Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices 23311

4The U.S. Working Committee of the Group of

Thirty is an organization consisting of

representatives from broker-dealers, banks, and

financial intermediaries charged with analyzing the

existing clearance and settlement systems in the

U.S.

5 DTC included the text of its updated operational

arrangements as an exhibit to its proposed rule

change which is available for inspection and

copying at the Commission’s public reference room

and through DTC.

6 If an issuer or agent continually fails to make

payments and provide the related payment detail in

a timely manner, DTC may decide not to allocate

such payments to participants on the payable date.

7 DTC undertakes to make available to issuers that

execute blanket LORs any future modifications in

the operational arrangements. Upon review, issuers

will have the opportunity to withdraw their blanket

LORs.

8These LORs were chosen to be replaced first

because these securities types account for the

highest volume of repeat requests for DTC eligibility

from issuers.

9 15 U.S.C. 78q–1(b)(3)(F).

10 15 U.S.C. 78s(b)(3)(A)(i).

11 17 CFR 240.19b–4(e)(1).

12 17 CFR 200.30–3(a)(12).

1The Board initially filed this proposal on

December 22, 1997. However, a substantive

amendment was requested to restore rule language

that had been deleted. The Board filed Amendment

No. 1 on March 12, 1998. Pursuant to section 19(b),

Amendment No. 1 is subject to notice and

comment; thus, the proposed rule change is deemed

filed as of the date of the amendment. 15 U.S.C. 78s.

On April 22, 1998, the Board filed Amendment

No. 2 clarifying the underwriter’s obligation if it

prepares the official statement on behalf of issuers.

See letter from Ernesto A. Lanza, Assistant General

Counsel, MSRB, to Katherine A. England, Esq.,

Assistant Director, Division of Market Regulation,

SEC, dated April 22, 1998.

(‘‘P&I Task force’’).4 The purpose of the

proposed rule change is to update DTC’s

issue eligibility requirements.5

DTC’s operational arrangements

include requirements that all payments

to DTC of principal and income be made

in same-day funds on payment date by

2:30 p.m. Eastern Time (‘‘ET’’) and that

CUSIP information be provided in

automated form early enough to allow

the funds received to be matched with

the related issues. In order to help

assure that these requirements are met,

the operational arrangements have been

modified to require issuers to remit

funds for all principal and income

payments to paying agents or

intermediaries by 1:00 p.m. ET or by

such earlier time as required by the

paying agent to guarantee that DTC will

receive payment in same-day funds by

2:30 p.m. ET on payable date.6

In addition, the current operational

arrangements require the submission of

individual letters of representations

(‘‘LORs’’) each time an issuer wants to

distribute securities of a type for which

DTC requires an LOR. DTC uses sixteen

different LORs for various types of

municipal and corporate securities and

money market instruments. The

modified arrangements introduce the

use of a blanket LOR which an issuer

only needs to submit to DTC once for all

issues. A blanket LOR eliminates the

need for the submission of individual

LORs each time the issuer wishes to

distribute certain securities.7

The proposed rule change replaces

only three of the LORs with the blanket

LORs: the book entry only municipal

bond LOR, the book entry only

municipal note LOR, and the book entry

only municipal variable rate demand

obligation LOR.8 As issuers gain

experience with the use of blanket

LORs, DTC will eliminate additional

individual LORs.

DTC believes that the proposed rule

change is consistent with Section

17A(b)(3)(F) 9 in that it should maximize

the number of issues that can be made

depository eligible while ensuring

orderly processing and timely payments

to participants.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

DTC does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purposes of the Act.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The subject principal and income

guidelines incorporated in the proposed

operational arrangements have been

endorsed by the Corporate Trust

Advisory Board of the American

Bankers Association, the Bank

Depository User Group, the Corporate

Trust Advisory Committee of the

Corporate Fiduciaries Association of

New York City, the New York Clearing

House Securities Committee, The Bond

Market Association, and the Securities

Industry Association.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Because the foregoing rule change

constitutes an interpretation with

respect to the meaning, administration,

or enforcement of an existing rule of

DTC, it has become effective pursuant to

Section 19(b)(3)(A)(i) of the Act 10 and

Rule 19b–4(e)(1) thereunder.11 At any

time within sixty days of the filing of

the proposed rule change, the

Commission may summarily abrogate

such rule change if it appears to the

Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.

