[Federal Register Volume 73, Number 153 (Thursday, August 7, 2008)]
[Proposed Rules]
[Pages 46138-46160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-17856]



[[Page 46137]]

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Part II





Securities and Exchange Commission





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17 CFR Part 240



Proposed Amendment to Municipal Securities Disclosure; Proposed Rule; 
Notice

Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / 
Proposed Rules

[[Page 46138]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-58255; File No. S7-21-08]
RIN-3235-AK20


Proposed Amendment to Municipal Securities Disclosure

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
publishing for comment proposed amendments to a rule under the 
Securities Exchange Act of 1934 (``Exchange Act'') relating to 
municipal securities disclosure. The proposal would amend certain 
requirements regarding the information that the broker, dealer, or 
municipal securities dealer acting as an underwriter in a primary 
offering of municipal securities must reasonably determine that an 
issuer of municipal securities or an obligated person has undertaken, 
in a written agreement or contract for the benefit of holders of the 
issuer's municipal securities, to provide. Specifically, the amendments 
would require the broker, dealer, or municipal securities dealer to 
reasonably determine that the issuer or obligated person has agreed to 
provide the information covered by the written agreement to the 
Municipal Securities Rulemaking Board (``MSRB'' or ``Board''), instead 
of to multiple nationally recognized municipal securities information 
repositories (``NRMSIRs'') and state information depositories 
(``SIDs''), as the rule currently provides, and to provide such 
information in an electronic format and accompanied by identifying 
information as prescribed by the MSRB.

DATES: Comments should be received on or before September 22, 2008.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#cab8bfa6afe7a9a5a7a7afa4beb98ab9afa9e4ada5bc"><span class="__cf_email__" data-cfemail="4f3d3a232a622c2022222a213b3c0f3c2a2c61282039">[email protected]</span></a>. Please include 
File No. S7-21-08 on the subject line; or
    <bullet> Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File No. S7-21-08. This file number 
should be included on the subject line if e-mail is used. To help us 
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/proposed.shtml). Comments 
are also available for public 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. 
All comments received will be posted without change; we do not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Martha Mahan Haines, Assistant 
Director and Chief, Office of Municipal Securities, at (202) 551-5681; 
Mary N. Simpkins, Senior Special Counsel, Office of Municipal 
Securities, at (202) 551-5683; Cyndi N. Rodriguez, Special Counsel, 
Office of Market Supervision, at (202) 551-5636; or Rahman J. Harrison, 
Special Counsel, Office of Market Supervision, at (202) 551-5663, 
Division of Trading and Markets, Securities and Exchange Commission, 
100 F Street, NE., Washington, DC 20549-6628.

SUPPLEMENTARY INFORMATION: The Commission is requesting public comment 
on a proposed amendment to Rule 15c2-12 under the Exchange Act.\1\
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    \1\ 17 CFR 240.15c2-12.
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I. Background

A. History of Rule 15c2-12

    The Commission has long been concerned with improving the quality, 
timing, and dissemination of disclosure in the municipal securities 
markets. In an effort to improve the transparency of the municipal 
securities market, in 1989, the Commission adopted Rule 15c2-12\2\ 
(``Rule'' or ``Rule 15c2-12'') and an accompanying interpretation 
modifying a previously published interpretation of the legal 
obligations of underwriters of municipal securities.\3\ As adopted in 
1989, Rule 15c2-12 required, and still requires, underwriters 
participating in primary offerings of municipal securities of 
$1,000,000 or more to obtain, review, and distribute to potential 
customers copies of the issuer's official statement. Specifically, Rule 
15c2-12 required, and still requires, an underwriter acting in a 
primary offering of municipal securities: (1) To obtain and review an 
official statement ``deemed final'' by an issuer of the securities, 
except for the omission of specified information, prior to making a 
bid, purchase, offer, or sale of municipal securities; (2) in non-
competitively bid offerings, to send, upon request, a copy of the most 
recent preliminary official statement (if one exists) to potential 
customers; (3) to send, upon request, a copy of the final official 
statement to potential customers for a specified period of time; and 
(4) to contract with the issuer to receive, within a specified time, 
sufficient copies of the final official statement to comply with the 
Rule's delivery requirement, and the requirements of the rules of the 
MSRB.
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    \2\ 17 CFR 240.15c2-12.
    \3\ See Securities Exchange Act Release No. 26985 (June 28, 
1989), 54 FR 28799 (July 10, 1989 (``1989 Adopting Release'').
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    While the availability of primary offering disclosure significantly 
improved following the adoption of Rule 15c2-12, there was a continuing 
concern about the adequacy of disclosure in the secondary market.\4\ To 
enhance the quality, timing, and dissemination of disclosure in the 
secondary municipal securities market, the Commission in 1994 adopted 
amendments to Rule 15c2-12.\5\ Among

[[Page 46139]]

