, March 20, 2002)]
[Notices]
[Pages 13030-13031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6715]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45562; File No. SR-MSRB-2001-08]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Granting Approval of Proposed Rule Change Relating to 
Official Communications, Pursuant to MSRB Rules G-15 and G-8

March 14, 2002.
    On November 6, 2001, the Municipal Securities Rulemaking Board 
(``MSRB'')

[[Page 13031]]

filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change (File No. SR-MSRB-2001-08) (the ``proposed rule 
change'') relating to official communications under Rules G-15 and G-8. 
The MSRB submited the proposed rule change pursuant to Section 19(b)(1) 
of the Securities Exchange Act of 1934 (``Exchange Act'') and Rule 19b-
4 thereunder.\1\
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    \1\ 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b-4 thereunder.
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    The Commission published the proposed rule change for comment in 
the Federal Register on February 8, 2001.\2\ The Commission received no 
comment letters regarding the forgoing proposal. This order approves 
the proposal.
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    \2\ See Release No. 34-45363 (January 30, 2002), 67 FR 6067.
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I. Description of the Proposed Rule Change

    The MSRB's proposed rule change amended Rule G-15 on confirmation, 
clearance and settlement of transactions with customers and Rule G-8 on 
books and records. The proposed rule change requires brokers, dealers 
and municipal securities dealers (collectively ``dealers'') that 
safekeep municipal securities to retransmit official documents about 
municipal securities issues to their safekeeping clients under certain 
conditions. The amendment to Rule G-15 provides that, upon request for 
retransmission, dealers who serve as safekeeping agents must undertake 
``reasonable efforts'' to retransmit ``official communications' \3\ to 
their safekeeping clients. For their retransmission efforts, the 
amendment provides that dealers receive ``adequate compensation'.\4\ 
Without an offer of adequate compensation, dealers are not required to 
effect the retransmission.
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    \3\ The proposed rule change defines an ``official 
communication'' as a document or collection of documents addressed 
to beneficial owners that was prepared or authorized by an issuer of 
municipal securities, a trustee for an issue of municipal 
securities, a state or federal tax authority or a custody agent for 
a stripped coupon municipal securities program in its capacity as 
custody agent. See Release No. 34-45363 (January 30, 2002), 67 FR 
6067.
    \4\ Rule G-15 does not provide specific guidance to define 
adequate compensation; however, the proposed rule change references 
the rates of compensation for transmittal of documents detailed in 
NASD interpretation IM-2260, on Suggested Rates of Reimbursement, 
relating to forwarding of proxy and other materials. See id.; see 
also NASD Manual (CCH) para. 4233. As under NASD Rule 2260, 
compensation under Rule G-15 is intended to reimburse a dealer for 
its out of pocket expenses, including reasonable clerical expenses, 
associated with the particular retransmission. See NASD Manual (CCH) 
para. 4231.
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    The proposed amendment includes a ``compensation threshold''. For 
retransmission where the total compensation sought will be less than 
$500, the dealer should begin retransmitting immediately and ask for 
the calculated compensation concurrently. For retransmission where the 
total compensation sought will be greater than $500, the dealer may 
chose instead to promptly contact the party offering compensation, 
inform it of the amount of compensation required, obtain specific 
agreement on the amount of compensation and wait for receipt of such 
compensation prior to proceeding with the retransmission.
    In addition, the amendment allows dealers in certain circumstances 
to send to the party requesting an official communication 
retransmission a list of beneficial owners who do not object to the 
disclosure of their name, contact information and security positions 
(``non-objecting beneficial owners'') in lieu of retransmitting 
documents. The customer account information amendment to Rule G-8 
ensures that dealers retain an official record of a customer's written 
authorization, if any, as to the customer's status as a non-objecting 
beneficial owner.
    The MSRB realizes that some dealers today retransmit documents to 
their customers voluntarily, or under specific terms of their 
safekeeping agreements, and in many cases do so without compensation 
from the party requesting retransmission. It is not the intent of the 
proposed rule change to discourage retransmissions of official 
communications in these cases. Rather, the purpose of the proposed rule 
change is to ensure that parties needing to transmit official 
communications to beneficial owners may rely on dealers undertaking 
reasonable efforts, under the explicit terms of Rules G-15 and G-8, to 
retransmit such official communications and maintain appropriate 
records.

II. Discussion

    The MSRB believes that the proposed rule filing, relating to 
official communications, will promote just and equitable principles of 
trade and fosters an open market for municipal securities. 
Additionally, the MSRB believes that the proposed rule change will not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act since it applies 
equally to all dealers in municipal securities.
    The Commission must approve a proposed MSRB rule change if the 
Commission finds that the MSRB's proposal is consistent with the 
requirements of the Exchange Act and the rules and regulations 
thereunder that govern the MSRB.\5\ The language of Section 15(b)(2)(C) 
of the Exchange Act requires that the MSRB's rules must be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principals of trade, to foster cooperation and 
coordination with persons engaged in regulating, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national system, and, in general, to protect 
investors and the public interest.\6\
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    \5\ Additionally, in approving this rule, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78o-4(b)(2)(c).
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    After careful review, the Commission finds that the MSRB's proposed 
rule change relating to official communications meets this standard. 
The Commission believes that this proposed rule change is consistent 
with the requirements of the Exchange Act, and the rules and 
regulations thereunder. In particular, the Commission finds that the 
proposed rule is consistent with the requirements of Section 
15B(b)(2)(C) of the Exchange Act, set forth above.

III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act that the proposed rule change (File No. SR-MSRB-2001-08) 
be, and hereby is, approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-6715 Filed 3-19-02; 8:45 am]
BILLING CODE 8010-01-P