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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street N.W.,

Washington, D.C. 20549. 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

Section, 450 Fifth Street N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the DTC. All submissions

should refer to the File No. SR–DTC–

97–23 and should be submitted by May

19, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–11168 Filed 4–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39904; File No. SR–MSRB–

97–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Municipal Securities Rulemaking

Board Relating to Rule G–32, on

Disclosures in Connection With New

Issues

April 22, 1998.

On March 12, 1998,1 the Municipal

Securities Rulemaking Board (‘‘Board’’

or ‘‘MSRB’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) a proposed

rule change (File No. SR–MSRB–97–14),

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

Securities Exchange Act of 1934
23312 Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices

2 15 U.S.C. 78s(b)(1).

3 17 CFR 240.19b–4.

(‘‘Act’’),2 and Rule 19b–4 thereunder.3

The proposed rule change and

Amendment Nos. 1 and 2 (collectively

referred to herein as the ‘‘proposed rule

change’’) are described in Items, I, II,

and III below, which Items have been

prepared by the Board. 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 Board has filed with the

Commission a proposed rule change

consisting of amendments of Rule G–32,

on disclosures in connection with new

issues. The proposed rule change will

strengthen the provisions of the rule

relating to dissemination of official

statements among dealers and

incorporate a long-standing Board

interpretation relating to disclosures

required to be made to customers in

connection with negotiated sales of new

issue municipal securities. Below is the

text of the proposed rule change.

Additions are italicized; deletions are in

brackets.

Rule G–32. Disclosures in Connection

with New Issues

(a) Disclosure Requirements. No

broker, dealer or municipal securities

dealer shall sell, whether as principal or

agent, any new issue municipal

securities to a customer unless such

broker, dealer or municipal securities

dealer delivers to the customer no later

than the settlement of the transaction:

(i) No change.

(ii) in connection with a negotiated

sale of new issue municipal securities,

the following information concerning

the underwriting arrangements:

(A)–(B) No change.

(C) the initial offering price for each

maturity in the issue that is offered or

to be offered in whole or in part by the

underwriters, including maturities that

are not reoffered.

In the event an official statement in

final form will not be prepared by or on

behalf of the issuer, an official statement

in preliminary form, if any, shall be sent

to the customer with a notice that no

final official statement is being

prepared.

Every broker, dealer or municipal

securities dealer shall send, upon

request, [promptly furnish] the

documents and information referred to

in this section (a) to any broker, dealer

or municipal securities dealer to which

it sells new issue municipal securities

[, upon the request of such broker,

dealer or municipal securities dealer.]

no later than the business day following

the request or, if an official statement in

final form is being prepared but has not

been received from the issuer or its

agent, no later than the business day

following such receipt. Such items shall

be sent by first class mail or other

equally prompt means, unless the

purchasing broker, dealer or municipal

securities dealer arranges some other

method of delivery and pays or agrees

to pay for such delivery.

(b) Responsibility of Managing

Underwriters, and Sole Underwriters

and Financial Advisors. (i) Managing

Underwriters and Sole Underwriters.

When an [a final] official statement in

final form is prepared by or on behalf

of an issuer, the managing underwriter

or sole underwriter, upon request, shall

send to [provided] all brokers, dealers

and municipal securities dealers that

purchase the new issue municipal

securities [with] an official statement in

final form and other information

required by paragraph (a)(ii) of this rule

and not less than one additional official

statement in final form per $100,000 par

value of the new issue purchased by the

broker, dealer or municipal securities

dealer and sold to customers. Such

items shall be sent no later than the

business day following the request or, if

an official statement in final form is

being prepared but has not been

received from the issuer or its agent, no

later than the business day following

such receipt. Such items shall be sent by

first class mail or other equally prompt

means, unless the purchasing broker,

dealer or municipal securities dealer

arranges some other method of delivery

and pays or agrees to pay for such

delivery. In addition, the managing

underwriter or sole underwriter, upon

request, [and] shall provide all

purchasing brokers, dealers and

municipal securities dealers with

instructions on how to order additional

copies of the [final] official statement in

final form directly from the printer. [A

managing underwriter or sole

underwriter that prepares an official

statement on behalf of an issuer shall

print the final official statement and

other information required by paragraph

(a)(ii) of this rule and make them

available promptly after the date of sale

of the issue but no later than two

business days before the date all

securities are delivered by the syndicate

manager to the syndicate members.]