other things, the 1994 Amendments placed certain requirements on 
brokers, dealers, and municipal securities dealers (``Dealers'' or, 
when used in connection with primary offerings, ``Participating 
Underwriters''). In adopting the 1994 Amendments, the Commission 
intended ``to deter fraud and manipulation in the municipal securities 
market'' by prohibiting the underwriting and subsequent recommendation 
of transactions in municipal securities for which adequate information 
was not available on an ongoing basis.\6\
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    \4\ In 1993, the Commission's Division of Market Regulation (n/
k/a the Division of Trading and Markets) conducted a comprehensive 
review of many aspects of the municipal securities market, including 
secondary market disclosure (``1993 Staff Report''). Findings in the 
1993 Staff Report highlighted the need for improved disclosure 
practices in both the primary and secondary municipal securities 
markets. The 1993 Staff Report found that investors need sufficient 
current information about issuers and significant obligors to better 
protect themselves from fraud and manipulation, to better evaluate 
offering prices, to decide which municipal securities to buy, and to 
decide when to sell. Moreover, the 1993 Staff Report found that the 
growing participation of individuals as both direct and indirect 
purchasers of municipal securities underscored the need for sound 
recommendations by brokers, dealers, and municipal securities 
dealers. See Securities and Exchange Commission, Division of Market 
Regulation (n/k/a Division of Trading and Markets), Staff Report on 
the Municipal Securities Market (September 1993) (available at 
http://www.sec.gov/info/municipal.shtml).
    \5\ See Securities Exchange Act Release No. 34961 (November 10, 
1994), 59 FR 59590 (November 17, 1994) (``1994 Amendments'').
    In light of the growing volume of municipal securities 
offerings, as well as the growing ownership of municipal securities 
by individual investors, in March 1994, the Commission published the 
Statement of the Commission Regarding Disclosure Obligations of 
Municipal Securities Issuers and Others. See Securities Exchange Act 
Release No. 33741 (March 9, 1994), 59 FR 12748 (March 17, 1994). The 
Commission intended that its statement of views with respect to 
disclosures under the federal securities laws in the municipal 
market would encourage and expedite the ongoing efforts by market 
participants to improve disclosure practices, particularly in the 
secondary market, and to assist market participants in meeting their 
obligations under the antifraud provisions. Id.
    \6\ See 1994 Amendments, supra note 5.
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    Specifically, under the 1994 Amendments, Participating Underwriters 
are prohibited, subject to certain exemptions, from purchasing or 
selling municipal securities covered by the Rule in a primary offering, 
unless the Participating Underwriter has reasonably determined that an 
issuer of municipal securities or an obligated person \7\ has 
undertaken in a written agreement or contract for the benefit of 
holders of such securities (``continuing disclosure agreement'') to 
provide specified annual information and event notices to certain 
information repositories. The information to be provided consists of: 
(1) Certain annual financial and operating information and audited 
financial statements (``annual filings''); \8\ (2) notices of the 
occurrence of any of eleven specific events (``material event 
notices'') \9\ and (3) notices of the failure of an issuer or other 
obligated person to make a submission required by a continuing 
disclosure agreement (``failure to file notices'').\10\ The 1994 
Amendments require the Participating Underwriter to reasonably 
determine that an issuer of municipal securities or an obligated person 
has undertaken in the continuing disclosure agreement to provide: (1) 
Annual filings to each NRMSIR; (2) material event notices and failure 
to file notices either to each NRMSIR or to the MSRB; and (3) in the 
case of states that established SIDs, all continuing disclosure 
documents to the appropriate SID. Finally, the 1994 Amendments revise 
the definition of ``final official statement'' to include a description 
of the issuer's or obligated person's continuing disclosure 
undertakings for the securities being offered, and of any instances in 
the previous five years in which the issuer or obligated person failed 
to comply, in all material respects, with undertakings in previous 
continuing disclosure agreements.
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    \7\ Obligated persons include persons, including the issuer, 
committed by contract or other arrangement to support payment of all 
or part of the obligations on the municipal securities to be sold in 
an offering. See 17 CFR 240.15c2-12(f)(10).
    \8\ 17 CFR 240.15c2-12(b)(5)(i)(A) and (B).
    \9\ 17 CFR 240.15c2-12(b)(5)(i)(C). The following events, if 
material, require notice: (1) Principal and interest payment 
delinquencies; (2) non-payment related defaults; (3) unscheduled 
draws on debt service reserves reflecting financial difficulties; 
(4) unscheduled draws on credit enhancements reflecting financial 
difficulties; (5) substitution of credit or liquidity providers, or 
their failure to perform; (6) adverse tax opinions or events 
affecting the tax-exempt status of the security; (7) modifications 
to rights of security holders; (8) bond calls; (9) defeasances; (10) 
release, substitution, or sale of property securing repayment of the 
securities; and (11) rating changes.
    In addition, Rule 15c2-12(d)(2) provides an exemption from the 
application of paragraph (b)(5) of the Rule with respect to primary 
offerings if, among other things, the issuer or obligated person has 
agreed to a limited disclosure obligation, including sending certain 
material event notices to each NRMSIR or the MSRB, as well as the 
appropriate SID. See 17 CFR 240.15c2-12(d)(2).
    \10\ 17 CFR 240.15c2-12(b)(5)(i)(D). Annual filings, material 
event notices, and failure to file notices are referred to 
collectively herein as ``continuing disclosure documents.''
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B. Disclosure Practices in the Secondary Market and Need for Improved 
Availability to Continuing Disclosure

    Since the adoption of Rule 15c2-12 in 1989 and its subsequent 
amendment in 1994, the size of the municipal securities market has 
grown considerably.\11\ There were over $2.6 trillion of municipal 
securities outstanding at the end of 2007.\12\ Notably, at the end of 
2007, retail investors held approximately 35% of outstanding municipal 
securities directly and up to another 36% indirectly through money 
market funds, mutual funds, and closed end funds.\13\ There is also 
substantial trading volume in the municipal securities market. 
According to the MSRB, more than $6.6 trillion of long and short term 
municipal securities were traded in 2007 in more than 9 million 
transactions.\14\ Further, the municipal securities market is extremely 
diverse, with more than 50,000 state and local issuers of these 
securities.\15\
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    \11\ According to statistics assembled by the Securities 
Industry and Financial Markets Association (SIFMA), the amount of 
outstanding municipal securities grew from $1.2616 trillion in 1996 
to $2.6174 trillion at the end of 2007. See SIFMA ``Outstanding U.S. 
Bond Market Debt'' (available at http://www.sifma.org/research/pdf/Overall_Outstanding.pdf ).
    \12\ See SIFMA ``Outstanding U.S. Bond Market Debt'' (available 
at http://www.sifma.org/research/pdf/Overall_Outstanding.pdf ).
    \13\ See SIFMA ``Holders of U.S. Municipal Securities'' 
(available at http://www.sifma.org/research/pdf/Holders_Municipal_Securities.pdf ).
    \14\ See MSRB's Real-Time Transaction Reporting Statistical 
Information, Monthly Summaries 2007 (available at http://www.msrb.org/msrb1/TRSweb/MarketStats/statistical_patterns_in_the_muni.htm).
    \15\ See Securities Exchange Act Release No. 33741, supra note 
5.
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    Currently, there are four NRMSIRs \16\ and three SIDs.\17\ Each of 
the NRMSIRs utilizes the information obtained from continuing 
disclosure documents to create proprietary information products that 
are primarily sold to and used by dealers, institutional investors and 
other market participants who subscribe to such products. With respect 
to the availability of municipal securities information to retail 
investors, each of the NRMSIRs also make continuing disclosure 
documents available for sale to non-subscribers.\18\
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    \16\ The four NRMSIRs are the Bloomberg Municipal Repository, 
DPC Data, Inc., Interactive Data Pricing and Reference Data, Inc., 
and Standard & Poor's Securities Evaluations, Inc.
    \17\ The three SIDs are the Municipal Advisory Council of 
Michigan, the Municipal Advisory Council of Texas, and the Ohio 
Municipal Advisory Council.
    \18\ See http://www.bloomberg.com/markets/rates/municontacts.html (Bloomberg Municipal Repository); http://www.munifilings.com/help/help.cfm (DPC Data, Inc.); http://www.interactivedata-prd.com/07company_info/about_us/MN/NRMSIR.shtml (Interactive Data Pricing and Reference Data, Inc.); 
and http://www.disclosuredirectory.standardandpoors.com/ (Standard & 
Poor's Securities Evaluations, Inc.).
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    Although the existing practice for the collection and availability 
of municipal securities disclosures has substantially improved the 
availability of information to the market, the Commission believes that 
improvements could achieve more efficient, effective, and wider 
availability of municipal securities information to market 
participants.\19\ Among other things, improvements in information 
availability may allow investors to obtain information more readily and 
may help them to make

