[Federal Register Volume 68, Number 62 (Tuesday, April 1, 2003)]
[Notices]
[Pages 15782-15784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7731]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47565; File No. SR-MSRB-2003-01]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Proposed Rule Change Relating to the 
Establishment of an Optional Procedure for Electronic Submission of 
Forms G-37/G-38 and G-37x Under Rule G-37, on Political Contributions 
and Prohibitions on Municipal Securities Business, and Rule G-38, on 
Consultants

March 25, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'') and rule 19b-4 thereunder,\1\ notice is hereby 
given that on March 21, 2003, the Municipal Securities Rulemaking Board 
(the ``MSRB'' or ``Board'') filed with the Securities and Exchange 
Commission (the ``Commission'') a proposed rule change (File No. SR-
MSRB-2003-01) (the ``proposed rule change'') described in items I, II, 
and III below, which Items have been prepared by the MSRB. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b-4 thereunder.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB has filed with the Commission a proposed rule change 
amending Rule G-37, on political contributions and prohibitions on 
municipal securities business, and Rule G-38, on consultants, to 
establish an optional procedure for electronic submission of Forms G-
37/G-38 and G-37x. The proposed rule change will become effective on 
the later of June 30, 2003 or 30 days after Commission approval, and 
the MSRB expects that the new electronic submission system will become 
operational concurrently therewith. The text of the proposed rule 
change is set forth below. Additions are italicized; deletions are 
bracketed.

Rule G-37--Political Contributions and Prohibitions on Municipal 
Securities Business

    (a)-(d) No change.
    (e)(i) Except as otherwise provided in paragraph (e)(ii), each 
broker, dealer or municipal securities dealer shall, by the last day of 
the month following the end of each calendar quarter (these dates 
correspond to January 31, April 30, July 31 and October 31) send to the 
Board [by certified or registered mail, or some other equally prompt 
means that provides a record of sending, two copies of] Form G-37/G-38 
setting forth, in the prescribed format, the following information:
    (A)-(E) No change.
    The Board shall make public a copy of each Form G-37/G-38 received 
from any broker, dealer or municipal securities dealer.
    (ii)(A) No broker, dealer or municipal securities dealer shall be 
required to send Form G-37/G-38 to the Board for any calendar quarter 
in which either:
    (1) No change.
    (2) Subject to clause (B) of this paragraph (e)(ii), such broker, 
dealer or municipal securities dealer has not engaged in municipal 
securities business, but only if such broker, dealer or municipal 
securities dealer:
    (a) No change.
    (b) Has sent to the Board[, by certified or registered mail or some 
other equally prompt means that provides a record of sending, two 
copies of a] completed Form G-37x setting forth, in the prescribed 
format, (i) a certification to the effect that such broker, dealer or 
municipal securities dealer did not engage in municipal securities 
business during the eight consecutive calendar quarters immediately 
preceding the date of such certification, (ii) certain acknowledgments 
as are set forth in said Form G-37x regarding the obligations of such 
broker, dealer or municipal securities dealer in connection with Forms 
G-37/G-38 and G-37x under this paragraph (e)(ii) and rule G-8(a)(xvi), 
and (iii) such other identifying information required by Form G-37x; 
provided that, if a broker, dealer or municipal securities dealer has 
engaged in municipal securities business subsequent to the submission 
of Form G-37x to the Board, such broker, dealer or municipal securities 
dealer shall be required to submit a new Form G-37x to the Board in 
order to again qualify for an exemption under this subclause (A)(2). 
The Board shall make public a copy of each Form G-37x received from any 
broker, dealer or municipal securities dealer.
    (B) No change.
    (iii) No change.
    (iv) A broker, dealer or municipal securities dealer that submits 
Form G-37/G-38 or Form G-37x to the Board shall either:
    (A) Send two copies of such form to the Board by certified or 
registered mail, or some other equally prompt means that provides a 
record of sending; or
    (B) submit an electronic version of such form to the Board in such 
format

[[Page 15783]]

and manner specified in the current Instructions for Form G-37/G-38 and 
Form G-37x.
    (f)-(i) No change.
* * * * *

Rule G-38--Consultants

    (a)-(d) No change.
    (e) Disclosure to Board. Each broker, dealer and municipal 
securities dealer shall send to the Board, [by certified or registered 
mail, or some other equally prompt means that provides a record of 
sending,] and the Board shall make public, reports of all consultants 
used by the broker, dealer or municipal securities dealer during each 
calendar quarter. Such [Two copies of the] reports must be sent to the 
Board on Form G-37/G-38 by the last day of the month following the end 
of each calendar quarter (these dates correspond to January 31, April 
30, July 31, and October 31) in the manner provided under Rule G-37. 
Such reports shall include, for each consultant, in the prescribed 
format, the consultant's name pursuant to the Consultant Agreement, 
business address, role (including the state or geographic area in which 
the consultant is working on behalf of the broker, dealer or municipal 
securities dealer), compensation arrangement, any municipal securities 
business obtained or retained by the consultant with each such business 
listed separately, and, if applicable, dollar amounts paid to the 
consultant connected with particular municipal securities business. 
Such reports shall indicate the total dollar amount of payments made to 
each consultant during the report period. In addition, such reports 
shall include the following information to the extent required to be 
obtained during such calendar quarter pursuant to paragraph (c)(i) of 
this rule:
    (i)-(ii) No change.
    (iii) if applicable, a statement that the consultant failed to 
provide any report of information to the broker, dealer or municipal 
securities dealer concerning reportable political contributions or 
reportable political party payments.
    Once a contribution or payment has been disclosed on a report, the 
broker, dealer or municipal securities dealer should not continue to 
disclose that particular contribution or payment on subsequent reports.

