[Federal Register Volume 75, Number 2 (Tuesday, January 5, 2010)]
[Notices]
[Pages 485-492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-31206]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61237; File No. SR-MSRB-2009-10]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Amendment No. 1 to Proposed Rule Change 
Relating to Additional Voluntary Submissions by Issuers to the MSRB's 
Electronic Municipal Market Access System (EMMA[supreg])

December 23, 2009.
    On July 14, 2009, the Municipal Securities Rulemaking Board 
(``MSRB'') filed with 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 relating to additional voluntary submissions by 
issuers to the MSRB's Electronic Municipal Market Access System 
(EMMA[supreg]). The proposed rule change was published for comment in 
the Federal Register on July 22, 2009.\3\ On December 18, 2009, the 
MSRB filed with the Commission Amendment No. 1 to the proposed rule 
change. The Commission is publishing this notice of Amendment No. 1 to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60315 (July 15, 
2009), 74 FR 36294.
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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 the amendment to File No. 
SR-MSRB-2009-10, originally filed on July 14, 2009 (the ``original 
proposed rule change''). The amendment amends and restates the original 
proposed rule change relating to additional voluntary submissions by 
issuers to the MSRB's Electronic Municipal Market Access system 
(``EMMA'') (as amended, the ``proposed rule change''). The proposed 
rule change would amend EMMA's primary market and continuing disclosure 
services to permit issuers and their designated agents to submit 
preliminary official statements and other related pre-sale documents, 
official statements and advance refunding documents, as well as to 
permit issuers, obligated persons and their designated agents to submit 
information relating to the preparation and submission of audited 
financial statements and annual financial information and to post links 
to other disclosure information. The MSRB requests an effective date 
for the proposed rule change of a date to be announced by the MSRB in a 
notice published on the MSRB Web site, which date shall be no later 
than nine months after Commission approval of the proposed rule change 
and shall be announced no later than sixty (60) days prior to the 
effective date.
    The text of the proposed rule change is available on the MSRB's Web 
site at http://www.msrb.org/msrb1/sec.asp, at the MSRB's principal 
office, and at the Commission's Public Reference Room.

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 
text 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

Preliminary Official Statements and Other Primary Market Documents

    The proposed rule change would amend the EMMA primary market 
disclosure service \4\ to permit issuers and their designated agents to 
make voluntary submissions to the primary market disclosure service of 
official statements, preliminary official statements and related pre-
sale documents, and advance refunding documents (collectively, 
``primary market documents'').\5\ Pre-sale documents other than a 
preliminary official statement (including but not limited to notices of 
sale or supplemental disclosures) would be accepted only if accompanied 
or preceded by the preliminary official statement.\6\ An issuer seeking 
to make submissions of primary market documents to the EMMA primary 
market disclosure service would use the same accounts established with 
respect to submissions of continuing disclosure documents to the EMMA 
continuing disclosure service, subject to additional verification 
procedures to affirmatively establish the account holder's authority to 
act on behalf of the issuer in connection with such primary market 
disclosure submissions.
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    \4\ This amendment does not modify the provisions of the 
original proposed rule change relating to the EMMA primary market 
disclosure service.
    \5\ Obligated persons would be permitted to submit primary 
market documents through the EMMA primary market disclosure service 
only if designated as an agent by the issuer.
    \6\ The MSRB believes that posting of such pre-sale documents 
without the related disclosure information provided in a preliminary 
official statement would be inconsistent with the core disclosure 
purposes of EMMA.
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    Submissions of primary market documents by issuers and their 
designated agents will be accepted on a voluntary basis if, at the time 
of submission, they are accompanied by information necessary to 
accurately identify: (i) The category of document being submitted; (ii) 
the issues or specific securities to which such document is related; 
and (iii) in the case of an advance refunding document, the specific 
securities being refunded pursuant thereto. The primary market 
documents and related indexing information would be displayed on the 
EMMA Web portal and also would be included in EMMA's primary market 
disclosure subscription service.

Additional Continuing Disclosure Submissions and Undertakings

    As amended and restated by this amendment, the proposed rule change 
also would amend the EMMA continuing disclosure service to permit 
issuers, obligated persons and their agents to make voluntary 
submissions to the continuing disclosure service of additional 
categories of disclosures, as well as information about their 
continuing disclosure undertakings. Such additional continuing 
disclosures and related indexing information would be displayed on the 
EMMA Web portal and also would be included in EMMA's

[[Page 486]]