(ii) Financial Advisors. A broker,

dealer or municipal securities dealer

that, acting as financial advisor,

prepares an [a final] official statement in

final form on behalf of an issuer, shall

make that official statement in final

form available to the managing

underwriter or sole underwriter

promptly after the issuer approves its

distribution. [award is made. If the

financial advisor is responsible for

printing the final official statement, it

shall make adequate copies of the final

official statement available to the

managing underwriter or sole

underwriter promptly after the award is

made but no later than two business

days before the date all securities are

delivered by the syndicate manager to

the syndicate members to permit their

compliance with paragraph (b)(i) of this

rule.]

(c) No change.

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

Board included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The texts of these

statements may be examined at the

places specified in Item IV below. The

Board 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

Rule G–32, on disclosures in

connection with new issues, provides

that no broker, dealer or municipal

securities dealer (‘‘dealer’’) shall sell

any new issue municipal securities to a

customer unless such dealer delivers to

the customer no later than the

settlement of the transaction a copy of

the official statement in final form, if

one is being prepared. In connection

with a negotiated sale of new issue

municipal securities, dealers are also

required to deliver to their customers,

by no later than settlement with the

customer, information regarding, among

other things, the initial offering price for

each maturity in the new issue (termed

the ‘‘Offering Price Disclosure

Provision’’). Managing underwriters and

other dealers that sell new issue

municipal securities to purchasing

dealers are required to furnish copies of

the official statement to such purchasing

dealers upon request, and dealers acting

as financial advisors are also required to

ensure that official statements are made

available to the underwriters in a timely
Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices 23313

4Consistent with the position taken by the

Commission in connection with its Rule 15c2–12,

the Board recognizes that the official statement is

the issuer’s document. As a result, the proposed

rule change would remove references in the existing

rule to the preparation of official statements by

underwriters.

5The Bond Market Association’s Standard

Agreement Among Underwriters provides that

syndicate members must place orders for the

official statement by the business day following the

date of execution of the purchase contract and

states that any syndicate member that fails to place

such an order will be assumed to have requested

the quantity required under Rule G–32(b)(i). See

Agreement Among Underwriters, Instructions,

Terms and Acceptance, The Bond Market

Association, (Oct. 1, 1997) at ¶ 3. Thus, except in

the rare instances where an official statement in

final form is completed and available for

distribution on the date of sale, syndicate members

will have made or have been deemed to have made

their requests for official statements by the time the

managing underwriter receives the official

statement from the issuer, thereby obligating the

managing underwriter under the proposed rule

change to send the official statement to syndicate

members within one business day of receipt.

6See supra note 1, Amendment No. 2.

7Of course, this amendment would not relieve

dealers acting as financial advisors of their

obligations to comply with their contractual

arrangements entered into with issuers and with all

applicable state and federal statutes, regulations

and common law. Thus, in particular, in instances

where a dealer, acting as financial advisor, has a

contractual or other legal duty to assist an issuer in

complying with its contractual obligation to deliver

final official statements within the timeframe and

in the quantities set forth in Rule 15c2–12(b)(3)

under the Act, such obligation would not be

diminished by operation of the revised amendment.

8See MSRB Reports, Vol. 3, No. 1 (Jan. 1983),

‘‘Rule G–32 + Frequently Asked Questions

Concerning Disclosures in Connection with New

Issues,’’ at 25–27. See also MSRB Reports, Vol. 6,

No. 4 (Sept. 1986), ‘‘Disclosure Requirements for

New Issue Securities: Rule G–32,’’ at 17–20 and

MSRB Reports, Vol. 16, No. 3 (Sept. 1996),

‘‘Disclosures in Connection with New Issues: Rule

G–32,’’ at 19–23.

manner (termed the ‘‘Dealer

Dissemination Provisions’’). The Board

is proposing amendment to Rule G–32

to strengthen the Dealer Dissemination

Provisions and to explicitly incorporate

into the Offering Price Disclosure

Provision a long-standing Board

interpretation of such provision.

Amendments to Dealer Dissemination

Provisions

All dealers selling new issue

municipal securities to customers, not

just dealers that participated in the

underwriting of the new issue, are

required to deliver official statements to

their customers by no later than

settlement of their transactions. As a

result, the Dealer Dissemination

Provisions were included in Rule G–32

to make official statements for new

issues available to all dealers so that

they may fulfill their customer delivery

obligation under the rule. Dealers that

are not part of the underwriting group

have indicated from time to time that

they have had some difficulty in

obtaining official statements from the

managing underwriter or other selling

dealers on a timely basis. The Board,

therefore, is proposing amendments to

the Dealer Dissemination Provisions of

Rule G–32 to provide a specific

timeframe and method for delivery of

official statements to purchasing

dealers.

