Federal Register / Vol. 74, No. 158 / Tuesday, August 18, 2009 / Notices 41771 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 3 15 U.S.C. 78o–4(b)(2)(C). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60487; File No. SR–MSRB– 

2009–12] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing of Proposed 

Rule Change Relating to Amendments 

to Rule G–11(i) (Settlement of 

Syndicate or Similar Account), Rule G– 

11(j) (Payment of Designations), and 

Rule G–12(i) (Settlement of Joint or 

Similar Account) 

August 12, 2009. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 6, 

2009, the Municipal Securities 

Rulemaking Board (‘‘MSRB’’ or 

‘‘Board’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’ 

or ‘‘SEC’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The MSRB has filed with the 

Commission proposed amendments to 

Rule G–11(i) (settlement of syndicate or 

similar account), MSRB Rule G–11(j) 

(payment of designations), and MSRB 

Rule G–12(i) (settlement of joint or 

similar account). For the proposed 

amendments to Rule G–11, the MSRB 

requested that the amendments become 

effective for new issues of municipal 

securities for which the Time of Formal 

Award (as defined in Rule G– 

34(a)(ii)(C)(1)(a)) is more than 30 

calendar days after the date the 

amendments are approved by the SEC. 

For the proposed amendments to Rule 

G–12, the MSRB requested that the 

amendments become effective for 

secondary market trading accounts 

formed more than 30 days after the date 

the amendments are approved by the 

SEC. 

The text of the proposed rule change 

is available on the MSRB’s Web site 

(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 

The proposed rule change accelerates 

the settlement of syndicate accounts and 

secondary market trading accounts, and 

the payment of designations, by 

shortening certain time periods within 

the rules. These proposals are designed 

to reduce the exposure of syndicate and 

secondary market trading account 

members to the risk of potential 

deterioration in the credit of the 

syndicate or account manager during 

the pendency of account settlements. 

Since the existing rules were adopted in 

the 1970s, dealers and those firms who 

invoice them for syndicate expenses 

have adopted significantly more 

efficient billing and accounting systems. 

The MSRB believes that such systems 

make reductions in the time periods for 

distribution of syndicate and secondary 

market trading account profits feasible 

and not unduly burdensome to dealers. 

Furthermore, many fees are agreed upon 

in advance or can be estimated with 

considerable accuracy soon after 

settlement. 

Currently, Rule G–11(i), on settlement 

of syndicate or similar account, requires 

that final settlement of an underwriting 

syndicate or similar account be made 

within 60 calendar days following the 

date all securities have been delivered 

by the syndicate or account manager to 

the syndicate or account members 

(‘‘bond closing’’). Rule G–11(j), on 

payments of designations, requires that 

any credit designated by a customer in 

connection with the purchase of new 

issue securities as due to a member of 

a syndicate shall be distributed to such 

member by any dealer handling such 

order within 30 calendar days following 

bond closing. 

The proposed rule change changes the 

deadlines in Rule G–11 to 30 calendar 

days after bond closing for distributions 

(currently 60 calendar days) and 10 

calendar days after bond closing for 

designations (currently 30 calendar 

days). To facilitate implementation of 

these reduced time periods, the MSRB 

also determined to add a new 

requirement that all syndicate members 

submit their designations to the 

syndicate manager within two business 

days after bond closing. 

Rule G–12(i), on settlement of joint or 

similar account, contains requirements 

for the settlement of joint or similar 

accounts formed in the secondary 

market. The rule currently requires that 

the settlement of these accounts be 

made within 60 days following the date 

all securities have been delivered by the 

syndicate or account manager to the 

syndicate or account members 

(‘‘delivery date’’). The proposed rule 

change changes the deadline in the rule 

to 30 calendar days following delivery 

date. 

2. Statutory Basis 

The MSRB has adopted the proposed 

rule change pursuant to Section 

15B(b)(2)(C) of the Act,3 which provides 

that the MSRB’s rules shall: 

[B]e 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. 

The MSRB believes that the proposed 

rule change is consistent with the Act 

because it will further the free and open 

market in municipal securities by 

reducing the exposure of dealers to the 

potential deterioration of the credit of 

syndicate managers during the period 

prior to settlement of syndicate accounts 

and providing a comparable rule for the 

settlement of secondary market trading 

accounts. 