[[Page 46140]]

more informed investment decisions. Specifically, the Commission 
believes that municipal securities disclosure documents should be made 
more readily and more promptly available to the public and that all 
investors should have better access to important market information 
that may affect the price of a municipal security, such as information 
in financial statements and notices regarding defaults and changes in 
ratings, credit enhancement provider, and tax status.
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    \19\ The Commission notes that the aspects of the Rule that 
relate to the provision of continuing disclosure documents to 
multiple locations (i.e., to each NRMSIR and SID) may have 
engendered certain inefficiencies in the current system. See 17 CFR 
240.15c2-12(b)(5)(i)(A) through (D). For instance, there have been 
reports that NRMSIRs may not receive continuing disclosure documents 
concurrently, resulting in the uneven availability of documents from 
the various NRMSIRs for some period of time. There also have been 
reports of inconsistent document collections among NRMSIRs, possibly 
due to the failure of some issuers or obligated persons to provide 
continuing disclosure documents to each NRMSIR. Finally, there have 
been reports indicating possible weaknesses in document retrieval at 
the NRMSIRs. See, e.g., Troy L. Kilpatrick and Antonio Portuondo, Is 
This the Last Chance for the Muni Industry to Self-Regulate?, THE 
BOND BUYER, August 6, 2007, and comments made at the 2001 Municipal 
Market Roundtable--``Secondary Market Disclosure for the 21st 
Century'' held November 14, 2001 (``2001 Roundtable''), and the 2000 
Municipal Market Roundtable held October 12, 2000 (available at 
http://www.sec.gov/info/municipal/roundtables/thirdmuniround.htm and 
http://www.sec.gov/info/municipal/roundtables/2000participants.htm, 
respectively).
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    Furthermore, the Commission believes that improved access to the 
information in continuing disclosure documents not only would provide 
the investing public with important information regarding municipal 
securities, both during offerings and on an ongoing basis, but also 
would help fulfill the regulatory and information needs of municipal 
market participants, including Dealers, Participating Underwriters, 
mutual funds, and others. For example, many mutual funds include 
municipal securities in their portfolios that they routinely monitor 
for regulatory and other reasons.\20\ They do so by reviewing annual 
filings, as well as material event notices and failure to file notices, 
obtained from NRMSIRs and SIDs.\21\ In addition, the MSRB requires 
Dealers to disclose to a customer at the time of trade all material 
facts about a transaction known by the Dealer.\22\ Further, the MSRB 
requires a Dealer to disclose material facts about a security when such 
facts are reasonably accessible to the market.\23\ Accordingly, a 
Dealer is responsible for disclosing to a customer any material fact 
concerning a municipal security transaction made publicly available 
through sources such as NRMSIRs, the MSRB's Municipal Securities 
Information Library[supreg] (``MSIL''[supreg]) system,\24\ the MSRB's 
Real-Time Transaction Reporting System (``RTRS''), rating agency 
reports and other sources of information relating to the municipal 
securities transaction generally used by Dealers that effect 
transactions in the type of municipal securities at issue.\25\ Dealers 
use the information contained in the continuing disclosure documents to 
carry out these obligations. Therefore, improving access to information 
in the continuing disclosure documents would help facilitate and 
simplify the process of gathering the necessary information to carry 
out their obligations. For these reasons, the Commission believes that 
municipal market participants should have more efficient access to 
information in continuing disclosure documents to satisfy their 
regulatory requirements and informational needs.
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    \20\ For example, Rule 2a-7 under the Investment Company Act of 
1940 specifies the characteristics of investments that may be 
purchased and held by money market funds. Among other requirements, 
Rule 2a-7 requires a money market fund to limit its portfolio 
investments to those securities that the fund's board of directors 
determines present minimal credit risks (including factors in 
addition to any assigned rating). See Rule 2a-7(c)(3), 17 CFR 
270.2a-7(c)(3).
    \21\ See, e.g., the comments of Leslie Richards-Yellen, 
Principal, The Vanguard Group, at the 2001 Roundtable, supra note 
19.
    \22\ See MSRB ``Interpretive Notice Regarding Rule G-17 on 
Disclosure of Material Facts'' (March 20, 2002) (available at http://www.msrb.org/msrb1/rules/notg17.htm). See also Securities Exchange 
Act Release No. 45591 (March 18, 2002), 67 FR 13673 (March 25, 2002) 
(SR-MSRB-2002-01) (order approving MSRB's proposed interpretation of 
the duty to deal fairly set forth in MSRB Rule G-17).
    \23\ Id.
    \24\ Municipal Securities Information Library and MSIL are 
registered trademarks of the MSRB. The Official Statement and 
Advance Refunding Document (``OS/ARD'') system of the MSIL system 
was initially approved by the Commission in 1991 and was amended in 
2001 to establish the MSRB's current optional electronic system for 
underwriters to submit official statements and advance refunding 
documents. See Securities Exchange Act Release Nos. 29298 (June 13, 
1991), 56 FR 28194 (June 19, 1991) (File No. SR-MSRB-90-2) (order 
approving MSRB's proposal to establish and operate the OS/ARD of the 
MSIL system, through which information collected pursuant to MSRB 
Rule G-36 would be made available electronically to market 
participants and information vendors) and 44643 (August 1, 2001), 66 
FR 42243 (August 10, 2001) (File No. SR-MSRB-2001-03) (order 
approving MSRB's proposal to amend the OS/ARD system to establish an 
optional procedure for electronic submissions of required materials 
under MSRB Rule G-36).
    \25\ See note 22, supra.
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C. The MSRB's Electronic Systems