continuing disclosure subscription service. Such additional items are:
     An issuer's or obligated person's undertaking to prepare 
audited financial statements pursuant to generally accepted accounting 
principles (``GAAP'') as established by the Governmental Accounting 
Standards Board (``GASB''), or pursuant to GAAP as established by the 
Financial Accounting Standards Board (``FASB''), as applicable to such 
issuer or obligated person and as further described below (the 
``voluntary GAAP undertaking''); \7\
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    \7\ In response to the comments received on the original 
proposed rule change, as discussed below, this amendment modifies 
the original proposed rule change by permitting issuers and 
obligated persons to elect either the GASB standard or the FASB 
standard for GAAP, as appropriate. The original proposed rule change 
only contemplated the use of the GASB standard.
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     An issuer's or obligated persons' undertaking to submit 
annual financial information to EMMA within 120 calendar days after the 
end of the fiscal year or, as a transitional alternative that may be 
elected through December 31, 2013, within 150 calendar days after the 
end of the applicable fiscal year, as further described below (the 
``voluntary annual filing undertaking''); \8\ and
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    \8\ In response to the comments received on the original 
proposed rule change, as discussed below, this amendment modifies 
the original proposed rule change by permitting issuers and 
obligated persons to elect to undertake to submit annual financial 
information either within 120 days or 150 days after the end of the 
fiscal year. The original proposed rule change only contemplated a 
120 day timeframe.
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     Uniform resource locator (URL) of the issuer's or 
obligated person's Internet-based investor relations or other 
repository of financial/operating information.
    Voluntary GAAP Undertaking. The voluntary GAAP undertaking would 
consist of a voluntary undertaking by an issuer or obligated person, 
either at the time of a primary offering or at any time thereafter, 
that the issuer or obligated person will prepare its audited financial 
statements in accordance with GAAP. The MSRB contemplates that state or 
local governments or any other entities to which GASB standards are 
applicable would apply GAAP as established by GASB and that any other 
entities to which FASB standards are applicable would apply GAAP as 
established by FASB.
    The voluntary GAAP undertaking would assist investors and other 
market participants in understanding how audited financial statements 
were prepared. The fact that an issuer or obligated person has entered 
into a voluntary GAAP undertaking, and the standard under which audited 
financial statements are to be prepared, would be prominently disclosed 
on the EMMA Web portal as a distinctive characteristic of the 
securities to which such undertaking applies. An issuer or obligated 
person that has made a voluntary GAAP undertaking may later rescind 
such undertaking, which would be disclosed through EMMA. The MSRB would 
not review whether an entity has selected the appropriate accounting 
standard and would not review or confirm the conformity of submitted 
audited financial statements to GAAP. The MSRB contemplates that the 
making of a voluntary GAAP undertaking through EMMA by an issuer or 
obligated person would reflect the bona fide intent of the issuer or 
obligated person to perform as undertaken but would not, by itself, 
necessarily create a contractual obligation of such issuer or obligated 
person.
    Voluntary Annual Filing Undertaking. The voluntary annual filing 
undertaking would consist of a voluntary undertaking by an issuer or 
obligated person, either at the time of a primary offering or at any 
time thereafter, that the issuer or obligated person, as appropriate, 
will submit to EMMA its annual financial information as contemplated 
under Rule 15c2-12 of the Securities Exchange Act of 1934 (the 
``Exchange Act'') by no later than 120 calendar days after the end of 
such issuer's or obligated person's fiscal year (the ``120 day 
undertaking'').\9\ Alternatively, to and including December 31, 2013, 
the EMMA continuing disclosure service will provide the option for an 
issuer or obligated person to indicate its undertaking to submit to 
EMMA its annual financial information by no later than 150 calendar 
days after the end of such issuer's or obligated person's fiscal year 
(the ``transitional 150 day undertaking'').\10\ An issuer or obligated 
person that has made a transitional 150 day undertaking may convert 
such election to a 120 day undertaking at any time. On and after 
January 1, 2014, the transitional 150 day undertaking option would no 
longer be available for selection.
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    \9\ Under the Exchange Act, smaller public reporting companies, 
as non-accelerated filers, generally are required to file their 
annual reports on Form 10-K with the Commission within 90 days after 
the end of their fiscal year. The longer 120-day period included in 
the voluntary annual filing undertaking of the proposed rule change 
is designed to accommodate additional steps that state and local 
governments often must take--under state law, pursuant to their own 
requirements, or otherwise--in completing the work necessary to 
prepare their annual financial information as contemplated under 
Exchange Act Rule 15c2-12.
    \10\ The option to elect, through December 31, 2013, a 
transitional 150 day undertaking acknowledges that the 120 day 
undertaking may not be immediately achievable by most issuers and 
obligated persons, as described in the comments discussed below, and 
is designed to provide a means by which to recognize issuers and 
obligated persons that are taking steps toward ultimately making 
their annual financial information available within 120 days of 
fiscal year end in the future.
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    The voluntary annual filing undertaking would assist investors and 
other market participants in understanding when the annual financial 
information is expected to be available in the future. The fact that an 
issuer or obligated person has entered into a voluntary annual filing 
undertaking would be prominently disclosed on the EMMA Web portal as a 
distinctive characteristic of the securities to which such undertaking 
applies. An issuer or obligated person that has made a voluntary annual 
filing undertaking may later rescind such undertaking, which would be 
reflected on the EMMA Web portal. A transitional 150 day undertaking 
would continue to be displayed on the EMMA Web portal through June 30, 
2014, and would automatically cease to be displayed on the EMMA Web 
portal after such date, unless the issuer or obligated person has 
previously changed or rescinded such undertaking.
    The MSRB would not review or confirm the compliance of an issuer or 
obligated person with its voluntary annual filing undertaking. The MSRB 
contemplates that the making of a voluntary annual filing undertaking 
through EMMA by an issuer or obligated person would reflect the bona 
fide intent of the issuer or obligated person to perform as undertaken 
but would not, by itself, necessarily create a contractual obligation 
of such issuer or obligated person. Unless the issuer or obligated 
person incorporates the 120 day undertaking or transitional 150 day 
undertaking as an obligation under its continuing disclosure agreement, 
the MSRB would view such issuer's or obligated person's performance 
pursuant to such undertaking as distinct from any performance 
obligations under its continuing disclosure agreement entered into 
consistent with Rule 15c2-12, although the MSRB believes that 
successful performance in accordance with a voluntary annual filing 
undertaking generally should also satisfy the obligation under a 
continuing disclosure agreement, depending on the specific terms of 
such agreement, if the agreement provides a longer timeframe for such 
submission.
    Investor Relation URL Posting. A URL of an issuer's or obligated 
person's Internet-based investor relations or other repository of 
financial/operating information would provide investors

