[Federal Register Volume 60, Number 63 (Monday, April 3, 1995)]
[Notices]
[Pages 16896-16898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8088]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35544; File No. SR-MSRB-95-02]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Municipal Securities 
Rulemaking Board Relating to Interpretation of Rule G-37 on Political 
Contributions and Prohibitions on Municipal Securities Business

March 28, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), and Rule 19b-4 thereunder, notice is 
hereby [[Page 16897]] given that on March 23, 1995, the Municipal 
Securities Rulemaking Board (``Board'' or ``MSRB'') filed with the 
Securities and Exchange Commission (``Commission'' or ``SEC'') a 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Board. The purpose of the proposed rule 
change is to provide interpretative guidance concerning rule G-37 on 
political contributions and prohibitions on municipal securities 
business. The Board has designated this proposal as constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the Board under 
section 19(b)(3)(A) of the Act, which renders the proposal effective 
upon receipt of this filing by the Commission. 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 is filing the proposed rule change to provide 
interpretative guidance concerning rule G-37 on political contributions 
and prohibitions on municipal securities business.\1\ Proposed new 
language is in italics.

    \1\The Board plans to publish the interpretations in the April 
1995 MSRB Reports (Vol. 15, no. 1).
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Rule G-37 Questions and Answers

* * * * *
    1. Definition of Municipal Finance Professional: Solicitation of 
Municipal Securities Business (Rule G-37(g)(iv)(B))
    Q. Any associated person who solicits municipal securities 
business is deemed a municipal finance professional under rule G-37. 
The Board previously noted that ``solicitation'' may encompass a 
number of activities, including, for example, making presentations 
of public finance and/or municipal securities marketing capabilities 
to issuer officials, and engaging in other activities calculated to 
appeal to issuer officials for municipal securities business, or 
which effectively do so (MSRB Reports, Vol. 14, No. 5 (Dec. 1994) at 
8). If an associated person of a dealer attends a presentation by 
dealer personnel of public finance capabilities, would this also 
constitute ``solicitation'' under rule G-37?
    A: Yes. If an associated person of a dealer attends such a 
presentation, then he or she is assumed to have solicited municipal 
securities business and therefore is deemed a municipal finance 
professional under rule G-37. Accordingly, any contributions given 
to issuer officials by that person within the last two years could 
subject the dealer to the rule's two-year prohibition on business 
with such issuers. For additional guidance in this area, please 
refer to O&A number 4 in the June 1994 issue of MSRB Reports (Vol. 
14, No. 3), CCH Manual paragraph 3681; and Q&A numbers 1, 2 and 3 in 
the December 1994 issue of MSRB Reports (Vol. 14, No. 5), CCH Manual 
paragraph 3681.
    2. Definition of Municipal Finance Professional: Supervisors 
(Rule G-37(g)(iv)(C))
    Q: A sales representative at a branch office solicits municipal 
securities business for the dealer. Such activity results in that 
person becoming a ``municipal finance professional'' under rule G-
37(g)(iv)(B). Would that person's branch manager also be considered 
a municipal finance professional?
    A: Yes. Rule G-37(g)(iv)(C) provides that the definition of 
municipal finance professional includes, among others, any 
associated person who is both a (i) municipal securities principal 
or a municipal securities sales principal and (ii) a supervisor of 
any associated person who solicits municipal securities business (or 
who is primarily engaged in municipal securities representative 
activities). If a sales person is soliciting municipal securities 
business, then the supervisor of that person (i.e., the branch 
manager) also is included within the definition of municipal finance 
professional. Prior to the most recent revision to this portion of 
the definition of municipal finance professional (which was approved 
on March 6, 1995 in Securities Exchange Act Release No. 34-35446), 
the definition included any ``direct supervisor'' of any associated 
person who solicited municipal securities business (or who was 
primarily engaged in municipal securities representative 
activities). Under both definitions, branch managers are included 
within the definition of municipal finance professional in the 
circumstances described above. For additional information in this 
area, please refer to MSRB Reports, Vol. 14, No. 4 (August 1994) at 
28-29, CCH Manual paragraph 3681.
* * * * *
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 
text 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

    On April 7, 1994, the Commission approved Board rule G-37, 
concerning political contributions and prohibitions on municipal 
securities business.\2\ Since that time, the Board has received 
numerous inquiries concerning the application of the rule. In order to 
assist the municipal securities industry and, in particular, brokers, 
dealers and municipal securities dealers in understanding and complying 
with the provisions of the rule, the Board published three prior 
notices of interpretation which set forth, in question-and-answer 
format, general guidance on rule G-37.\3\ In prior filings with the 
Commission, the Board stated that it will continue to monitor the 
application of rule G-37, and, from time to time, will publish 
additional notices of interpretations, as necessary.\4\ In light of 
questions recently received from market participants concerning certain 
provisions of the rule, the Board has determined that it is necessary 
to provide further guidance to the municipal industry. Accordingly, the 
Board is publishing this fourth set of questions and answers which 
focuses on those provisions of the rule relating to: (1) solicitation 
of municipal securities business; and (2) the definition of municipal 
finance professional. As previously stated, the Board will continue to 
monitor the application of rule G-37, and, from time to time will 
publish additional notices of interpretations, as necessary.

    \2\Securities Exchange Act Release No. 33868 (April 7, 1994), 59 
FR 17621 (April 13, 1994). The rule applies to contributions made on 
and after April 25, 1994
    \3\See Securities Exchange Act Release No. 34161 (June 6, 1994), 
59 FR 30379 (June 14, 1994), Securities Exchange Act Release No. 
34603 (Aug. 25, 1994); 59 FR 45049 (Aug. 31, 1994); and Securities 
Exchange Act Release No. 35128 (Dec. 20, 1994); 59 FR 66989 (Dec. 
28, 1994). See also MSRB Reports Vol. 14, No. 3 at 11-16 (June 
1994); Vol. 14, No. 4 at 31-32 (August 1994); and Vol. 14, No. 5 at 
8 (December 1994)
    \4\File Nos. SR-MSRB-94-6, SR-MSRB-94-15 and SR-MSRB-94-16.
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    The Board believes that 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.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Because the proposed rule change would apply equally to all 
brokers, dealers and municipal securities dealers, the Board does not 
believe that [[Page 16898]] 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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(i) of the Act and subparagraph (e) of Rule 19b-4 
thereunder because the rule change constitutes a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the Board.
    At any time within 60 days of the filing of a rule change pursuant 
to Section 19(b)(3)(A) of the Act, the Commission may summarily 
abrogate the 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, 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 principal office of the 
Board. All submissions should refer to File No. SR-MSRB-95-02 and 
should be submitted by April 24, 1995.

    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. 95-8088 Filed 3-31-95; 8:45 am]
BILLING CODE 8010-01-M