[Federal Register Volume 87, Number 133 (Wednesday, July 13, 2022)]
[Notices]
[Pages 41846-41851]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14881]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95208; File No. SR-MSRB-2022-05]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change Consisting of
Amendments to MSRB Rule G-34 To Better Align the CUSIP Requirements for
Underwriters and Municipal Advisors With Current Market Practices
July 7, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 1, 2022 the Municipal Securities
Rulemaking Board (``MSRB'' or ``Board'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change as 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).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The MSRB filed with the Commission a proposed rule change
consisting of amendments to MSRB Rule G-34, on CUSIP numbers, new
issue, and market information requirements (the ``proposed rule
change''). The proposed rule change would make minor amendments to
better align Rule G-34's requirements for obtaining CUSIP numbers with
the process followed by market participants and facilitate compliance
with MSRB Rule G-34 by streamlining the rule text.
If the Commission approves the proposed rule change, the MSRB will
publish a Notice announcing the effective date of the proposed rule
change no later than 10 days following Commission approval. The
effective date will be no later than 30 days following Commission
approval.
The text of the proposed rule change is available on the MSRB's
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2022-Filings.aspx, 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
Among other things, MSRB Rule G-34 on CUSIP numbers, new issue, and
market information requirements establishes requirements relating to
CUSIP numbers for brokers, dealers and municipal securities dealers
(collectively and individually ``dealers'') acting as underwriters and
for municipal advisors (dealers and municipal advisors together,
``regulated entities''). In particular, Rule G-34(a)(i)(A) requires
dealers acting as underwriters and municipal advisors advising the
issuer with respect to a competitive sale of a new issue of municipal
securities to apply for a CUSIP number or numbers based on eight
specified items of information about the new issue.\3\ MSRB Rule G-
34(a)(i)(A)(5) addresses the obligations to update application
information that has changed. The rule further stipulates details on
how these regulated entities must apply for CUSIP numbers in detail
that includes specific data points to be included in the application
for obtaining CUSIP numbers.
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\3\ These eight items are set forth in current MSRB Rule G-
34(a)(i)(A)(4)(a) through (h).
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In 2019, the MSRB announced priority rules to be considered as part
of its ongoing retrospective rule review. The goal of the review was to
help ensure that: MSRB rules and interpretive guidance are effective in
their principal goal of protecting investors, issuers and the public
interest; not overly burdensome; clear; harmonized with the rules of
other regulators, as appropriate; and reflective of current market
practices.\4\ In this announcement, the MSRB listed MSRB Rule G-34 as a
rule to be prioritized for
[[Page 41847]]
review.\5\ The MSRB sought comment in 2019 on MSRB Rule G-34, but the
following year determined to maintain the obligations under the rule
with respect to the responsible party for obtaining a CUSIP number in
new issues.\6\
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\4\ See MSRB Notice 2019-04, MSRB Identifies Priority Rules for
Retrospective Rule Review (February 5, 2019).
\5\ Id. at 3.
\6\ See MSRB Notice 2019-08, Request for Comment on MSRB Rule G-
34 Obligation of Municipal Advisors to Apply for CUSIP Numbers When
Advising on Competitive Sales (February 27, 2019). Comments
submitted in response to Regulatory Notice 2019-08 are available
here: https://msrb.org/Rules-and-Interpretations/Regulatory-Notices/2019/2019-08?c=1.
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In recent years, the MSRB has heard from industry members through
stakeholder engagement that MSRB Rule G-34's requirements on obtaining
CUSIP numbers, in its current form, do not accurately reflect the
actual process that an underwriter or municipal advisor must go through
when obtaining a CUSIP number. This discrepancy further complicates
efforts when a municipal advisor or underwriter creates written
supervisory procedures that are mapped to the rule text but do not
accurately reflect the actual or logistical process that they must
undertake for appropriately obtaining a CUSIP number. After reviewing
rule requirements relating to obtaining a CUSIP number, the MSRB is
submitting this proposed rule change to: modernize the rule to better
align with the realities of obtaining a CUSIP number; provide
flexibility in the rule; and clear up areas of confusion for
underwriters and municipal advisors attempting to comply with the rule.