[[Page 487]]

with an additional avenue for obtaining further financial, operating or 
other investment-related information about such issuer or obligated 
person.
    Elimination of Proposed GFOA-CAFR Certificate. This amendment 
modifies the original proposed rule change by eliminating one item of 
additional voluntary submissions relating to the award of the 
Certificate of Achievement for Excellence in Financial Reporting 
awarded by the Government Finance Officers Association (``GFOA'') in 
connection with the preparation of a Comprehensive Annual Financial 
Report (``CAFR'') of an issuer. The MSRB notes that CAFRs are already 
frequently submitted to EMMA by issuers, and in most cases the issuers 
include the GFOA certificate in the submitted CAFR. Therefore, EMMA 
already effectively serves as a venue through which CAFRs and GFOA 
certificates are made available to investors.
    Manner of Submission. Issuers and obligated persons would make a 
voluntary GAAP undertaking or voluntary annual filing undertaking 
through a data input election on EMMA. Voluntary undertakings could 
later be rescinded through the same EMMA interface process. The URL of 
an issuer's or obligated person's investor relations or other 
repository of financial/operating information also could be entered 
through a text/data input field on EMMA. No document would be required 
to be submitted to EMMA in connection with the voluntary GAAP 
undertaking, voluntary annual filing undertaking or the issuer/
obligated person URL. The input process for each of these additional 
items would include a free text input field permitting issuers and 
obligated persons to include limited additional information relating to 
each such item that they deem appropriate with respect thereto for 
public dissemination. Further, the MSRB would include an explanation of 
the nature of the voluntary GAAP undertaking and voluntary annual 
filing undertaking on the EMMA Web portal.

Effective Date of Proposed Rule Change

    As noted above, the MSRB has requested an effective date for the 
proposed rule change of a date to be announced by the MSRB in a notice 
published on the MSRB Web site, which date shall be no later than nine 
months after Commission approval of the proposed rule change and shall 
be announced no later than sixty (60) days prior to the effective date.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
the provisions of Section 15B(2)(C) of the Act,\11\ which requires, 
among other things, that MSRB rules must 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.
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    \11\ 15 U.S.C. 78o-4(b)(2)(C).
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    The MSRB believes that the proposed rule change is consistent with 
the Exchange Act in that it serves to remove impediments to and help 
perfect the mechanisms of a free and open market in municipal 
securities and would serve to promote the statutory mandate of the MSRB 
to protect investors and the public interest. Voluntary dissemination 
of preliminary official statements through EMMA, particularly if made 
available prior to the sale of a primary offering to the underwriters, 
would provide timely access by investors and other market participants 
to key information useful in making an investment decision in a manner 
that is consistent with the MSRB's statutory authority. The voluntary 
GAAP undertaking would assist understanding of how such information was 
prepared and the voluntary annual filing undertaking would assist 
understanding of when such information is expected to be available in 
the future. A URL provided by an issuer or obligated person would 
provide investors with an additional avenue for obtaining further 
financial, operating or other investment-related information about such 
issuer or obligated person.

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

    The MSRB does not believe the proposed rule change would impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Exchange Act. The additional items of information 
submitted by issuers and obligated persons to the EMMA system for 
public dissemination would be available to all persons simultaneously. 
In addition to making such information available for free on the EMMA 
Web portal to all members of the public, the MSRB would make such 
documents and information available by subscription on an equal and 
non-discriminatory basis. Further, the proposed rule change would apply 
equally to all issuers and obligated persons.
    The MSRB does not believe that making the additional items of 
information to be included in the EMMA continuing disclosure service 
available to the public would compete with other information providers 
and, to the extent other information providers were to seek to make 
such information available to the public, such providers could obtain 
the information from the MSRB through the subscription service on an 
equal and non-discriminatory basis. Further, the MSRB does not believe 
that allowing issuers to submit documents to the EMMA primary market 
disclosure service would create a burden on or compete inappropriately 
with any other information providers to which such documents may also 
be provided and notes that other information providers would be able to 
obtain the information from the MSRB through the subscription service 
on an equal and non-discriminatory basis.
    The proposed rule change also would not impose any additional 
burdens on competition among issuers of municipal securities since the 
voluntary submissions provided for under the proposed rule change may 
be made by any issuer on an equal and non-discriminatory basis.

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 by the MSRB on 
the original proposed rule change prior to filing with the Commission. 
The original proposed rule change was published by the Commission for 
comment in the Federal Register and the Commission received comments 
from a number of commentators.\12\ In

[[Page 488]]