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 MSRB 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 MSRB 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
    Rules G-37 and G-38 require brokers, dealers and municipal 
securities dealers (``dealers'') to submit to the MSRB on Form G-37/G-
38 certain information regarding political contributions to issuer 
officials, payments to state and local political parties, issuers with 
which the dealer has engaged in municipal securities business and 
consultants engaged by the dealer to obtain municipal securities 
business. In addition, certain dealers that wish to be exempted from 
the Form G-37/G-38 submission requirement must submit Form G-37x to the 
MSRB. The MSRB is implementing an optional system of electronic 
submission by dealers of Forms G-37/G-38 and G-37x to the MSRB. The 
MSRB also is amending rules G-37 and G-38 in order to effectuate this 
electronic system.\2\
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    \2\ Technical amendments to the final sentence of Rule G-38(e) 
and to Rule G-38(e)(iii) are also made to conform language to usage 
throughout MSRB rules.
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    Dealers will not be required to make submissions electronically and 
the MSRB will continue to accept submissions made on paper. Dealers 
that submit Forms G-37/G-38 and G-37x on paper will continue to be 
required to send two copies of each form to the MSRB by certified or 
registered mail, or some other equally prompt means that provides a 
record of sending.\3\ Electronic submissions will be made as described 
below.\4\
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    \3\ Procedures for making submissions by paper are removed from 
Rules G-37(e)(i), G-37(e)(ii)(A)(2)(b) and G-38(e) and are 
consolidated in amended Rule G-37(e)(iv)(A).
    \4\ Amended Rule G-37(e)(iv)(B) provides that procedures for 
making submissions using the electronic system would be set forth in 
the MSRB's Instructions for Form G-37/G-38 and Form G-37x to be 
published upon implementation of the system. These instructions will 
replace the current Instructions of Completing and Filing Form G-37/
G-38.
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    Electronic submissions will be made by dealers through a secure, 
password-protected Internet website. A password will be assigned to a 
dealer prior to the first use by such dealer of the electronic system 
in a manner intended to assure authentication of submitters using the 
system. Each dealer will be required to submit an e-mail address for 
purposes of receiving electronic records of submissions as well as to 
provide for follow-up by MSRB staff should any submission prove to be 
incomplete or incorrect.
    Forms G-37/G-38 and G-37x will be submitted electronically by 
completion of an on-line data entry form, by uploading of an electronic 
file of a completed form, or a combination of on-line data entry and 
uploading of files.\5\ On-line forms will elicit the same information 
as paper Forms G-37/G-38 and G-37x and will be in substantially the 
same format. All uploaded files must be in Adobe Acrobat [reg] portable 
document format (``PDF''). The MSRB will continue to make all Forms G-
37/G-38 and G-37x available to the public for viewing and printing 
through its website.
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    \5\ For example, a dealer could provide information regarding 
political contributions through direct data entry into the on-line 
form and could upload an internally-generated electronic file 
listing all municipal securities business engaged in during the 
calendar quarter.
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    The new system will provide a dealer that makes an electronic 
submission with an electronic record confirming receipt of the 
submission and providing a control number assigned by the system. This 
electronic record, together with a PDF copy of the Form G-37/G-38 or G-
37x submitted by the dealer made available by the system on-line, is 
intended to satisfy the requirement under Rule G-8(a)(xvi)(H) that 
dealers maintain copies of Forms G-37/G-38 and G-37x and records of 
sending such forms to the MSRB.\6\
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    \6\ Of course, this electronic record must be maintained in a 
manner that complies with section (e) of Rule G-9, on preservation 
of records.
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    The MSRB currently requires that any incomplete or incorrect 
submission be corrected by the submitter prior to the MSRB accepting 
the submission as in compliance with Rules G-37 and G-38. Thus, any 
submission through the electronic system will be subject to such 
automated and/or manual review as MSRB staff deems appropriate prior to 
final acceptance. The electronic record of submission sent by the 
system as described above should not be viewed as a record of 
acceptance by the MSRB.
(2) Basis
    The MSRB believes that the proposed rule change is consistent with 
section 15B(b)(2)(C) of the Exchange Act, which requires that the 
MSRB's rules:

be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with

[[Page 15784]]

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.

The MSRB believes that the proposed rule change is consistent with the 
Exchange Act in that it allows for a more efficient process of 
submitting required information by dealers to the MSRB.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB 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 Exchange Act since it would apply equally to all 
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 
Commssion Action

    Within 35 days of the publication of this notice in the Federal 
Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The MSRB has requested that the proposed rule change become 
effective on the later of June 30, 2003 or 30 days after Commission 
approval.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
is consistent with the Exchange Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0608. 
Copies of the submissions, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the SEC, and all written communications relating to the proposed rule 
change between the SEC 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 SEC's Public 
Reference Room. Copies of the filing will also be available for 
inspection and copying at the MSRB's principal offices. All submissions 
should refer to File No. SR-MSRB-2003-01 and should be submitted by 
April 22, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
Jill M. Peterson,
Assistant Secretary.
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    \7\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 03-7731 Filed 3-31-03; 8:45 am]
BILLING CODE 8010-01-P