In summary, the proposed rule change:
specifies that CUSIP applications must be made to the
Board's designee (and not the Board itself);
removes the obligation for municipal advisors providing
advice with respect to a competitive offering to apply for the CUSIP
number by no later than one business day after dissemination of a
notice of sale in favor of a more flexible standard that still
obligates the application to be made within sufficient time to ensure
timely CUSIP number assignment;
removes language dictating the precise content of a CUSIP
number application that the Board feels would more appropriately be
left to the Board's designee for receiving and reviewing such
applications; and
explicitly provides that certain obligations set forth in
the rule do not apply when CUSIP numbers have been preassigned.
Designee of the Board
MSRB Rule G-34(a)(i)(A) currently requires an underwriter or
municipal advisor to obtain CUSIP numbers through an application in
writing to the Board or its designee. The proposed rule change amends
this language by providing that underwriters and municipal advisors
must apply to the Board's designee and removing the language in the
rule text that makes reference to the Board in that requirement.\7\
This revised language is designed to avoid the potential for confusion
associated with the current rule text and to more clearly convey the
MSRB's expectations with respect to the process of obtaining a CUSIP
number. The Board does not currently assign CUSIP numbers to municipal
securities; underwriters and municipal advisors may only obtain one by
application to the only entity that provides these identifiers, CUSIP
Global Services. The Board's current designee is CUSIP Global
Services.\8\ This designation would remain unchanged by the proposed
rule change and would be reflected in new Supplementary Material .01.
If CUSIP numbers become available from another source or another
identifier for municipal securities becomes market practice at some
point in the future, the MSRB would notify the market of a decision to
modify the designee via publication of an MSRB regulatory notice.
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\7\ The proposed rule change also makes similar amendments to
Rule G-34(a)(i)(A)(5) and G-34(a)(i)(D) to remove references to the
Board and make clear that the CUSIP number application discussed in
those paragraphs must be made to the Board's designee.
\8\ In 1983, the Board designated the CUSIP Service Bureau as
its designee to assign CUSIP numbers to new issues of municipal
securities. See MSRB Reports, Vol. 3, No. 3 at 11 (May 1983),
available at https://msrb.org/-/media/Files/MSRB-Reports/1983/
May1983-Volume3--Number3.ashx. The CUSIP Service Bureau has since
changed its name to CUSIP Global Services. Pursuant to a contract
between the CUSIP Service Bureau and the MSRB, all references to the
CUSIP Service Bureau were amended to read CUSIP Global Services.
Accordingly, CUSIP Global Services (formerly known as the CUSIP
Service Bureau) remains the MSRB's designee.
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In addition, as it is the Board's designee, and not the Board, that
controls the CUSIP number application process, the Board proposes to
remove the in-writing requirement for the application made for
obtaining CUSIP numbers. Because the Board does not receive or review
CUSIP applications, it believes that the manner in which an applicant
applies for CUSIP numbers is best left to the entity that reviews
applications and assigns the CUSIP number (i.e., the Board's designee).
One Business Day Obligation
MSRB Rule G-34(a)(i)(A)(3) states that a municipal advisor advising
the issuer with respect to a competitive sale of a new issue of
municipal securities shall make an application by no later than one
business day after dissemination of a notice of sale or other such
request for bids. The proposed rule change removes the obligation to
make such application by no later than one business day since it is not
always practical for municipal advisors to comply given the realities
of the marketplace and therefore may place an undue burden on municipal
advisors. The rule already obligates the application to be made at a
time sufficient to ensure final CUSIP number assignment occurs prior to
the award of the issue. The MSRB believes that this language is
sufficient to ensure that any such application is timely without
dictating a more burdensome approach of requiring a specific numeric
time obligation. Additionally, the MSRB understands that, from an
operational perspective, it may be impracticable for municipal advisors
to apply for a CUSIP number within one business day after dissemination
of a notice of sale, as currently required by Rule G-34(a)(i)(A)(3).\9\
Accordingly, removal of this language would better align the rule text
with the operational process followed by municipal advisors in
connection with their CUSIP applications.