addition, several commentators provided comments to the MSRB with 
respect to the submission of preliminary official statements to EMMA in 
response to a series of notices published by the MSRB seeking comment 
on the establishment of EMMA for purposes of official statement 
dissemination (the ``MSRB Notices'').\13\
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    \12\ See Securities Exchange Act Release No. 60315 (July 15, 
2009) (File No. SR-MSRB-2009-10), 74 FR 36294 (July 22, 2009). The 
Commission received comments from the City of Brookfield, Wisconsin 
(``Brookfield''); Connecticut State Treasurer (``Connecticut''); 
Government Finance Officers Association (``GFOA''); Village of 
Greendale, Wisconsin (``Greendale''); Village of Hinsdale, Illinois 
(``Hinsdale''); Inland Empire Utilities Agency (``Inland''); 
International City/County Management Association, National 
Association of Counties, National Association of State Auditors, 
Comptrollers and Treasurers, National League of Cities, U.S. 
Conference of Mayors, American Public Power Association, and Council 
on Infrastructure Financing Authorities, jointly (``Joint Issuer 
Groups''); Investment Company Institute (``ICI''); Township of Lower 
Merion, Pennsylvania (``Lower Merion''); Michigan State Treasurer 
(``Michigan''); National Association of Bond Lawyers (``NABL''); 
National Association of Health and Educational Facilities Finance 
Authorities (``NAHEFFA''); National Association of State Treasurers 
(``NAST''); Oregon Municipal Finance Officers Association 
(``OMFOA''); City of Portland, Oregon (``Portland''); City of Rock 
Hill, South Carolina (``Rock Hill''); Rutherford County, Tennessee 
(``Rutherford''); Securities Industry and Financial Markets 
Association (``SIFMA''); State of Tennessee (``Tennessee''); Utah 
Government Finance Officers Association (``UGFOA''); and Virginia 
Government Finance Officers' Association (``VGFOA''). The comment 
letters received by the Commission are posted on the Commission's 
Web site at http://www.sec.gov/comments/sr-msrb-2009-10/msrb200910.shtml.
    \13\ MSRB Notice 2006-19 (July 27, 2006) (the ``Concept 
Release''); MSRB Notice 2007-5 (January 25, 2007) (the ``January 
2007 Notice''). Comments relating to preliminary official statement 
submissions were received in response to the Concept Release from 
American Government Financial Services Company (``AGFS''), TRB 
Associates (``TRB''), UMB Bank, N.A. (``UMB''), and Zions Bank 
Public Finance (``Zions''). Comments relating to preliminary 
official statement submissions were received in response to the 
January 2007 Notice from American Municipal Securities, Inc. 
(``AMS''), DPC DATA Inc. (``DPC''), Ipreo Holdings LLC (``Ipreo''), 
NABL and SIFMA. These notices and comment letters are included in 
Exhibit 2.
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General
    Except with respect to the voluntary annual filing undertaking, 
virtually all commentators on the original proposed rule change 
supported the proposal. Most commentators opposed the voluntary annual 
filing undertaking, with some of these commentators not expressing 
opinions on the remaining portions of the original proposed rule 
change. NABL suggested delaying action on changes to the EMMA 
continuing disclosure service until the Commission's proposed 
amendments to Rule 15c2-12 are finalized,\14\ and also noted general 
concerns regarding whether prominent display of the voluntary 
undertakings would be construed as recommendations by the MSRB and 
regarding the specific process by which issuers and obligated persons 
could later rescind any undertakings they make. SIFMA asked what 
responsibilities dealers may have arising from an issuer's failure to 
meet a voluntary undertaking. Various commentators provided comments on 
specific elements of the original proposed rule change, as described 
below.
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    \14\ See Securities Exchange Act Release No. 60332 (July 17, 
2009) (File No. S7-15-09), 74 FR 36832 (July 24, 2009).
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Preliminary Official Statements
    The original proposed rule change would amend the EMMA primary 
market disclosure service to permit issuers and their designated agents 
to make voluntary submissions to the primary market disclosure service 
of official statements, preliminary official statements and related 
pre-sale documents, and advance refunding documents. Pre-sale documents 
other than a preliminary official statement (including but not limited 
to notices of sale or supplemental disclosures) would be accepted only 