The proposed rule change would

retain the existing responsibility of the

managing underwriter under the rule to

provide, upon request, one copy of the

official statement to purchasing dealers,

together with the disclosure information

required for negotiated offerings, and

one additional official statement per

$100,000 par value purchased for resale

to customers. The managing underwriter

also would continue to be required to

provide purchasing dealers, upon

request, with instructions on how to

order copies of the official statement

from the printer.4 The amendments

would add a requirement that the

official statement be sent by the

managing underwriter to the purchasing

dealer no later than the business day

after the request or, if the official

statement has not been received from

the issuer or its agent, the business day

after receipt. The managing

underwriters would be required to send

official statements by first class mail or

other equally prompt means unless the

purchasing dealer arranges some other

method of delivery at its own expense.

These obligations of the managing

underwriter would continue to apply

with respect to all purchasing dealers,

even where the managing underwriter

did not sell the securities to the

purchasing dealer.

In addition, the proposed rule change

would retain the existing requirement

that every dealer selling a new issue

municipal security to another dealer

must furnish the official statement to

such purchasing dealer upon request.

The amendments would add a

requirement that the selling dealer send

the official statement to the purchasing

dealer within the same timeframe and

by the same means as would be required

of the managing underwriter.

The Board believes that the proposed

rule change will help dealers to comply

with their obligation to deliver official

statements to their customers by

settlement and will more effectively

ensure rapid dissemination of official

statements to customers and to the

marketplace generally than is occurring

in many instances under the current

version of the rule. In particular, the

Board believes that the provisions of the

proposed rule change and of The Bond

Market Association’s Standard

Agreement Among Underwriters would

effectively obligate the managing

underwriter to send the official

statement to syndicate members within

one business day of its receipt from the

issuer.5 Furthermore, although the

proposed amendment removes specific

references in the existing rule to

underwriters that prepare official

statements on behalf of issuers, the

Board is of the view that an underwriter

that prepares an official statement on

behalf of an issuer would be deemed to

have received the official statement

from the issuer immediately upon such

issuer approving the distribution of the

completed official statement in final

form.6

The proposed rule change would

retain the existing requirement under

Rule G–32 that a dealer acting as

financial advisor that prepares an

official statement on behalf of an issuer

must make that official statement

available to the managing or sole

underwriter, but would change the

timing for such availability from

promptly after the award is made, as

provided in the current rule, to

promptly after the issuer approves

distribution of the official statement in

final form. However, as the Board

cannot prescribe the content, timing,

quantity or manner of production of the

official statement by the issuer or its

agents, the portions of the existing rule

that would regulate such production on

behalf of an issuer by a dealer acting as

financial advisor would be deleted. The

Board is proposing this amendment to

ensure that, once the official statement

is completed and approved by the issuer

for distribution, dealers acting as

financial advisors will be obligated to

commence the dissemination process

promptly.7 The Board urges issuers that

utilize the services of non-dealer

financial advisors to hold such financial

advisor to the same standards for

prompt delivery of official statements to

the underwriters.

Amendment to Offering Price

Disclosure Provision

Since January 1983,8 the Board has

interpreted the Offering Price Disclosure

Provision to require that the initial

offering price of all maturities of a new

issue of municipal securities in a

negotiated offering must be disclosed to

customers, even for maturities that are

not reoffered. The proposed amendment

to the Offering Price Disclosure

Provision of Rule G–32 would

incorporate into the rule language this
23314 Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices

9Section 15B(b)(2)(C) states that the Board’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, 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.

10See MSRB Reports, Vol. 16, No. 3 (Sept. 1996),

‘‘Disclosures in Connection with New Issues: Rule

G–32,’’ at 19–23.

The proposed amendments described in the

Notice included, in addition to the proposed

amendments to the Dealer Dissemination Provisions

(other than the proposed amendment to require

dealers acting as financial advisors to make the

official statement available promptly after the issuer

approves its distribution) and the Offering Price

Disclosure Provision, a requirement that official

statements for primary offerings of municipal

securities subject to Rule 15c2–12 under the Act be

sent to customers no later than the date that final

money confirmations are sent (the ‘‘Customer

Delivery Proposal’’). In conjunction with this

proposed change to the official statement delivery

requirement, the Board proposed reorganizing Rule

G–32 to address separately those offerings that are

subject to Rule 15c2–12 and those that are not. The

Board subsequently withdrew the proposed

amendments and is not, at this time, filing with the

Commission the Customer Delivery Proposal.