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\9\ See Letter from Susan Gaffney, Executive Director, NAMA,
dated May 28, 2019 available at: https://www.msrb.org/rfc/2019-08/gaffney.pdf (stating that there is an inherent timing inconsistency
with respect to Rule G-34(a)(i)(A)(3) as it requires application for
CUSIP numbers no later than one business day after the Notice of
Sale, which will almost always be before the identity of the
investors are known, and therefore the [municipal advisor] could not
reasonably obtain the investors' written representations) (``NAMA
Letter'').
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Information To Be Provided When Applying for CUSIP Numbers
MSRB Rule G-34(a)(i)(A)(4) lists specific data points that must be
provided when applying for CUSIP numbers. These data points include the
complete name of issue and series designation, if any; interest rate(s)
and maturity date(s) (provided, however, that, if the interest rate is
not established at the time of application, it may be provided at such
time as it becomes available); dated date; type of issue (e.g., general
obligation, limited tax or revenue); type of revenue, if the issue is a
revenue issue; details of all redemption provisions; the name of any
company or other person in addition to the issuer obligated, directly
or indirectly, with respect to the debt
[[Page 41848]]
service on all or part of the issue (and, if part of the issue, an
indication of which part); and any distinction(s) in the security or
source of payment of the debt service on the issue, and an indication
of the part(s) of the issue to which such distinction(s) relate.
The proposed rule change removes these data points from the rule
and instead provides that underwriters and municipal advisors shall
provide the information required by the Board's designee in connection
with their CUSIP application. The proposed rule change also makes a
similar amendment to Rule G-34(a)(i)(D), removing from the rule text
the three specified pieces of information that must be included in an
application to obtain a CUSIP number in connection with certain new
issuances that refund part of an outstanding issuance. The MSRB
believes that Rule G-34 should not contain specific data points to be
provided to its designee, as the MSRB does not control the specifics of
the application process, nor does it make a determination on the
sufficiency of an application to receive CUSIP numbers. The MSRB
believes that the entity providing CUSIP numbers, the Board's designee,
is the appropriate entity to dictate what individual data points must
be provided with an application for CUSIP numbers in order to
sufficiently evaluate an application. The MSRB believes that this
flexibility will help create a rule that is less likely to become stale
over time.
CUSIP Pre-Assignment
The proposed rule change specifies that the Rule G-34(a)(i)(A)(3)
obligation to apply for a CUSIP number only applies where no CUSIP
numbers have been pre-assigned. The Board believes that this aligns
with the common understanding among market participants that there is
no obligation to seek a CUSIP number where one has already been pre-
assigned. A similar amendment to Rule G-34(a)(i)(C) provides that the
provisions of Rule G-34(a)(i) regarding the assignment and affixture of
CUSIP numbers do not apply with respect to any new issue of municipal
securities on which CUSIP numbers have been preassigned.
2. Statutory Basis
The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2) of the Exchange Act,\10\ which provides that the
Board shall propose and adopt rules to effect the purposes of this
title with respect to transactions in municipal securities effected by
brokers, dealers, and municipal securities dealers and advice provided
to or on behalf of municipal entities or obligated persons by brokers,
dealers, municipal securities dealers, and municipal advisors with
respect to municipal financial products, the issuance of municipal
securities, and solicitations of municipal entities or obligated
persons undertaken by brokers, dealers, municipal securities dealers,
and municipal advisors.
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\10\ 15.U.S.C. 78o-4(b)(2).