if accompanied or preceded by the preliminary official statement.
    A number of commentators on the original proposed rule change 
expressed general support for the various elements thereof (other than 
the voluntary annual filing undertaking), including the element to 
permit issuers to submit preliminary official statements and related 
pre-sale documents. In addition, in comment letters to the MSRB on the 
MSRB Notices, SIFMA,\15\ along with AMS, DPC, Ipreo, NABL, TRB, UMB and 
Zions, supported the concept of voluntary submissions of preliminary 
official statements. DPC and AGFS suggested that the MSRB explore 
making the submission of preliminary official statements mandatory, 
while SIFMA, AMS and NABL emphasized that preliminary official 
statement submissions should not be made mandatory.
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    \15\ Bear Stearns & Co., Inc. and Griffin, Kubik, Stephens & 
Thompson, Inc. stated that they participated in the formulation of 
SIFMA's comments on the January 2007 Notice and fully supported 
SIFMA's positions.
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    The MSRB believes that there is considerable value in providing a 
means for centralized access to preliminary official statements at or 
prior to the time of trade and in sufficient time to make use of the 
information in coming to an investment decision. However, the MSRB is 
precluded from mandating pre-sale submission of preliminary official 
statement pursuant to Exchange Act Section 15B(d)(1). In its filing 
with the Commission to establish the EMMA primary market disclosure 
service, the MSRB stated that it expected to provide the opportunity 
for voluntary submissions of and access to preliminary official 
statements through EMMA, consistent with the MSRB's statutory 
authority, pursuant to a future filing with the Commission.\16\ The 
proposed rule change would permit such voluntary submissions of 
preliminary official statements.
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    \16\ See Securities Exchange Act Release No. 59636 (March 27, 
2009), 74 FR 15190 (April 2, 2009) (File No. SR-MSRB-2009-02).
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    Connecticut noted in its comments on the original proposed rule 
change that preliminary official statements would generally not have 
CUSIP numbers associated with them and that EMMA's usability would be 
improved by making such documents identifiable by means other than 
CUSIP numbers, such as by issuer. NABL supported submissions of 
preliminary official statements and related pre-sale documents for 
competitive sales of new issues but expressed concerns with regard to 
potentially conflicting submissions by underwriters and issuers in the 
case of negotiated issues and therefore recommended that the ability to 
make preliminary official statement submissions by issuers be 
restricted solely to competitive issues.
    The MSRB expects to provide search capabilities tailored to the 
types of indexing information that would be available for preliminary 
official statements, including issuer name, issue description, state, 
and appropriate date ranges, among other things. Submissions made by 
issuers would be noted as such on the EMMA Web portal. The MSRB 
believes that postings of preliminary official statements by issuers 
should be available for any new issue, not just those sold on a 
competitive basis, and the EMMA primary market submission process would 
be designed to discourage duplicative submissions by issuers and 
underwriters.
    In commenting on the MSRB Notices, SIFMA and DPC noted the 
importance of ensuring version control where both preliminary official 
statements and official statements are made available (as well as in 
handling ``stickers'' to official statements), suggesting that the MSRB 
include a mechanism for notification to the public when the final 
official statement is posted in cases where a preliminary official 
statement has previously been submitted. DPC suggested that preliminary 
official statements be deleted when final official statements are 
submitted, while NABL suggested that underwriters be permitted to 
request that the preliminary official statement be removed from the 
centralized electronic system once the ``timeliness of a POS has 
ended,'' noting that its continued availability may confuse investors. 
However, SIFMA opposed the removal of the preliminary official 
statement.
    The MSRB notes that the current operation of the EMMA Web portal 
provides processes that address each of these suggestions. Under 
current Rule