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 Act since it would apply 

equally to all dealers. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

On May 12, 2009, the MSRB 

requested comment on draft 


jlentini on DSKJ8SOYB1PROD with NOTICES
41772 Federal Register / Vol. 74, No. 158 / Tuesday, August 18, 2009 / Notices 

4See MSRB Notice 2009–20 (May 12, 2009). 

5Letter from Hill A. Feinberg, Chairman and 

Chief Executive Officer, First Southwest Company 

(‘‘First Southwest’’) to Margaret C. Henry, dated 

June 26, 2009; Letter from Leslie M. Norwood, 

Managing Director and Associate General Counsel, 

Securities Industry and Financial Markets 

Association (‘‘SIFMA’’) to Margaret C. Henry, dated 

June 29, 2009. 6 17 CFR 200.30–3(a)(12). 

amendments to Rules G–11 and G–12.4

The MSRB received comments on the 

proposed rule change from two 

commentators.5

First Southwest applauded the MSRB 

for proposing the changes to Rule G–11 

and urged that they be adopted. No 

comment was made on the proposed 

change to Rule G–12. First Southwest 

also urged that the MSRB study how 

syndicates could be structured to 

eliminate the bankruptcy risk of the 

senior manager to the co-managers. The 

MSRB’s Regulatory Review Special 

Committee gave preliminary 

consideration to potentially mandating 

such a structural change, and its initial 

review indicated that the cost of such a 

structural change likely would outweigh 

the potential benefits. Accordingly, the 

Committee chose to recommend to the 

full Board, and the Board approved, the 

proposed rule changes instead. 

SIFMA applauded the MSRB for 

attempting to reduce the exposure of 

syndicate members to a potential 

deterioration in credit of the syndicate 

manager by means of the draft 

amendments to Rules G–11 and G–12. 

However, SIFMA only recommended 

that the changes to Rule G–12 be 

adopted. It opposed the proposed 

change to Rule G–11(i) that would 

require settlement of syndicate accounts 

within 30 calendar days rather than 60 

calendar days for three reasons: (1) It 

said that, in many competitive deals, 

not all the bonds were sold within 30 

days; (2) It said that many underwriters’ 

counsel bills were not received within 

30 days, particularly for new and 

complicated financings; and (3) It said 

that 30 calendar days usually amounted 

to only 20 business days, which it said 

was too short a period. SIFMA opposed 

the proposed changes to the Rule G– 

11(j) on payment of designations for two 

reasons. First, it said that the new rule 

requiring co-managers to inform the 

syndicate manager within two business 

days after closing of a bond issue was 

unduly burdensome to co-managers. 

Instead, it said that the syndicate 

manager should be required to obtain 

the information from the co-managers 

outside of MSRB rules. Second, SIFMA 

said that the shortening of the time 

period for payments of designations 

from 30 calendar days to 10 calendar 

days would unduly burden the 

syndicate manager, with minimal 

reduction in risk. SIFMA said that the 

periods for settlement of syndicate 

accounts and payment of designations 

should be the same: 60 days. 

As to SIFMA’s comment about the 

potential effect of the draft Rule G–11(i) 

changes on competitive underwritings, 

the Board concluded that only a small 

percentage of syndicates for competitive 

underwritings could not be settled 

within 30 days after closing of a bond 

issue and that, in such a case, the 

syndicate could be split up or any 

unsold bonds sold to a general account 

of the whole. The Board did not agree 

with SIFMA’s comment regarding the 

timing of the receipt of underwriter’s 

counsel bills. The Board also found that 

it was reasonable to require the payment 

of designations within 10 calendar days 

after closing of a bond issue and to 

require all syndicate members to notify 

the syndicate manager of their 

designations within two business days 

after closing of a bond issue. 

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. 

For the proposed amendments to Rule 

G–11, the MSRB requested that the 

amendments become effective for new 

issues of municipal securities for which 

the Time of Formal Award (as defined 

in Rule G–34(a)(ii)(C)(1)(a)) is more than 

30 calendar days after the date the 

amendments are approved by the SEC. 

For the proposed amendments to Rule 

G–12, the MSRB requested that the 

amendments become effective for 

secondary market trading accounts 

formed more than 30 days after the date 

the amendments are approved by the 

SEC. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–MSRB–2009–12 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–2009–12. 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, 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 such 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–2009–12 and should 

be submitted on or before September 8, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–19745 Filed 8–17–09; 8:45 am] 

BILLING CODE 8010–01–P 


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