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Section 15B(b)(2)(C) of the Exchange Act \11\ provides that the
MSRB's rules shall 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 and municipal
financial products, to remove impediments to and perfect the mechanism
of a free and open market in municipal securities and municipal
financial products, and, in general, to protect investors, municipal
entities, obligated persons, 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 the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Exchange Act \12\ because the proposed rule
change would foster cooperation and coordination with persons engaged
in regulating, processing information with respect to and facilitating
transactions in municipal securities. It does so by modernizing the
rule to align with the realities of the process followed by
underwriters and municipal advisors in obtaining a CUSIP number,
allowing the Board's designee to dictate the details of the CUSIP
application process without the distraction of the rule text describing
the application process that may not necessarily reflect the designee's
process, and creating a more efficient CUSIP application process more
generally. Specifically, the MSRB believes that by removing potential
ambiguities as to the identity of the entity to whom CUSIP applications
should be sent, specifying directly in the rule that such application
should be sent to CUSIP Global Services, and allowing CUSIP Global
Services to dictate the details of the CUSIP application process, the
MSRB is fostering coordination with those processing information with
respect to municipal securities and fostering cooperation with
underwriters and municipal advisors by facilitating compliance with a
clearer rule.
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\12\ Id.
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The MSRB believes that the proposed rule change also will remove
impediments to a free and open municipal securities market because it
will align MSRB Rule G-34's obligations associated with obtaining CUSIP
numbers with the actual process an underwriter or municipal advisor
must undertake when obtaining CUSIP numbers for new issues of municipal
securities. It would do so by removing burdens on underwriters and
municipal advisors that result in no appreciable benefit for the market
and promoting clarity of the rule and compliance expectations. The MSRB
believes that removal of these burdens may facilitate better and more
timely compliance with the rule. For example, in some cases, the
proposed rule change may facilitate more timely applications for CUSIP
numbers. By removing potential ambiguities as to the identity of the
entity to whom CUSIP number applications should be made, underwriters
and municipal advisors are less likely to spend time trying to learn to
whom such applications should be made and potentially are more likely
to make their applications in a timely manner.
Additionally, the Board sees no benefit to requiring municipal
advisors to apply for a CUSIP number within a specific numerical time
frame--particularly in circumstances where it may be impractical or
impossible to do so--where the rule already requires that the
application must be made within sufficient time to obtain a CUSIP
number. By removing this burden and by specifying that CUSIP
applications are not necessary for any new issue on which CUSIP numbers
have been preassigned, the proposed rule change would reduce compliance
burdens and permit municipal advisors to spend the time that would have
been spent trying to comply with those burdens in service of their
municipal entity and obligated person clients instead. The MSRB again
believes that removal of these obligations does not negatively impact
investors, issuers or the public interest, but does facilitate
compliance and the establishment of more practical written supervisory
procedures for underwriters and municipal advisors that reflect the
actual process followed in connection with the process to obtain CUSIP
numbers.
The MSRB also believes that the proposed rule change will remove
impediments to a free and open municipal securities market because it
would create a rule that is less likely to become stale over time. As
market practices evolve, rule text that specifies detailed information
that must be
[[Page 41849]]
included in a CUSIP application or that otherwise governs the details
of the CUSIP application process may become impediments to an efficient
CUSIP application process, instead of facilitating that very process.
The MSRB believes that the proposed rule change provides the
appropriate degree of flexibility in the rule text.
Section 15B(b)(2)(L)(iv) of the Exchange Act \13\ requires that
rules adopted by the Board not impose a regulatory burden on small
municipal advisors that is not necessary or appropriate in the public
interest and for the protection of investors, municipal entities, and
obligated persons, provided that there is robust protection of
investors against fraud. The MSRB believes that the proposed rule
change is consistent with Section 15B(b)(2)(L)(iv) of the Exchange Act
\14\ because the proposed rule change would relieve all municipal
advisors, including small municipal advisors of the same compliance
burdens and would not impose any new compliance burdens on municipal
advisors.