[[Page 489]]

G-32, preliminary official statements, if available, are required to be 
submitted by the underwriter by closing solely in the circumstance 
where an official statement is not being prepared by the issuer or if 
the official statement is not available for submission to EMMA by the 
closing. Once the official statement is provided by the underwriter, 
the preliminary official statement generally is moved to a document 
archive that is accessible through the EMMA portal directly from the 
page where the link to the official statement is provided, thereby 
distinguishing the final official statement from the preliminary 
official statement while maintaining public access for those wishing to 
refer back to the preliminary official statement. Users of the EMMA 
portal are able to request to receive e-mail notifications for updates 
to the disclosure document for a specific security, which applies to 
the situation where an official statement is submitted to EMMA 
following an initial submission of the preliminary official statement.
Voluntary Annual Filing Undertaking
    The original proposed rule change would amend the EMMA continuing 
disclosure service to permit issuers and obligated persons to 
undertake, on a voluntary basis, to submit annual financial information 
to EMMA within 120 calendar days after the end of the fiscal year. This 
would consist of a voluntary undertaking by an issuer or obligated 
person, either at the time of a primary offering or at any time 
thereafter, that the issuer or obligated person, as appropriate, will 
submit to EMMA its annual financial information as contemplated under 
Rule 15c2-12 by no later than 120 calendar days after the end of such 
issuer's or obligated person's fiscal year. Issuers and obligated 
persons would indicate the existence of such an undertaking through a 
data input election on EMMA. No document would be required to be 
submitted to EMMA in connection with this undertaking. The fact that an 
issuer or obligated person has entered into such an undertaking would 
be prominently disclosed on the EMMA Web portal as a distinctive 
characteristic of the securities to which such undertaking applies and 
the MSRB would include an explanation of the undertaking on the EMMA 
Web portal. If an issuer or obligated person that has made an 
undertaking later rescinds such undertaking, the issuer or obligated 
person would be able to disclose such action through EMMA. The MSRB 
would not review or confirm the compliance of an issuer or obligated 
person with this undertaking.
    This element of the original proposed rule change generated 
significant, but not universal, negative commentary, with virtually all 
commentators, except as noted below, strongly objecting.\17\ GFOA 
stated that it believes that ``setting an `ideal' deadline of 120 days 
is unnecessary, arbitrary, and likely harmful to the quality of 
financial reporting.'' GFOA noted that many issuers that meet the 180 
day timeframe for receiving its Certificate of Achievement for 
Excellence in Financial Reporting with respect to the preparation of 
their CAFRs must ``struggle'' to achieve that deadline and that a 
significantly shorter deadline ``might reasonably be expected to 
persuade any number of such governments to abandon a CAFR altogether in 
favor of a plain set of basic financial statements.'' GFOA also noted 
that GAAP requires reporting of data from legally separate component 
units over which most issuers have no legal ability to compel to 
provide such data in a timeframe that would make meeting the voluntary 
annual filing undertaking possible. GFOA further suggested that the 
voluntary annual filing undertaking could encourage the use of less 
qualified audit firms and the increased use of estimates. The Joint 
Issuer Groups and NAST stated that they ``strongly encourage the SEC 
and the MSRB to withdraw this part of the proposal, as it is not 
consistent with current practices and would diminish the quality of 
financial reporting and auditing standards.'' Various other issuers and 
issuer groups made arguments similar to those raised by the GFOA.\18\
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    \17\ See Brookfield, Connecticut, GFOA, Greendale, Inland, Joint 
Issuer Groups, Lower Merion, Michigan, NABL, NAHEFFA, NAST, OMFOA, 
Portland, Rock Hill, Rutherford, Tennessee, UGFOA and VGFOA.
    \18\ See Brookfield, Connecticut, Greendale, Inland, Joint 
Issuer Groups, Lower Merion, Michigan, NABL, NAHEFFA, NAST, OMFOA, 
Portland, Rock Hill, Rutherford, Tennessee, UGFOA and VGFOA.
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    Numerous issuers and issuer groups argued that the voluntary annual 
filing undertaking would likely become a de facto standard that issuers 
would feel compelled to meet.\19\ They noted that the accelerated 
production of financial information would create significant financial 
and personnel burdens that would likely have adverse consequences to 
issuers while providing questionable benefits to investors.\20\ Small 
issuers observed that their internal staffs are not able to support 
this timeframe and are given low priority by their auditors as compared 
to their larger clients.\21\ Portland stated that ``even if the City 
`staffed up' on its end, there are not a sufficient number of 
independent auditors available to conduct the auditing function within 
the 120-day time period.'' Rock Hill stated that auditing firms ``are 
increasingly less inclined to bid for governmental audits because of 
the specialized continuing education requirements and the perception 
that the work is not lucrative.''
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    \19\ See Brookfield, Connecticut, Inland, Joint Issuer Groups, 
NAHEFFA, NAST and VGFOA.
    \20\ See Brookfield, Connecticut, GFOA, Greendale, Inland, Joint 
Issuer Groups, NAHEFFA, NAST, OMFOA, Portland, UGFOA and VGFOA.
    \21\ See Brookfield, Greendale, Inland, NAHEFFA, OMFOA, 
Portland, Rock Hill, Rutherford, UGFOA and VGFOA.
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    Inland Empire expressed concern that the potential ``black eye'' 
for not making the voluntary annual filing undertaking could create 
pressure from elected officials to meet it that, in turn, could cause 
professional staff and their auditors to produce less accurate 
information just to meet the deadline. While not expressly opposing the 
voluntary annual filing undertaking, Connecticut questioned the 
usefulness of this element and expressed concern if this element is 
used by the market to screen issues. Many issuers stated that the 180 
day standard used by GFOA in connection with its CAFR program is a more 
appropriate timeframe.\22\ VGFOA cited difficulties in simultaneously 
meeting GFOA's CAFR timeframes, state law requirements and the existing 
annual financial undertaking in its continuing disclosure undertaking 
entered into pursuant to Rule 15c2-12. Several commentators noted 
various adjustments that are uniquely required to be made for 
governmental entities or conduit borrowers after the end of the fiscal 
year that make meeting the 120 day timeframe difficult or 
impossible.\23\ Tennessee reviewed various statistics on timing of 
preparation of audited statements and concluded that ``[s]electing a 
timeframe of 120 days without understanding the differences in 
reporting environments appears arbitrary and may unnecessarily limit 
the municipal market volume.'' Tennessee further noted that states have 
met to discuss ``timeliness barriers and ways of reducing the timeframe 
of financial reporting'' and requests that further study be undertaken. 
NAHEFFA noted that, since there are apparently no legal ramifications 
for failing to meet the deadline in an issuer's voluntary annual filing 
undertaking, nothing would ``preclude the issuer from effectively 
advertising the undertaking on EMMA, and as a result receiving 
preferred

