[Federal Register Volume 65, Number 124 (Tuesday, June 27, 2000)]
[Notices]
[Pages 39639-39640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42967; File No. SR-MSRB-99-11]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Approving Proposed Rule Change To Amend Rule G-36

June 21, 2000.

I. Introduction

    On December 10, 1999, the Municipal Securities Rulemaking Board 
(``MSRB'' or the ``Board'') filed with the Securities and Exchange 
Commission (``SEC'' or ``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 to amend Rule G-36, on delivery 
of official statements, advance refunding documents and Forms G-36(OS) 
and G-36(ARD) to the Board or its designee. The proposed rule change 
was published for comment in the Federal Register on February 9, 
2000.\3\ The Commission received no comments on the proposal. This 
order approves the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 42374 (February 2, 
2000), 65 FR 6427 (February 9, 2000).
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II. Description of the Proposal

    The Board has filed with the Commission a proposed rule change to 
amend Rule G-36, on delivery of official statements, advance refunding 
documents and Forms G-36(OS) and G-36(ARD) to the Board or its 
designee. Rule G-36 requires, among other things, that a broker, dealer 
or municipal securities dealer (a ``dealer'') acting as underwriter in 
a primary offering of municipal securities (with certain limited 
exceptions) send to the Board copies of the official statement and 
completed Form G-36(OS).
    Originally, Rule G-36 applied to all primary offerings of municipal 
securities regardless of principal amount, other than primary offerings 
that qualified for exemption under paragraph (d)(1) of Rule 15c2-12 
under the Act.\4\ The Board subsequently amended Rule G-36 to include 
certain categories of primary offerings that are exempt under Rule 
15c2-12(d)(1).\5\ For any primary offering subject to Rule G-36(c)(i), 
the underwriter currently is required to send two copies of the 
official statement, if one is prepared, in final form with two copies 
of Form G-36(OS), to the Board by the business day after the issuer 
delivers the municipal securities to the underwriter (the ``bond 
closing'').
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    \4\ Originally, Rule G-36 applied to all primary offerings 
subject to Rule 15c2-12, as well as to Small Issue Securities for 
which an official statement in final form was prepared, bud did not 
apply to Limited Offering Securities, Short-Term Securities and 
Puttable Securities.
    \5\ See Securities Exchange Act Release No. 32086 (March 31, 
1993), 58 FR 18290 (April 8, 1993); ``Delivery of Official 
Statements to the Board: Rule G-36,'' MSRB Reports, Vol. 12, No. 3 
(September 1992) at 11. Thus, only primary offerings exempt from 
Rule 15c2-12 for which no official statement in final form is 
prepared and Limited Offering Securities remain exempt from Rule G-
36. Currently, Small Issue Securities, Short-Term Securities, and 
Puttable Securities, are subject to Rule G-36(c)(1) where an 
official statement in final form has been prepared by or on behalf 
of the issuer.
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    As amended, the rule would require an underwriter in a primary 
offering subject to Rule G-36(c)(i) for which an official statement in 
final form is prepared by the issuer to send two copies of the official 
statement in final form, together with two copies of Form G-36(OS), to 
the Board by the later of (i) one business day after the bond closing 
or (ii) one business day after receipt of the official statement from 
the issuer.\6\
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    \6\ In contrast, Rule G-36(c)(i) currently requires that the 
underwriter send the official statement to the Board by the business 
day after the bond closing, regardless of whether the underwriter 
has in fact received the official statement by such day.
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act \7\ and the rules and regulations 
thereunder applicable to the MSRB.\8\ In particular, the Commission 
finds the amendments to MSRB Rule G-36 consistent with the requirements 
of Section 15B(b)(2)(C) \9\ of the Act, which provides, in part, that 
the Board's rules shall:
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    \7\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78o-4(b)(2)(C).

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

[[Page 39640]]

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 
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the public interest.

    The MSRB represents that the proposed rule change is intended to 
provide relief to underwriters that face violation of Rule G-36(c)(i) 
caused by a delay in delivery by issuers for whom no concomitant 
obligations exists to delivery an official statement by any particular 
date. The Commission believes that because underwriters and other 
dealers are still required to adhere to their continuing obligation 
under Rule G-32 to deliver official statements for new issue municipal 
securities to customers by settlement, the MSRB proposal will foster 
cooperation among persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in municipal securities, without adversely affecting the protection of 
investors and the public interest.
    In general, underwriters may be exposed to a potential violation of 
Rule G-36 when an issuer fails to provide the official statement. The 
Commission notes that pursuant to Rule 15c2-12(b)(3), underwriters are 
required to contract to obtain official statements and thus have an 
enforceable mechanism to obtain the official statements. The Commission 
also appreciates the situation of underwriters who, because an issuer 
does not provide a final official statement and is not required to do 
so under a 15c2-12 contract, finds themselves in violation of Rule G-
36(c)(i). However, the Commission expects that an underwriter that 
receives an official statement will provide the official statement to 
the Board without delay.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-MSRB-99-11) is approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-16210 Filed 6-26-00; 8:45 am]
BILLING CODE 8010-01-M