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\13\ 15 U.S.C. 78o-4(b)(2)(L)(iv).
\14\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The MSRB believes that the proposed rule change does not impose a
burden on competition. Section 15B(b)(2)(C) of the Act \15\ requires
that MSRB rules not be designed to impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act. The
MSRB has considered the economic impact associated with the proposed
rule change, including a comparison to reasonable alternative
regulatory approaches, relative to the baseline.\16\ The MSRB believes
that the proposed rule change would lessen the compliance burden for
underwriters and municipal advisors, and encourage fair competition by
reducing confusion and ensuring compliance with existing CUSIP number
requirements. Furthermore, the proposed rule change would apply equally
to all MSRB regulated entities. The MSRB believes the proposed rule
change would relieve a burden on competition without any erosion of
protection for issuers and investors. Therefore, the MSRB believes the
proposed rule change would not impose any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the
Exchange Act.
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\15\ 15 U.S.C. 78o-4(b)(2)(C).
\16\ See Policy on the Use of Economic Analysis in MSRB
Rulemaking, available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. In evaluating whether there was a
burden on competition, the Board was guided by its principles that
required the Board to consider costs and benefits of a rule change,
its impact on capital formation and the main reasonable alternative
regulatory approach.
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The purpose of amending Rule G-34 is to better align the CUSIP
requirements for underwriters and municipal advisors with current
market practices, clarify the identity of the Board's designee for
CUSIP number applications, and modernize Rule G-34 by reducing
prescriptive requirements on how applicants obtain CUSIP numbers. The
proposed rule change would accurately reflect that the MSRB does not
assign CUSIP numbers. The proposed rule change would also reflect the
Board's designee as CUSIP Global Services. Additionally, the proposed
amendments would remove eight currently identified data fields for
CUSIP number application and instead require regulated entities to
provide the information required by the Board's designee, CUSIP Global
Services, to determine the appropriate information that an applicant
shall provide when applying to receive CUSIP numbers.\17\ Finally, the
proposed rule change would eliminate the no later than one business day
after the dissemination of a notice of sale or other such request for
bids time limit requirement for obtaining CUSIP numbers by municipal
advisors, though it would continue to require municipal advisors to
obtain CUISP numbers at a time sufficient to ensure final CUSIP number
assignment occurs prior to the award of the issue. As the MSRB is not,
and never was, involved in assigning CUSIP numbers to applicants,
amending the rule text to specify that the Board's designee assigns
CUSIP numbers should not affect the practical implementation of Rule G-
34. The remainder of the MSRB's statement on burden on competition
mostly focuses on the removal of eight data points and the time limit
required for CUSIP registration.
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\17\ The current obligations require CUSIP number applicants to
provide (a) complete name of issue and series designation, if any;
(b) interest rate(s) and maturity date(s); (c) dated date; (d) type
of issue (e.g., general obligation, limited tax or revenue); (e)
type of revenue, if the issue is a revenue issue; (f) details of all
redemption provisions; (g) the name of any company or other person
in addition to the issuer obligated, directly or indirectly, with
respect to the debt service on all or part of the issue; and (h) any
distinction(s) in the security or source of payment of the debt
service on the issue.
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For this filing, the current iteration of Rule G-34, where MSRB-
registered underwriters and municipal advisors are required to obtain
CUSIP numbers for competitive sales, is used as the baseline to
evaluate the costs and benefits for the proposed amendments, as well as
other reasonable regulatory alternatives.
The MSRB considered and assessed a couple of reasonable regulatory
alternatives but determined the proposed rule change is superior to
these alternatives. One alternative would be to modify the data fields
requirements for CUSIP number applicants to be consistent with what the
Board's designee, CUSIP Global Services requires. There are currently
eight data elements proscribed in the rule.\18\ However, CUSIP Global
Services, as an independent entity from the MSRB, may amend the
requirements periodically in the future. In this alternative, the MSRB
would have to amend Rule G-34 whenever there is a change initiated by
CUSIP Global Services. This would be an unpredictable alternative which
may require the MSRB to revise Rule G-34 on a regular basis; in
addition, it would create inconsistency for a period of time before the
MSRB is able to revise Rule G-34.