[[Page 490]]

status, irrespective of actual compliance.''
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    \22\ See Inland, Michigan, Portland and UGFOA.
    \23\ See GFOA, Inland, Joint Issuer Groups, NAHEFFA, NAST, Rock 
Hill, Tennessee, UGFOA and VGFOA.
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    Hinsdale, however, noted that ``the proposed 120 day period for 
submitting annual financial information is a good start toward meeting 
the objective of making financial statements of governments timely and 
useful in the public securities market.'' GFOA stated that it 
``certainly could support a voluntary disclosure field indicating that 
a government was, in fact, in compliance with its continuing disclosure 
agreement obligations.''
    The ICI stated that it is ``particularly supportive'' of the 
voluntary annual filing undertaking proposal, although it continued to 
press for ``the establishment of a meaningful, mandatory timeframe for 
filing financial reports.'' ICI recommended, with regard to a mandatory 
standard, a 180-day deadline as an incremental improvement over the 
current industry practice of 270 days. SIFMA also supported the 
voluntary annual filing undertaking.
    The MSRB acknowledges and appreciates the detailed explanations 
provided by commentators on the original proposed rule change with 
respect to the existing difficulties and barriers to meeting the 120 
day timeframe of the voluntary annual filing undertaking as proposed in 
the original proposed rule change. The MSRB understands that a 
significant portion of the issuer and obligated person community is 
likely unable to make such a 120 day undertaking at this time and that 
such inability does not necessarily reflect problems with the issuer's 
or obligated person's credit or the quality of disclosures they make. 
As the MSRB had previously noted, this voluntary undertaking was 
originally proposed after consultation between the MSRB and Commission 
staff.\24\ After a careful review of the comments and further 
discussions with Commission staff on the voluntary annual filing 
undertaking, the MSRB understands that the Commission staff strongly 
believes that, given its voluntary nature, the undertaking to provide 
annual financial information within the originally proposed 120 day 
timeframe remains the appropriate undertaking for display on the EMMA 
Web portal.
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    \24\ See MSRB Notice 2009-44 (July 15, 2009).
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    In light of the commentators' widespread concerns regarding the 
attainability of the 120 day timeframe, the MSRB has determined to 
provide a transitional option for issuers and obligated persons to 
elect a 150 day undertaking as an alternative to the 120 day 
undertaking. This alternative election would provide issuers and 
obligated persons seeking to make the voluntary annual filing 
undertaking, but that are not currently able to meet a 120 day 
timeframe, with a reasonable opportunity to overcome existing barriers 
to more rapid dissemination of financial information in an orderly and 
cost-effective manner. Commission staff has indicated that an 
alternative election of 150 days after fiscal year end would be an 
appropriate transitional alternative but that this option should be 
available only on a temporary basis to provide a pathway toward 
achieving the 120 day timeframe.
    The MSRB has accordingly modified the original proposed rule change 
to allow the election, through December 31, 2013, of a transitional 150 
day alternative, which election would be displayed on the EMMA Web 
portal through June 30, 2014 unless the issuer or obligated person 
changes or rescinds such undertaking. On and after January 1, 2014, the 
transitional 150 day undertaking option would no longer be available 
for selection. An issuer or obligated person that makes a transitional 
150 day undertaking could convert such election to a 120 day 
undertaking at any time. Of course, an issuer or obligated person that 
believes it is able to meet the 120 day timeframe could make the 120 
day undertaking immediately upon the effectiveness of the proposed rule 
change. The fact that an issuer or obligated person has entered into 
such an undertaking, including the timeframe elected, would be 
prominently disclosed on the EMMA Web portal as a distinctive 
characteristic of the securities to which such undertaking applies. The 
EMMA Web portal would not include information regarding the 
availability or existence of the voluntary annual filing undertaking in 
those cases where an issuer or obligated person does not make a 
voluntary annual filing undertaking.
    The MSRB reiterates that the voluntary annual filing undertaking 
would in fact be voluntary and that an issuer or obligated person that 
makes a voluntary annual filing undertaking may later rescind such 
undertaking. The MSRB contemplates that the making of a voluntary 
annual filing undertaking through EMMA by an issuer or obligated person 
would reflect the bona fide intent of issuer or obligated person to 
perform as undertaken but would not, by itself, necessarily create a 
contractual obligation of such issuer or obligated person. Unless the 
issuer or obligated person incorporates the 120 day undertaking or 
transitional 150 day undertaking as an obligation under its continuing 
disclosure agreement, the MSRB would view the issuer's or obligated 
person's performance pursuant to such undertaking as distinct from any 
performance obligations under its continuing disclosure agreement 
entered into consistent with Rule 15c2-12. By making a voluntary annual 
filing undertaking, an issuer that has a contractual obligation under 
its continuing disclosure agreement to provide its annual financial 
information within a longer timeframe would be indicating its intent to 
make a good faith effort to submit its annual financial information to 
EMMA more rapidly than it is otherwise obligated under the continuing 
disclosure agreement.
    The MSRB would include an explanation of the nature of the 
voluntary annual filing undertaking on the EMMA Web portal. In 
particular, the MSRB would disclose that the voluntary annual filing 
undertaking is voluntary, is solely indicative of the timing by which 
the annual financial information is intended to be made available and 
is not indicative of the accuracy or completeness of the annual 
financial information or of the financial health of the issuer or 
obligated person. Further, the MSRB would disclose that a decision by 
an issuer or obligated person not to make such an undertaking does not 
raise a negative inference in regard to the accuracy or completeness of 
its annual financial information or of the financial health of the 
issuer or obligated person.
Voluntary GAAP Undertaking
    The original proposed rule change would amend the EMMA continuing 
disclosure service to permit issuers and obligated persons to 
undertake, on a voluntary basis, to prepare audited financial 
statements pursuant to GAAP as established by GASB. This would consist 
of a voluntary undertaking by an issuer or obligated person (in the 
case of an obligated person that is a state or local governmental 
entity), either at the time of a primary offering or at any time 
thereafter, that the issuer or obligated person will prepare its 
audited financial statements in accordance with GAAP as established by 
GASB. This undertaking could be included within the continuing 
disclosure undertaking entered into consistent with Rule 15c2-12 or 
could be made in a separate agreement. Issuers and obligated persons 
would indicate the existence of such an undertaking through a data 
input election on EMMA. No document would be required to be submitted 
to EMMA in connection with this undertaking. The fact that an issuer or 
obligated person has entered into such an undertaking would be 
prominently disclosed on the EMMA

[[Page 491]]