    In 2006, the Commission published for comment proposed amendments 
to Rule 15c2-12 in response to a petition from the MSRB \26\ that would 
permit the MSRB to close its Continuing Disclosure Information Net 
(``CDINet'') system, thereby eliminating the MSRB as a location to 
which issuers could submit material event notices and failure to file 
notices.\27\ In the 2006 Proposed Amendments, the Commission indicated 
its belief that, given the limited usage of the MSRB's CDINet system, 
among other things, the proposed elimination of the provision in Rule 
15c2-12 that allows the filing of material event notices with the MSRB 
was warranted.\28\
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    \26\ See Letter from Diane G. Klinke, General Counsel, MSRB, to 
Jonathan G. Katz, Secretary, Commission, dated September 8, 2005 
(``MSRB Petition'').
    \27\ See Securities Exchange Act Release No. 54863 (December 4, 
2006), 71 FR 71109 (December 8, 2006) (``2006 Proposed 
Amendments''). According to the MSRB Petition, the CDINet system was 
designed to permit issuers to satisfy their undertakings to provide 
material event notices through a single submission to the MSRB, 
rather than through separate submissions to each of the NRMSIRs. The 
MSRB stated that relatively few issuers had opted to use the CDINet 
system, and, in recent years, usage of the CDINet system had 
diminished. See MSRB Petition, supra note 26.
    \28\ See 2006 Proposed Amendments, supra note 27.
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    The Commission recently approved the MSRB's proposed rule change, 
filed under section 19(b) of the Exchange Act,\29\ to establish a pilot 
program for an Internet-based public access portal (``pilot portal'') 
for the consolidated availability of primary offering information about 
municipal securities that currently is made available in paper form, 
subject to copying charges, at the MSRB's public access facility, and 
electronically by paid subscription on a daily over-night basis and by 
purchase of annual back-log collections.\30\ The MSRB is implementing 
the pilot portal as a service of its new Internet-based public access 
system, which it is designating as the Electronic Municipal Market 
Access (``EMMA'') system, as a pilot facility within the MSIL system.
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    \29\ 15 U.S.C. 78s(b).
    \30\ See Securities Exchange Act Release No. 57577 (March 28, 
2008), 73 FR 18022 (April 2, 2008) (File No. SR-MSRB-2007-06) (order 
approving the pilot portal). Primary offering information consists 
of the official statement and the advance refunding document that 
Participating Underwriters are required to send to the MSRB under 
MSRB Rule G-36.
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    In the course of developing the primary offering information 
component of the EMMA system, the MSRB determined that it could 
incorporate in the EMMA system the collection and availability of 
continuing disclosure documents, thus eliminating the need for the 
Commission to adopt its proposed changes to Rule 15c2-12 to remove the 
MSRB as a repository of material event notices.\31\ As a result, the 
MSRB recently submitted to the Commission a proposed rule change, filed 
under section 19(b) of the Exchange Act,\32\ to expand the EMMA system 
to accommodate the collection and availability of annual filings, 
material event notices and failure to file notices.\33\ While the MSRB 
still intends to propose to terminate its CDINet System, subject to 
Commission approval,\34\ the MSRB's subsequent decision to file a 
proposed rule change to expand the EMMA system to accommodate annual 
filings, material event notices, and failure to file notices \35\ has 
led the MSRB to consider whether to withdraw the MSRB Petition.\36\ In 
light of the collection and availability of continuing disclosure

[[Page 46141]]

documents and in conjunction with the Commission's proposal today to 
amend Rule 15c2-12, the Commission is considering whether to withdraw 
its 2006 Proposed Amendments.
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    \31\ See Securities Exchange Act Release No. 58256 (July 30, 
2008) (File No. MSRB-2008-05).
    \32\ 15 U.S.C. 78s(b).
    \33\ See Securities Exchange Act Release No. 58256, supra note 
31.
    \34\ Id.
    \35\ Id.
    \36\ Id.
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    Under the MSRB's proposed rule change--filed under section 19(b) of 
the Exchange Act \37\ and under separate consideration by the 
Commission \38\--the EMMA system would be expanded from the pilot 
program to allow for the electronic collection through the MSRB's Web 
site of continuing disclosure documents and related information 
received by the MSRB from issuers and obligated persons pursuant to 
undertakings under the Rule and for free public access to such 
information through MSRB web-based systems.\39\ Information regarding 
the continuing disclosure documents would also be made available 
through a data stream by subscription for a fee.\40\
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    \37\ 15 U.S.C. 78s(b).
    \38\ The Commission is publishing for public comment this 
proposed rule change at the same time as it publishes these proposed 
amendments to Rule 15c2-12. Comments on the MSRB's proposed rule 
change should be directed to File No. SR-MSRB-2008-05.
    \39\ See Securities Exchange Act Release No. 58256, supra note 
31.
    \40\ The Commission notes that the MSRB would be required to 
file a proposed rule change with the Commission under Section 19(b) 
of the Exchange Act regarding any fees it proposes to establish for 
the subscription service.
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II. Description of the Proposal