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\18\ The eight data elements are listed in footnote 17.
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Another alternative the MSRB considered was to keep a numeric time
limit requirement for municipal advisors applying for CUSIP numbers in
place but expand the time limit from no later than one business day to
more than one business day to provide applicants more flexibility.
However, since the MSRB is not involved in any aspect of the CUSIP
number application process, the MSRB would not be able to determine
what the ideal application time limit would be other than being prior
to the award of an issue. As a result, the MSRB determined that
eliminating the no later than one business day time limit requirement
would be an even better option than simply extending the time limit.
Benefits and Costs
The MSRB believes the proposed amendments to Rule G-34, on
aggregate, would reduce the burden for underwriters and municipal
advisors by providing more clarity and aligning CUSIP number
applicants' responsibility with the real-world practice, without any
erosion of protection for issuers and investors.
Benefits
The proposed rule change to Rule G-34 would reduce the uncertainty
and challenge in collecting multiple data points by CUSIP number
applicants which may not be necessary for, or helpful to, the Board's
designee at the time of CUSIP obtainment. As it is
[[Page 41850]]
currently written, all underwriters and municipal advisors, as part of
a competitive sale, are required to provide security level information
such as revenue source, redemption provisions and any obligor related
information. This information may not be in line with the information
required by the entity providing CUSIP numbers. The proposed rule
change would reduce the need to source each data point by removing the
list of information that must be given to the Board's designee and
simply replacing it with the obligation to provide the Board's designee
with the information which the Board's designee requires to obtain a
CUSIP number. Additionally, if the Board's designee pre[hyphen]assigns
CUSIP numbers to an issuance, the regulated entity would not need to
specify the eight data fields simply to evidence its compliance with
Rule G-34 requirements.
The proposed rule change also would remove uncertainty by
explicitly identifying CUSIP Global Services as the Board's designee
and reduce the burden on municipal advisors by eliminating the time
limit for CUSIP number application, which may not be practical in the
real world.
Costs
The MSRB believes the changes to Rule G-34 would have minimal costs
associated with the amendments. One potential upfront cost would be for
underwriters and municipal advisors to update their policies and
procedures. The MSRB believes the revisions would be straightforward
and should not take much time and effort to implement. The ongoing
compliance costs also would be reduced, as the proposed rule change is
intended to reduce the compliance burden on underwriters and municipal
advisors.
In addition, there is a possibility that the proposed rule change
may lead to more usage of express requests for CUSIP numbers with CUSIP
Global Services than the current state, if municipal advisors delay
their CUSIP number applications until shortly before the competitive
bidding process. For example, it currently takes CUSIP Global Services
approximately one to two business days to process a standard CUSIP
request,\19\ which costs $192 for the first maturity, plus $27 for each
additional maturity or class per series in the same application/
offering document in 2022.\20\ The express request is more expensive,
with a 50% surcharge, but will result in a CUSIP number produced within
one hour of the request. While the MSRB does not have the information
to estimate the future usage of express requests,\21\ there is a chance
that eliminating the no later than one business day time limit required
to obtain a CUSIP number may result in more CUSIP numbers being
obtained using the express request process, which would be 50% more
expensive than the standard process. The MSRB believes, however, with
the current CUSIP number application process in place since June 2018,
most municipal advisors are unlikely to change the timing of obtaining
CUSIP numbers.
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\19\ Internal analysis conducted by the MSRB using data on CUSIP
issuance obtained from CUSIP Global Services for select months in
2018, 2019, 2020 and 2021.
\20\ See https://www.cusip.com/pdf/FeesforCUSIPAssignment.pdf.