Furthermore, because the Customer Delivery

Proposal is not being filed, the Board also is not

proposing to reorganize the rule as described in the

Notice.

11Chase Securities of Texas, Inc. (‘‘Chase’’), J.C.

Bradford & Co., and Paine Webber Incorporated.

12Chase.

13PaineWebber Incorporated.

14 J.C. Bradford & Co.

15 In addition, Rule G–32 will continue to require

that managing underwriters provide all purchasing

dealers with instructions on how to order

additional copies of the final official statement

directly from the printer.

16Municipal Securities Information Library and

MSIL are registered trademarks of the Board.

17Chase

long-standing Board interpretation. The

Board believes that the application of

the Offering Price Disclosure Provision

to maturities that are not reoffered

permits customers to determine whether

the price they paid for a new issue

municipal security is substantially

different from the price being paid by

presale purchasers.

2. Statutory Basis

The Board believes the proposed rule

change is consistent with Section

15B(b)(2)(C) of the Act.9 The Board

believes that the proposed rule change

would help dealers to comply with their

obligation to deliver official statements

to their customers by settlement, would

improve dissemination of official

statements to the marketplace generally

during the underwriting period, and

would ensure the continued availability

of important pricing information to new

issue customers.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Board does not believe that the

proposed rule change will impose any

burden on competition not necessary or

appropriate in furtherance of the

purposes of the Act, because it would

apply equally to all brokers, dealers and

municipal securities dealers.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

In September 1996, the Board

published a notice (the ‘‘Notice’’) in

which the Board proposed certain

amendments to Rule G–32 that, among

other things, would have strengthened

the rule’s Dealer Dissemination

Provisions and incorporated into the

Offering Price Disclosure Provision the

Board’s interpretation regarding

disclosure in a negotiated offering of the

initial offering prices of maturities that

are not reoffered.10

In response to its request for

comments, the Board received three

comment letters,11 each of which

addressed the proposed amendments to

the Dealer Dissemination Provisions and

one of which also addressed the

proposed amendment to the Offering

Price Disclosure Provision.

One commentator supports the

proposed amendments to the Dealer

Dissemination Provisions of Rule G–

3212 This dealer noted that it was

already responding to requests from

purchasing dealers for official

statements within one business day so

that the proposed amendments would

not pose any operational problems for it.

In addition, the dealer stated that

placing such an obligation on all dealers

would make it possible for dealers to

deliver official statements to their

customers in a more timely manner.

Two commentators did not object to

any of the changes in the proposed

amendments, but criticized certain of

the existing provisions of the Dealer

Dissemination Provisions. One dealer

objected to the open-ended requirement

that managing underwriters provide

purchasing dealers with official

statements and proposed that

purchasing dealers be required to obtain

the official statement from a nationally

recognized municipal securities

information repository (‘‘NRMSIR’’) if

the managing underwriter has

exhausted its supply of official

statements.13 Another dealer noted that

the requirement to provide an official

statement to purchasing dealers is

limited to one per $100,000 par value of

securities sold to customers and that

this limitation puts a heavier burden on

regional, retail-oriented firms that are

compelled to photocopy additional

copies.14

The Board recognizes that there may

not be sufficient quantities of the

original printed official statement for

every new issue to comply with dealers’

obligations under Board rules. It

believes, however, that requiring selling

dealers to provide a copy of the official

statement to purchasing dealers, upon

request, and requiring managing

underwriters to provide to purchasing

dealers, upon request, one official

statement plus one additional official

statement per $100,000 par value

purchased for resale to customers serves

as a reasonable floor on the number of

official statements that are available in

the marketplace to meet the

requirements of Board rules.15 If a

managing underwriter does not have

sufficient printed copies of the official

statement to meet its obligations with

respect to any particular new issue, it

may need to photocopy or otherwise

obtain additional copies of the official

statement. In addition, if a dealer selling

municipal securities to customers is

unable to obtain sufficient numbers of

official statements from the managing

underwriter or from the dealer that sold

the securities to it, then this dealer may

need to photocopy or otherwise obtain

additional copies of the official

statement. Such other sources of official

statements include, but are not limited

to, the Board’s Municipal Securities

Information Library (MSIL) system,16

the NRMSIRs, or other information

vendors.