A. Proposed Amendments to Rule 15c2-12

    The Commission is considering whether the development of a 
centralized system for the electronic collection and availability of 
information about outstanding municipal securities would improve the 
current paper-based system. Since the adoption of the 1994 Amendments, 
there have been significant advancements in technology and information 
systems that allow market participants and investors, both retail and 
institutional, easily, quickly, and inexpensively to obtain information 
through electronic means. The exponential growth of the Internet and 
the capacity it affords to investors, particularly retail investors, to 
obtain, compile and review information has likely helped to keep 
investors better informed. In addition to the Commission's EDGAR 
system, which contains filings by public companies required to file 
periodic reports and by mutual funds, the Commission has increasingly 
encouraged and, in some cases required, the use of the Internet and Web 
sites by public reporting companies and mutual funds to provide 
disclosures and communicate with investors.\41\
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    \41\ See, e.g., Securities Exchange Act Release Nos. 52056 (July 
19, 2005), 70 FR 44722 (August 3, 2005) (File No. S7-38-04) 
(adopting amendments to encourage and, in some cases, mandate the 
use of an Internet site in securities offering) and 56135 (July 26, 
2007), 72 FR 42222 (August 1, 2007) (File No. S7-03-07) (adopting 
amendments to the proxy rules under the Exchange Act requiring 
issuers and other soliciting persons to post their proxy materials 
on an Internet Web site and providing shareholders with a notice of 
the Internet availability of the materials).
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    The Commission believes that, at present, information about 
municipal issuers and their securities that is accessible on the 
Internet may not be as consistently available or comprehensive as 
information about other classes of issuers and their securities. This 
may be due, in part, to the lack of a central point of collection and 
availability of information in the municipal securities sector.\42\ 
Therefore, the Commission is proposing to amend Rule 15c2-12 to provide 
for a single centralized repository that receives submissions in an 
electronic format to encourage a more efficient and effective process 
for the collection and availability of continuing disclosure documents. 
In the Commission's view, a single repository that receives submissions 
in an electronic format could assist in facilitating and simplifying 
submissions of continuing disclosure documents under the Rule by 
enabling issuers and obligated persons to comply with their 
undertakings by submitting their continuing disclosure documents only 
to one repository, as opposed to multiple repositories.
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    \42\ Historically, there has been support for the concept of a 
central repository. For example, in response to the proposing 
release for Rule 15c2-12 in 1988, a majority of the comment letters 
supported a central repository and indicated a need to have a 
readily accessible central source of information about municipal 
bonds. See 1989 Adopting Release, supra note 3.
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    The Commission also believes that having a centralized repository 
that receives submissions in an electronic format would provide ready 
and prompt access to continuing disclosure documents by investors and 
other municipal securities market participants. Rather than having to 
approach multiple locations, investors and other market participants 
would be able to go solely to one location to retrieve continuing 
disclosure documents, thereby allowing for a more convenient means to 
obtain such information. Moreover, the Commission believes that having 
one repository electronically collect and make available all continuing 
disclosure documents would increase the likelihood that investors and 
other market participants obtain complete information about a municipal 
security or its issuer, since the information would not be dispersed 
across multiple repositories. In addition, the Commission preliminarily 
expects that the consistent availability of such information from a 
single source could simplify compliance with regulatory requirements by 
Participating Underwriters and others, such as mutual funds and 
Dealers. Information vendors (including NRMSIRs and SIDs) and others 
also would have ready access from a single source to continuing 
disclosure documents for use in their value-added products.
    The Commission notes that, when it adopted Rule 15c2-12 in 1989, it 
strongly supported the development of one or more central repositories 
for municipal disclosure documents.\43\ In this regard, the Commission 
noted in the 1989 Adopting Release that ``the creation of multiple 
repositories should be accompanied by the development of an information 
linkage among these repositories'' so as to afford ``the widest 
retrieval and dissemination of information in the secondary market.'' 
\44\ The Commission further stated that the ``use of such repositories 
will substantially increase the availability of information on 
municipal issues and enhance the efficiency of the secondary trading 
market.'' \45\ In addition, the Commission stated when it adopted the 
1994 Amendments that the ``requirement to deliver disclosure to the 
NRMSIRs and the appropriate SID also allay[ed] the anti-competitive 
concerns raised by the creation of a single repository.'' \46\
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    \43\ See 1989 Adopting Release at 54 FR 28807, supra note 3. See 
also Securities Exchange Act Release No. 33742 (March 9, 1994), 59 
FR 12759 (March 17, 1994) (File No. S7-5-94) (proposing release for 
the 1994 Amendments) (``1994 Proposing Release'').
    \44\ See 1989 Adopting Release, supra note 3.
    \45\ Id.
    \46\ See 1994 Amendments, supra note 5.
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    As noted earlier, the Commission has long been interested in 
improving the availability of disclosure in the municipal securities 
market. At the time the Commission adopted Rule 15c2-12 and amended it 
in 1994, disclosure documents were submitted in paper form. The 
Commission believed that, in such an environment where document 
retrieval would be handled manually, the establishment of one or more 
repositories could be beneficial in widening the retrieval and 
availability of information in the secondary market, since the public 
could obtain the disclosure documents from multiple locations. The 
Commission's objective

[[Page 46142]]

of encouraging greater availability of municipal securities information 
remains unchanged. However, as indicated earlier, there have been 
significant inefficiencies in the current use of multiple repositories 
that likely have impacted the public's ability to retrieve continuing 
disclosure documents.\47\ Although the Commission in the 1989 Adopting 
Release supported the development of an information linkage among the 
repositories, none was established to help broaden the availability of 
the disclosure information. Also, since the adoption of the 1994 
Amendments, there have been significant advancements in technology and 
information systems, including the use of the Internet, to provide 
information quickly and inexpensively to market participants and 
investors. In this regard, the Commission preliminarily believes that 
the use of a single repository to receive, in an electronic format, and 
make available continuing disclosure documents, in an electronic 
format, would substantially and effectively increase the availability 
of municipal securities information about municipal issues and enhance 
the efficiency of the secondary trading market.
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    \47\ See note 19, supra.
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    The Commission acknowledges that, if the proposed amendments were 
adopted to provide for a single repository, competition with respect to 
services provided by the existing NRMSIRs could decline, including a 
potential reduction in current services relating to municipal 
securities that are not within the ambit of Rule 15c2-12 or a potential 
narrowing of competing information services regarding municipal 
securities.\48\ The Commission, however, preliminarily believes that 
any potential effect on competition that could result from having a 
single repository would be justified by the more efficient and 
effective process for the collection and availability of continuing 
disclosure documents by a single repository. For instance, utilizing 
the Internet for the collection and availability of continuing 
disclosure documents would modernize the method of delivery of such 
documents to the single repository and make the documents more readily 
and easily accessible to investors and others. Moreover, in providing 
for a single repository for continuing disclosure documents that 
investors and others could easily access, the proposed amendments would 
foster the goals of the Exchange Act to protect investors and promote 
the public interest. For example, investors would be able to readily 
retrieve information from the central repository about municipal 
securities, and thus it would be easier for them to make more informed 
decisions in assessing whether to purchase, sell, or hold municipal 
securities. Similarly, commercial vendors could readily access the 
information to redisseminate it or use it in whatever value-added 
products they may wish to provide.
---------------------------------------------------------------------------

    \48\ See also discussion in Sections V. and VI., infra.
---------------------------------------------------------------------------

    As a result, the Commission preliminarily does not believe that 
having a single repository would have a significant adverse effect on 
the ability or willingness of private information vendors to compete to 
create and market value-added products. In fact, a single repository 
where documents are submitted in an electronic format could encourage 
the private information vendors to disseminate municipal securities 
information by reducing the cost of entry into the information services 
market. Vendors may need to make some adjustments to their 
infrastructure or facilities. However, some vendors could determine 
they no longer need to invest in the infrastructure and facilities 
necessary to collect and store continuing disclosure documents, and new 
entrants into the market would not need to purchase the information 
from multiple locations, but rather could readily access such 
information from one centralized source. Thus, all vendors would have 
equal availability to the continuing disclosure documents and be able 
to compete in providing value-added services.
    The Commission requests comment on whether it should amend Rule 
15c2-12 as proposed in this release, or whether it is preferable to 
continue to have multiple sources for such information. The Commission 
requests comment on whether having one repository instead of multiple 
repositories for the submission of, and access to, continuing 
disclosure documents would improve access to secondary market 
disclosure for investors and municipal securities market participants. 
The Commission also requests comment on whether the availability of 
such information from a single source would simplify compliance with 
regulatory requirements by Participating Underwriters and others. The 
Commission seeks comment on any possible disadvantages in having only 
one repository responsible for the collection of, and access to, 
municipal securities information. Furthermore, the Commission requests 
comment whether it should contemplate alternative ways of improving the 
efficiency of the current structure, including the use of the existing 
NRMSIRs, instead of amending the Rule to provide for only one 
repository. In this regard, the Commission seeks comment concerning 
whether instead Rule 15c2-12 should be amended to require Participating 
Underwriters to reasonably determine that the continuing disclosure 
agreements provide solely for the electronic submission of such 
documents to each of the NRMSIRs. Commenters should provide reasons why 
submitting documents, electronically or otherwise, to multiple NRMSIRs, 
rather than to a single repository, would be preferable.
    If the Commission should determine to amend the Rule to refer to 
one repository, the Commission also is proposing to revise Rule 15c2-12 
to delete all references to NRMSIRs and instead to insert references to 
the MSRB. Established pursuant to an act of Congress \49\ as a self-
regulatory organization (``SRO'') for brokers, dealers and municipal 
securities dealers engaged in transactions in municipal securities, the 
MSRB is subject to Commission oversight, as provided by the Exchange 
Act. As an SRO, the MSRB is required to file its rules and changes to 
those rules with the Commission for notice and comment and Commission 
review under Section 19(b) of the Exchange Act.\50\ Pursuant to Section 
15B(b)(2)(C) of the Exchange Act, the MSRB's rules are required to be 
designed, in part, ``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.'' \51\ The MSRB's existing RTRS and MSIL systems, and 
the primary offering information component of the EMMA system that has 
been approved by the Commission (relating to the submission of official 
statements and advance refunding documents),\52\ were subject to notice 
and comment and Commission review. Similarly, the MSRB's proposal to 
establish a continuing disclosure