Web portal as a distinctive characteristic of the securities to which 
such undertaking applies and the MSRB would include an explanation of 
the undertaking on the EMMA Web portal. If an issuer or obligated 
person that has made an undertaking later rescinds such undertaking, 
the issuer or obligated person would be able to disclose such action 
through EMMA. The MSRB would not confirm the accuracy of this 
undertaking and would not review or confirm the conformity of submitted 
audited financial statements to GAAP.
    Commentators generally supported permitting issuers to make an 
undertaking with respect to their use of GAAP according to GASB, 
although several commentators provide suggestions. GFOA supported a 
voluntary submission with regard to preparation of financial statements 
according to GAAP but did not support stating the standard used, noting 
that some submitters may be subject to FASB standards instead. The 
Joint Issuer Groups and NAST agreed with GFOA. NAHEFFA also noted that 
FASB standards, rather than GASB standards, are applicable to 501(c)(3) 
entities.
    The MSRB agrees that many obligated persons may be subject to FASB 
standards rather than GASB standards and therefore has modified the 
voluntary GAAP undertaking to permit the submitter to select either the 
GASB or FASB standard for GAAP.
    NABL expressed concern that an issuer that does not elect a 
voluntary GAAP undertaking will be stigmatized as less creditworthy 
even where they follow other standards, including statutory standards, 
and notes that financial statements are accompanied by a statement of 
the accounting principles applied. NAHEFFA stated that the EMMA Web 
site should be organized so that no improper inference is drawn by a 
charitable organization, as a conduit borrower, not making the 
voluntary GAAP undertaking. While not opposing the voluntary GAAP 
undertaking, Connecticut questioned the usefulness of this element and 
stated that use of GASB GAAP may not always be answerable on a yes-or-
no basis and that, since it prepares its information on a modified GAAP 
basis, it would probably not be able to make this undertaking.
    The MSRB believes that permitting investors to understand the 
standards applied to the preparation of an issuer's or obligated 
person's financial statements would be valuable but acknowledges that 
it is important that information about the nature of the voluntary GAAP 
undertaking should be disclosed. The fact that an issuer or obligated 
person has entered into a voluntary GAAP undertaking, including whether 
the financial statements are to be prepared pursuant to GASB or FASB 
standards, would be prominently disclosed on the EMMA Web portal as a 
distinctive characteristic of the securities to which such undertaking 
applies. The EMMA Web portal would not include information regarding 
the availability or existence of the voluntary GAAP undertaking in 
those cases where an issuer or obligated person does not make a 
voluntary GAAP undertaking. The MSRB would include an explanation of 
the nature of the voluntary GAAP undertaking on the EMMA Web portal. In 
particular, the MSRB would disclose that the voluntary GAAP undertaking 
is voluntary, is solely indicative of the accounting standards that the 
issuer or obligated person intends to use in preparing its financial 
statements and is not indicative of the accuracy or completeness of the 
financial statements or of the financial health of the issuer or 
obligated person. Further, the MSRB would disclose that a decision by 
an issuer or obligated person not to make such an undertaking does not 
raise a negative inference in regard to the accuracy or completeness of 
its financial statements or of the financial health of the issuer or 
obligated person. The MSRB contemplates that the making of a voluntary 
GAAP undertaking through EMMA by an issuer or obligated person would 
reflect the bona fide intent of the issuer or obligated person to 
perform as undertaken but would not, by itself, necessarily create a 
contractual obligation of such issuer or obligated person.
Issuer/Obligated Person URL
    The original proposed rule change would amend the EMMA continuing 
disclosure service to permit issuers and obligated persons to post the 
URLs for their Internet-based investor relations or other repository of 
financial/operating information. The URL of an issuer's or obligated 
person's investor relations or other repository of financial/operating 
information would be entered through a text/data input field on EMMA 
and no document would be required to be submitted to EMMA.
    Commentators generally supported permitting issuers and obligated 
persons to provide a hyperlink to their investor relations or similar 
Web page, with Connecticut noting that this hyperlink may be more 
useful to the general public than CUSIP-based EMMA filings for general 
financial information that is not issue-specific. GFOA observed the 
importance of guidance being provided on responsibilities with regard 
to posting of hyperlinks on EMMA and that issuers be given an ability 
to correct or withdraw URLs as necessary. SIFMA supported the posting 
of URLs for continuing disclosures but expresses concerns about their 
use during a primary offering due to potential liability issues.
    The MSRB has determined to retain this element as proposed. Issuers 
and obligated persons will be able to make appropriate changes to the 
URLs posted through EMMA. The hyperlinks will be posted in a manner 
designed to segregate access to the URL from postings of official 
statements for new issues.
GFOA's CAFR Certificate
    The original proposed rule change would amend the EMMA continuing 
disclosure service to permit issuers to submit the Certificate of 
Achievement for Excellence in Financial Reporting awarded by GFOA in 
connection with the preparation of its CAFR. The original proposed rule 
change noted that GFOA awards this certificate to a government if, 
based on a review process, its CAFR substantially complies with both 
GAAP and GFOA's CAFR program policy. According to current GFOA 
eligibility requirements, financial reports must include all funds and 
component units of the governmental entity, in accordance with GAAP, in 
order to be considered a CAFR. If an issuer were to submit a copy of 
the GFOA certificate to EMMA, the EMMA Web portal would prominently 
disclose the issuer's receipt thereof as a distinctive characteristic 
of the applicable securities and the MSRB would include an explanation 
of the certificate on the EMMA Web portal. The MSRB would not confirm 
the validity of any such certificate submitted to EMMA.
    GFOA recommended that EMMA disclose the basis for the certificate 
and provide a link to the GFOA's Web pages describing the CAFR program. 
GFOA also encouraged the MSRB to consider permitting a similar 
submission for issuers that have received GFOA's Distinguished Budget 
Presentation Award. NABL questioned whether investors would understand 
that this certificate recognizes the issuer's application of accounting 
principles but is not an affirmation of its creditworthiness. NABL also 
noted that some issuers that have received the GFOA certificate have 
been the subject of Commission enforcement actions for misleading 
disclosure, including misleading financial statements covered by such 
certificate. NAHEFFA noted

[[Page 492]]

that the GFOA certificate is generally inapplicable to conduit 
borrowings. While not opposing the disclosure of the GFOA certificates, 
Connecticut questioned the usefulness of this element.
    The MSRB has determined not to proceed with this element of the 
original proposed rule change at this time. The MSRB notes that CAFRs 
are already frequently submitted to EMMA by issuers as the audited 
financial statements element of their annual financial information 
filings, and in most cases the issuers include the GFOA certificate in 
the submitted CAFR. As part of the MSRB's standard EMMA update and 
maintenance process, the MSRB expects to modify the input process for 
all continuing disclosure submissions to permit issuers and obligated 
persons to input specific document titles and/or subcategories, which 
would permit submitters of CAFRs to indicate that their submitted 
audited financial statements are CAFRs. This document title/subcategory 
would be displayed on the EMMA Web portal.

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

    Within 35 days of the date of 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 such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-MSRB-2009-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-MSRB-2009-10. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission,\25\ 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the MSRB. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MSRB-2009-10 and should be 
submitted on or before January 26, 2010.
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    \25\ The text of Amendment No. 1 to the proposed rule change is 
available on the Commission's Web site at http://www.sec.gov/.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-31206 Filed 1-4-10; 8:45 am]
BILLING CODE 8011-01-P