One commentators supports the

proposed amendment to the Offering

Price Disclosure Requirement.17

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

days of such date if it finds such longer

period to be appropriate and publishes

its reasons for so finding or (ii) as to

which the self-regulatory organization

consents, the Commission will:

(A) By order approve the proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule
Federal Register / Vol. 63, No. 81 /Tuesday, April 28, 1998 / Notices 23315

18 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549. 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. Copies of the filing will also be

available for inspection and copying at

the Board’s principal offices. All

submissions should refer to File No.

SR–MSRB–97–14 and should be

submitted by May 19, 1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.18

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–11208 Filed 4–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39900; File No. SR–MSRB–

98–4]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Municipal Securities Rulemaking

Board Relating to Rule G–32, on

Disclosures in Connection With New

Issues

April 22, 1998.

On March 25, 1998, the Municipal

Securities Rulemaking Board (‘‘Board’’

or ‘‘MSRB’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) a proposed

rule change (File No. SR–MSRB–98–4)

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

Securities Exchange Act of 1934

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

The proposed rule change is described

in Items, I, II, and III below, which Items

have been prepared by the Board. 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 Board has filed with the

Commission a proposed rule change

consisting of amendments to Rule G–32,

on disclosures in connection with new

issues. The proposed rule change will

provide an alternate method of

compliance by brokers, dealers and

municipal securities dealers with their

obligation to deliver official statements

in final form to customers by settlement

for certain new issues of variable rate

demand obligations. Below is the text of

the proposed rule change. Additions are

italicized; deletions are in brackets.

Rule G–32. Disclosures in Connection

With New Issues

(a) Disclosure Requirements. No

broker, dealer or municipal securities

dealer shall sell, whether as principal or

agent, any new issue municipal

securities to a customer unless such

broker, dealer or municipal securities

dealer delivers to the customer no later

than the settlement of the transaction:

(i) a copy of the official statement in

final form prepared by or on behalf of

the issuer or, if an [a final] official

statement in final form is not being

prepared by or on behalf of the issuer,

a written notice to that effect together

with a copy of an official statement in

preliminary form, if any; provided,

however, that if an official statement in

final form is being prepared for new

issue municipal securities issued in a

primary offering that qualifies for the

exemption set forth in paragraph (iii) of

section (d)(1) of Securities Exchange Act

Rule 15c2–12, a broker, dealer or

municipal securities dealer may sell

such new issue municipal securities to

a customer if such broker, dealer or

municipal securities dealer:

(A) delivers to the customer no later

than the settlement of the transaction a

copy of an official statement in

preliminary form, if any, and written

notice that the official statement in final

form will be sent to the customer within

one business day following receipt

thereof by the broker, dealer or

municipal securities dealer, and

(B) sends to the customer a copy of

the official statement in final form, by

first class mail or other equally prompt

means, no later than the business day

following receipt thereof by the broker,

dealer or municipal securities dealer;

and

(ii) No change.

[In the event an official statement in

final form will not be prepared by or on

behalf of the issuer, an official statement

in preliminary form, if any, shall be sent

to the customer with a notice that no

final official statement is being

prepared.]

Every broker, dealer or municipal

securities dealer shall promptly furnish

the documents and information referred

to in this section (a) to any broker,

dealer or municipal securities dealer to

which it sells new issue municipal

securities, upon the request of such

broker, dealer or municipal securities

dealer.

(b) No change.

(c) Definitions [of New Issue

Municipal Securities and Official

Statement].

For purposes of this rule, the

following terms have the following

meanings:

(i)–(iii) No change.

(iv) The term ‘‘primary offering’’ shall

mean an offering defined in Securities

Exchange Act Rule 15c2–12(f)(7).

* * * * *

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

Board included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The texts of these

statements may be examined at the

places specified in Item IV below. The

Board 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 Board is proposing an

amendment to Rule G–32, on

disclosures in connection with new

issues, that would permit brokers,

dealers and municipal securities dealers

(‘‘dealers’’), selling variable rate demand

obligations to customers during the

underwriting period, to deliver a

preliminary official statement by no

later than settlement and to send the

official statement in final form within

one business day of receipt from the

issuer, provided these variable rate

demand obligations qualify for the

exemption provided under

subparagraph (d)(1)(iii) of Rule 15c2–12

under the Act (‘‘Rule 15c2–12’’).

Background. Rule G–32 provides that

no dealer shall sell any new issue

municipal securities to a customer

unless that dealer delivers to the