[[Page 46143]]

component within the EMMA system, as well as any future changes to that 
component, would be subject to Commission review under section 19(b) of 
the Exchange Act.\53\ Further, the Commission believes that, in 
addition to being subject to Commission oversight as an SRO, the MSRB 
is both familiar with the complexities of municipal securities and the 
municipal securities market and has experience in developing and 
maintaining electronic information systems for that market.\54\ 
Collectively, these factors lead the Commission to propose to amend 
Rule 15c2-12 to provide that the MSRB be the centralized location for 
collecting (in an electronic format) and making information about 
municipal securities available to the public at no cost.
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    \49\ 15 U.S.C. 78o-4.
    \50\ 15 U.S.C. 78s(b).
    \51\ 15 U.S.C. 78o-4(b)(2)(C).
    \52\ See Securities Exchange Act Release No. 57577, supra note 
30.
    \53\ See Securities Exchange Act Release No. 58256, supra note 
31.
    \54\ For example, the MSRB is experienced with operating CDINet, 
the MSIL system, and the RTRS system.
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    The Commission previously stated that it would specifically 
consider the competitive implications of the MSRB becoming a 
repository.\55\ In addition, the Commission stated that, if the 
Commission were to conclude that the MSRB's status as a repository 
might have adverse competitive implications, it would consider whether 
it should take any action to address these effects.\56\ As noted above, 
the Commission recognizes that competition with respect to certain 
information services regarding municipal securities that are provided 
by the existing NRMSIRs could decline should the MSRB become the 
central repository. However, the Commission believes that the reasons 
it provided above regarding the competitive implications with respect 
to having a single repository similarly would apply if the MSRB were 
the sole repository. The Commission does not believe that there are 
competitive implications that would uniquely apply to the MSRB in its 
capacity as the sole repository, as opposed to any other entity that 
could be the sole repository. In fact, the Commission believes that, if 
the MSRB were the sole repository, its status as an SRO would provide 
an additional level of Commission oversight, as any changes to its 
rules relating to continuing disclosure documents would have to be 
filed for Commission consideration as a proposed rule change under 
section 19(b) of the Exchange Act.
---------------------------------------------------------------------------

    \55\ Specifically, the Commission stated that it would consider 
the competitive implications of an MSRB request for NRMSIR status. 
See Securities Exchange Act Release No. 28081 (June 1, 1990), 55 FR 
23333 (June 7, 1990) (File No. SR-MSRB-89-9). See also 1994 
Proposing Release and 1994 Amendments, supra notes 43 and 5, 
respectively. Although the MSRB is not seeking NRMSIR status, the 
MSRB essentially would become a repository if the proposed 
amendments were adopted.
    \56\ See Securities Exchange Act Release No. 28081, supra note 
55.
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    Accordingly, similar to the discussion above, the Commission 
believes that any competitive impact that could result from the MSRB's 
status as the sole repository would be justified by the benefits that 
such status could provide. The Commission believes that one of the 
benefits in having the MSRB be the sole repository would be its ability 
to provide a ready source of continuing disclosure documents to all 
investors, broker-dealers and information vendors who wish to use that 
information for their products. Private vendors could utilize the MSRB 
in its capacity as a repository as a means to collect information from 
the continuing disclosure documents to create value-added products for 
their customers. As noted earlier, vendors may need to make some 
adjustments to their infrastructure or facilities in using the MSRB's 
services as a repository of continuing disclosure documents. However, 
some vendors could determine they no longer need to incur the cost of 
obtaining and storing continuing disclosure documents, and new entrants 
into the information services market would not need to purchase the 
information from multiple locations. Thus, all vendors would have equal 
availability to these public documents and would be able to develop 
whatever services they choose.
    The Commission requests comment concerning whether the MSRB should 
serve as the sole repository of continuing disclosure documents or 
whether another entity, such as a private vendor, should serve as the 
sole repository, instead of the MSRB. If commenters believe another 
entity should be the sole repository, commenters should provide reasons 
for their viewpoint. The Commission seeks comment on whether the MSRB 
would be an appropriate operator of a centralized repository for the 
collection and availability of continuing disclosure information about 
municipal securities, and whether there is a more appropriate location 
or means through which such information could be made readily available 
to the public without charge. Commenters are also asked to address 
whether the MSRB's status as an SRO would be an advantage or 
disadvantage to its serving as the sole repository. In addition, the 
Commission requests comment on whether having the MSRB serve as the 
sole repository would encourage or discourage competition between the 
MSRB and private vendors, or others.
    If the Commission were to amend the Rule to provide for the MSRB to 
serve as the sole repository, the Commission would amend Rule 15c2-
12(b)(5), which sets forth the undertakings to which Participating 
Underwriters must reasonably determine that issuers or other obligated 
persons have contractually agreed to provide in connection with primary 
offerings subject to the Rule. The proposed amendments would revise 
subparagraphs (b)(5)(i)(A) through (D) of Rule 15c2-12 to require 
Participating Underwriters to reasonably determine that the issuer or 
obligated person has agreed at the time of a primary offering: (1) To 
provide the continuing disclosure documents directly to the MSRB 
instead of to each NRMSIR and appropriate SID, and (2) to provide the 
continuing disclosure documents in an electronic format and accompanied 
by identifying information as prescribed by the MSRB. Specifically, the 
Commission proposes to amend Rule 15c2-12(b)(5)(i)(A) through (D) by 
deleting references in each of those provisions to NRMSIR and SID and 
adding language to require Participating Underwriters to reasonably 
determine that issuers or obligated persons have undertaken to provide 
continuing disclosure documents to the MSRB in an electronic format as 
prescribed by the MSRB.\57\
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    \57\ The Commission notes that the MSRB would be required to 
file a proposed rule change with the Commission under Section 19(b) 
of the Exchange Act regarding the electronic format it proposes to 
use.
---------------------------------------------------------------------------