\21\ As of January 2021, less than 9% of all CUSIP numbers were
obtained via the express request process, based on internal analysis
conducted by the MSRB using data on CUSIP issuance obtained from
CUSIP Global Services.
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Effect on Competition, Efficiency and Capital Formation
At present, the MSRB is unable to quantitatively evaluate the
magnitude of efficiency gains or losses, or the impact on capital
formation but believes that the benefits outweigh the costs. The MSRB
believes that the proposed rule change may improve the operational
efficiency of the municipal securities market by aligning the
requirements with the real-world practice, promoting consistency, and
reducing potentially misaligned requirements. Additionally, the MSRB
believes the proposed rule change would encourage fair competition by
reducing confusion and ensuring compliance with existing CUSIP number
requirements. Furthermore, a smooth and efficient process for CUSIP
number applications also helps ensure a successful onset of secondary
market trading, which would benefit investors seeking to change their
positions in newly issued municipal securities. This would in turn
benefit issuers by potentially lowering an issuance's liquidity risk
premium, which would also benefit the capital formation process.
Finally, the proposed rule change would apply equally to all MSRB
regulated entities. Accordingly, the MSRB believes the proposed rule
change would relieve a burden on competition without any erosion of
protection for issuers and investors.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Board did not specifically solicit comments on the proposed
rule change to MSRB Rule G-34. However, as previously referenced, the
Board did seek comment on MSRB Rule G-34 more generally as part of its
retrospective rule review initiative in 2017 \22\ and 2019.\23\
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\22\ See MSRB Notice 2017-05, Request for Comment on Draft
Amendments to Clarifications of MSRB Rule G-34, on Obtaining CUSIP
Numbers (March 1, 2017). Comments submitted in response to
Regulatory Notice 2017-05 are available here: https://msrb.org/Rules-and-Interpretations/Regulatory-Notices/2017/2017-05?c=1. See
MSRB Notice 2017-11, Second Request for Comment on Draft Amendments
to and Clarifications of MSRB Rule G-34, on Obtaining CUSIP Numbers
(June 1, 2017). Comments submitted in response to Regulatory Notice
2017-11 are available here: https://msrb.org/Rules-and-Interpretations/Regulatory-Notices/2017/2017-11?c=1.
\23\ See MSRB Notice 2019-08, Request for Comment on MSRB Rule
G-34 Obligation of Municipal Advisors to Apply for CUSIP Numbers
When Advising on Competitive Sales (February 27, 2019). Comments
submitted in response to MSRB Notice 2019-08 are available here:
https://msrb.org/Rules-and-Interpretations/Regulatory-Notices/2019/2019-08?c=1.
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In response to the 2019 request for comment, NAMA was of the view
that Rule G-34(a)(i)(A)(3) presents a timing inconsistency insofar as
that section of the rule requires application for CUSIP numbers no
later than one business day after the Notice of Sale. NAMA noted that
this will almost always be before the identity of the investors are
known, and therefore before a municipal advisor could reasonably obtain
written representations from investors.\24\ The MSRB believes that the
proposed rule change's removal of the one business day requirement
would remove the timing inconsistency raised by NAMA. The MSRB does not
believe that the remaining comments received in response to the 2017 or
2019 requests for comment are applicable to the proposed rule change.
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\24\ NAMA Letter at 3.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period of up to 90 days (i) as
the Commission may designate 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 or disapprove such proposed rule change, or
[[Page 41851]]
(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 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 email to [email protected]. Please include
File Number SR-MSRB-2022-05 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549.
All submissions should refer to File Number SR-MSRB-2022-05. This file
number should be included on the subject line if email 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 website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MSRB-2022-05 and should be submitted on
or before August 3, 2022.
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\25\ 17 CFR 200.30-3(a)(12).
For the Commission, pursuant to delegated authority.\25\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14881 Filed 7-12-22; 8:45 am]
BILLING CODE 8011-01-P