[Federal Register Volume 63, Number 14 (Thursday, January 22, 1998)]
[Notices]
[Pages 3368-3370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1424]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39545; File No. SR-MSRB-97-10]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board Relating to Forms G-36(OS) and G-36(ARD) and 
Recordkeeping, Operative on January 1, 1998

January 13, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November 
26, 1997, 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-
97-10). 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 revised Forms G-36(OS) and G-36(ARD) under rule G-36 and 
amendments to section (a)(xv) of rule G-8, on recordkeeping. The 
proposed rule change becomes operative on January 1, 1998.

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-36 requires that a broker, dealer or municipal securities 
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). If the 
securities advance refund an outstanding issue of municipal securities, 
rule G-36 requires that the underwriter also send to the Board copies 
of the advance refunding document and completed Form G-36(ARD). Forms 
G-36(OS) and G-36(ARD) are being revised to provide greater clarity to 
brokers, dealers and municipal securities dealers in the process of 
completing the forms as well as to provide additional information that 
would assist the enforcement agencies in their enforcement activities 
relating to rules G-36 and G-32.
    The revisions to Form G-36(OS) add the following new data elements: 
the date materials are received from the issuer, the date materials are 
sent to the Board, whether materials submitted consist of more than one 
document, the actual or expected date of delivery of securities to 
underwriters, whether the securities advance refund another issue, the 
SEC registration number, information regarding CUSIP-6 number 
assignments and the fax number of the preparer. The revisions to Form 
G-36(ARD) add the following new data elements: the date materials are 
received from the issuer, the date materials are sent to the Board, 
whether materials submitted consist of more than one document, the date 
of delivery of securities to underwriters, the SEC registration number 
and the fax number of the preparer. In addition, the layout of both 
forms is reorganized.
    Rule G-8(a)(xv) currently requires brokers, dealers and municipal 
securities dealers acting as underwriters in most primary offerings of 
municipal securities to maintain certain records relating to such 
primary offerings and the receipt and sending of materials as required 
under rule G-36. Rule G-8(a)(xv) is being amended to require such 
brokers, dealers and municipal securities dealers to record and 
maintain additional information regarding the date of delivery of the 
issue to the underwriters, as well as to retain a copy of the receipt 
of sending the required forms and documents to the Board and a copy of 
the forms and documents sent. The additional records required under the 
amended rule will assist the enforcement agencies in their enforcement 
activities relating to rule G-36.
2. Basis
    The Board believes the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act, which provides 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.

    As discussed above, the Board believes that the proposed rule 
change will provide greater clarity to brokers, dealers and municipal 
securities dealers

[[Page 3369]]

in completing Forms G-36(OS) and G-36(ARD) and will provide additional 
information to the enforcement agencies that would assist them in their 
enforcement activities relating to rules G-36 and G-32.

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 since 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 May 1997, the Board published a notice (``Notice'') that, among 
other things, urged brokers, dealers and municipal securities dealers 
to review their compliance procedures in connection with rules G-36 and 
G-32.\1\ To assist the agencies charged with enforcing rules G-36 and 
G-32, the Board proposed in the Notice certain revisions to Forms G-
36(OS) and G-36(ARD). These revisions would require underwriters to 
include information regarding the dates underwriters receive official 
statements and advance refunding documents from issuers, the date of 
delivery of the issue to the underwriters, whether a new issue is an 
advance refunding and the date the documents are sent to the Board. In 
addition, the Board proposed an amendment to rule G-8(a)(xv) to require 
underwriters to record the date of delivery of the issue to the 
underwriters and to retain a copy of the receipt of sending the 
required forms and documents to the Board, as well as a copy of the 
forms and documents sent.
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    \1\ ``Board Review of Underwriting Process,'' MSRB Reports, Vol. 
17, No. 2 (June 1997) at 3-16.
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    In response to its request for comments, the Board received comment 
letters addressing the proposed revisions to Forms G-36(OS) and G-
36(ARD) and the proposed amendments to rule G-8(a)(xv) from eight 
commentators.
    Several commentators state that they supported \2\ or did not 
oppose \3\ the proposed changes to Forms G-36(OS) and G-36(ARD) and the 
related change to rule G-8. One commentator \4\ supported the 
collection and retention of the additional information as a deterrent 
to issuers for the untimely provision of official statements to 
underwriters and as a source of information about the frequency and 
severity of any problem in the municipal market with the delivery of 
official statements and advance refunding documents. Another 
commentator \5\ stated that the proposal would evidence any late 
delivery by the issuer of official statements to underwriters.
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    \2\ Goldman, Sachs & Co., Government Finance Officers 
Association (``GFOA''), Newman & Associates, Inc. and Rauscher 
Pierce Refsnes, Inc. (``Rauscher Pierce'').
    \3\ Lehman Brothers Inc.
    \4\ GFOA.
    \5\ Rauscher Pierce.
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    NASD Regulation, Inc. suggested additional changes to the forms. It 
suggested that the forms include a clarifying statement which indicates 
whether the ``date of delivery'' is synonymous with ``settlement or 
closing date''; that a glossary or definition of terms be included as 
part of the forms, or alternatively, that the forms contain a reference 
to the appropriate rule or interpretation which provides appropriate 
definitions; that, in addition to the managing underwriter, the forms 
identify each syndicate member and percent participation, when 
applicable, to be used in compliance activities under rule G-37; and 
that when firms are identified by name on the forms they also be 
identified by their broker-dealer number or SEC-8 number. The Board has 
incorporated most of these suggestions in the revised forms. 
Information regarding syndicate members and participants was not 
included since this information would in several respects not be 
compatible with the type of information mandated by rule G-37 and would 
require that the forms be enlarged to three pages to add data elements 
that are entirely unrelated to rule G-36.
    Although another commentator \6\ did not specifically oppose the 
changes in the forms, it expressed some concern regarding the revisions 
by stating that the ``undisguised purpose'' of the proposed revisions 
to Forms G-36(OS) and G-36(ARD) was to require brokers, dealers and 
municipal securities dealers to advise the Board whenever a filing is 
late under rule G-36. The Board acknowledges that one of the stated 
purposes of the revisions to Forms G-36(OS) and G-36(ARD) is to assist 
the enforcement agencies in their enforcement activities.
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    \6\ Smith Barney Inc.
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    One commentator \7\ opposed the proposed amendments to rule G-
8(a)(xv), stating that it would increase the burden on brokers, dealers 
and municipal securities dealers without solving the underlying 
problem. The Board believes that the proposed amendments to rule G-
8(a)(xv) will at most constitute a negligible compliance burden while 
providing significant assistance to the enforcement agencies in their 
enforcement activities relating to rule G-36.
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    \7\ Wachovia Bank, N.A.
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III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Because the foregoing proposed rule change: (i) does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
(iii) was provided to the Commission for its review at least five 
business days prior to the filing date; and (iv) does not become 
operative for at least thirty (30) days from the date of its filing, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder and become 
operative on January 1, 1998. 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. 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 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-97-10 and should be 
submitted by February 12, 1998.


[[Page 3370]]


    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority, 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-1424 Filed 1-21-98; 8:45 am]
BILLING CODE 8010-01-M