    The Rule requires that Participating Underwriters reasonably 
determine that the information undertaken to be provided, in addition 
to being submitted to the NRMSIRs, or, in some cases, to the MSRB, must 
be submitted to a SID, if an appropriate SID has been established by 
that state.\58\ The Commission adopted an exemption from paragraph 
(b)(5) of the Rule that, among other things, contains conditions on 
limited undertakings relating to making financial information or 
operating data available upon request or at least annually to a SID, 
and providing material event notices to each NRMSIR or the MSRB, and to 
a SID.\59\ Because the Commission is now proposing to amend the Rule to 
provide for a single repository for the electronic collection and 
availability of continuing disclosure documents that the Commission 
believes would efficiently and effectively improve disclosure in the 
municipal securities market, the Commission believes that it is no 
longer necessary to specifically require in the

[[Page 46144]]

Rule that Participating Underwriters reasonably determine that issuers 
and obligated persons have contractually agreed to provide continuing 
disclosure documents to the SIDs. The Commission, therefore, is 
proposing to delete references to the SIDs in the Rule. As discussed 
further below, the Commission, however, notes that there may be an 
obligation to provide such documents to a SID, if required by 
applicable state law, which also could be beneficial in improving 
disclosure in the municipal securities market.
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    \58\ 17 CFR 240.15c2-12(b)(5)(i)(A) through (D).
    \59\ 17 CFR 240.15c2-12(d)(2)(ii)(A) and (B).
---------------------------------------------------------------------------

    Specifically, the Commission is proposing to delete references to 
the SIDs in Rule 15c2-12(b)(5)(i)(A) through (D). Under these proposed 
amendments, Participating Underwriters no longer would need to 
reasonably determine that issuers or obligated persons have agreed in 
the continuing disclosure agreements to provide continuing disclosure 
documents to the appropriate SID, if any. The proposed amendments, 
however, would not affect the legal obligations of issuers and 
obligated persons to provide continuing disclosure documents, along 
with any other submissions, to the appropriate SID, if any, that are 
required under the appropriate state law. In addition, the proposed 
amendments would have no effect on the obligations of issuers and 
obligated persons under outstanding continuing disclosure agreements 
entered into prior to any effective date of the proposed amendments to 
the Rule to submit continuing disclosure documents to the appropriate 
SID, if any, as stated in their existing continuing disclosure 
agreements, nor on their obligation to make any other submissions that 
may be required under the appropriate state law.
    The Commission requests comment on whether the reference to the 
SIDs should be deleted in the Rule. The Commission requests comment on 
the impact of deleting the references to the SIDs in the Rule, 
including the impact of the proposed deletion on the obligations of 
Participating Underwriters, issuers and obligated persons. The 
Commission also requests comment on the effect of the proposed deletion 
on SIDs and their role in the collection and disclosure of continuing 
disclosure documents.
    The proposed amendments also would revise Rule 15c2-12(d)(2)(ii), 
which is part of an exemptive provision from Rule 15c2-12(b)(5). The 
exemption in Rule 15c2-12(d)(2) currently provides that paragraph 
(b)(5) of the Rule, which relates to the submission of continuing 
disclosure documents pursuant to continuing disclosure agreements, does 
not apply to a primary offering if three conditions are met: (1) The 
issuer or the obligated person has less than $10 million of debt 
outstanding; \60\ (2) the issuer or obligated person has undertaken in 
a written agreement or contract (``limited undertaking'') to provide: 
(i) Financial information or operating data regarding each obligated 
person for which financial information or operating data is presented 
in the final official statement, including financial information and 
operating data which is customarily prepared by such obligated person 
and is publicly available, upon request to any person or at least 
annually to the appropriate SID,\61\ and (ii) material event notices to 
each NRMSIR or the MSRB, as well as the appropriate SID; \62\ and (3) 
the final official statement identifies by name, address and telephone 
numbers the persons from which the foregoing information, data and 
notices can be obtained. The proposed amendments would revise the 
limited undertaking set forth in 15c2-12(d)(2)(ii)(A) and (B) by 
deleting references to the NRMSIRs and SIDs and solely referencing the 
MSRB. Accordingly, under the proposed amendment to Rule 15c2-
12(d)(2)(ii), a Participating Underwriter would be exempt from their 
obligations under paragraph (b)(5) of the Rule as long as an issuer or 
obligated person has agreed in its limited undertaking to provide 
financial information, operating data and material event notices to the 
MSRB in an electronic format as prescribed by the MSRB, and the 
exemption's other conditions are satisfied. In conjunction with this 
proposed change, the Commission also would amend the provision of the 
exemption relating to the limited undertaking to provide that the type 
of financial information or operating data described in Rule 15c2-
12(d)(2)(ii)(A) regarding each obligated person be submitted at least 
annually to the MSRB.\63\
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    \60\ 17 CFR 240.15c2-12(d)(2)(i).
    \61\ 17 CFR 240.15c2-12(d)(2)(ii)(A).
    \62\ 17 CFR 240.15c2-12(d)(2)(ii)(B).
    \63\ Similar to the earlier discussion regarding the deletion of 
references to the SIDs in Rule 15c2-12(b)(5)(i), the proposed 
amendments to Rule 15c2-12(d)(2)(ii)(A) and (B) would not affect the 
legal obligations of issuers and obligated persons to provide 
financial information, operating data and material event notices, 
along with any other submissions, to the appropriate SID, if any, 
that are required under the appropriate state law. Furthermore, the 
proposed amendments to Rule 15c2-12(d)(2)(ii)(A) and (B) would have 
no effect on the obligations of issuers and obligated persons under 
outstanding limited undertakings entered into prior to any effective 
date of the proposed amendments to the Rule to submit financial 
information, operating data and material event notices to the 
appropriate SID, if any, as stated in their existing limited 
undertakings, nor on their obligation to make other submissions that 
may be required under the appropriate state law.
---------------------------------------------------------------------------

    With respect to the proposed electronic submission of continuing 
disclosure documents, the Commission believes that this method would 
better enable the information to be promptly posted and made available 
to the public without charge. Electronic submission also would 
eliminate the need for manual handling of paper documents, which can be 
a less efficient and more costly process. For instance, the submission 
of paper documents would require the repository to manually review, 
sort and store such documents. There is also a potential for a less 
complete record of continuing disclosure documents at the repository if 
such documents are submitted in paper to the repository and, for 
instance, are misplaced or misfiled. As discussed below, the Commission 
believes that submissions in an electronic format should not be very 
burdensome on issuers or other obligated persons, since many continuing 
disclosure documents already are being created in an electronic format 
and, as a result, are readily transmitted by electronic means.\64\
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    \64\ In addition, the availability of audited financial 
statements and other financial and statistical data in an electronic 
format by issuers subject to the Rule could encourage the 
establishment of the necessary taxonomies and permit states and 
local governments to make use of XBRL in the future, should they 
wish to do so.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed amendment to 
provide continuing disclosure documents in an electronic format. The 
Commission requests comment on whether submitting continuing disclosure 
documents in an electronic format would increase the efficiency of 
submission and availability of continuing disclosure documents, and 
whether submitting the documents in an electronic format would 
facilitate wider availability of the information. The Commission also 
requests comment on alternative methods of providing secondary market 
disclosure, including whether commenters instead believe that the 
NRMSIRs should establish new comprehensive electronic systems for the 
submission of such documents. Furthermore, the Commission requests 
comment concerning whether the proposed amendments to Rule 15c2-12 
should allow for the submission of paper documents and, if so, whether 
any conditions should be imposed in connection with paper submissions. 
Comments are also requested on whether the proposed amendments to Rule 
15c2-12 should allow for the

[[Page 46145]]

availability of paper copies upon request from the central repository.
    To enable the continuing disclosure documents to be identified and 
retrieved accurately, the Commission is proposing new subparagraph 
(b)(5)(iv) of Rule 15c2-12 to require Participating Underwriters to 
reasonably determine that the issuer or obligated person has undertaken 
in writing to accompany all documents submitted to the MSRB with 
identifying information as prescribed by the MSRB. Similarly, the 
Commission is proposing a conforming change in subparagraph 
(d)(2)(ii)(C) of Rule 15c2-12 relating to the limited undertaking set 
forth in Rule 15c2-12(d)(2)(ii) to provide that all documents provided 
to the MSRB would be required to be accompanied by identifying 
information as prescribed by the MSRB.\65\
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    \65\ The Commission notes that the MSRB would be required to 
file a proposed rule change with the Commission pursuant to Section 
19(b) of the Exchange Act regarding any such identifying information 
that it wished to specify.
---------------------------------------------------------------------------

    The Commission believes that providing identifying information with 
each submitted document would permit the repository to sort and 
categorize the document efficiently and accurately. The Commission also 
anticipates that including in each submission the basic information 
needed to accurately identify the document would facilitate the ability 
of investors, market participants, and others to reliably search for 
and locate relevant disclosure documents. Furthermore, the Commission 
preliminarily expects that there would be a minimal burden on 
Participating Underwriters to comply with the proposed new subparagraph 
(b)(5)(iv) of Rule 15c2-12 since it would only require that the 
Participating Underwriters reasonably determine that issuers and 
obligated persons have contractually agreed to one additional provision 
relating to the identifying information, while there would be a 
significant benefit to investors and other municipal market 
participants to easily retrieve the information. Indeed, issuers and 
other obligated persons that choose to submit continuing disclosure 
documents through some existing dissemination agents and document 
delivery services already are supplying identifying information with 
their submissions.\66\
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    \66\ The commitment by an issuer to provide identifying 
information would exist only if it were included in a continuing 
disclosure agreement. As a result, issuers submitting continuing 
disclosure documents pursuant to the terms of undertakings entered 
into prior to the effective date of the proposed amendments that did 
not require identifying information could submit documents without 
supplying identifying information.
---------------------------------------------------------------------------

    The Commission requests comment on the proposed amendments to the 
Rule regarding supplying identifying information as prescribed by the 
MSRB. The Commission also requests comment on alternative methods that 
would assist investors and municipal market participants in locating 
specific information about a municipal security that is submitted under 
the Rule.
    In addition, because the Commission is proposing to amend the Rule 
to reference the MSRB as the sole repository, the Commission proposes 
to make a similar change to Rule 15c2-12(b)(4)(ii), which currently 
refers to a NRMSIR with respect to the time period in which the 
Participating Underwriter must send the final official statement to any 
potential customer. Specifically, under Rule 15c2-12(b)(4), from the 
time the final official statement becomes available until the earlier 
of: (1) Ninety days from the end of the underwriting period, or (2) the 
time when the official statement is available to any person from a 
NRMSIR, but in no case less than twenty-five days following the end of 
the underwriting period, the Participating Underwriter in a primary 
offering is required to send to any potential customer, upon request, 
the final official statement. The Commission proposes to amend the 
language in Rule 15c2-12(b)(4)(ii) to refer to the MSRB instead of to a 
NRMSIR. Accordingly, Participating Underwriters would have the time 
period from when the final official statement becomes available until 
the earlier of: (1) Ninety days from the end of the underwriting 
period, or (2) the time when the official statement is available to any 
person from the MSRB, but in no case less than twenty-five days 
following the end of the underwriting period, to send the final 
official statement to a potential customer, upon request. The 
Commission requests comment on this proposed change to Rule 15c2-
12(b)(4)(ii), including whether Participating Underwriters or others 
would encounter problems complying with this provision as a result of 
the proposed revision.
    Finally, the Commission proposes to make similar changes in Rule 
15c2-12(f)(3) and (f)(9), which define the terms ``final official 
statement'' and ``annual financial information,'' respectively. Rule 
15c2-12(f)(3) defines the term ``final official statement'' to mean a 
document or set of documents prepared by an issuer of municipal 
securities or its representatives that is complete as of the date 
delivered to the Participating Underwriter and that sets forth 
information concerning, among other things, financial information or 
operating data concerning such issuers of municipal securities and 
those other entities, enterprises, funds, accounts, and other persons 
material to an evaluation of the offering. Rule 15c2-12(f)(9) defines 
the term ``annual financial information'' to mean financial information 
or operating data, provided at least annually, of the type included in 
the final official statement with respect to an obligated person, or in 
the case where no financial information or operating data was provided 
in the final official statement with respect to such obligated person, 
of the type included in the final official statement with respect to 
those obligated persons that meet the objective criteria applied to 
select the persons for which financial information or operating data 
will be provided on an annual basis. Both definitions allow for 
financial information or operating data to be set forth in the document 
or set of documents, or be included by specific reference to documents 
previously provided to each NRMSIR, and to a SID, if any, or filed with 
the Commission. The Commission is proposing amendments to Rule 15c2-
12(f)(3) and (f)(9) to replace references to a NRMSIR and SID, with 
references to the MSRB's Internet Web site. Accordingly, the proposed 
amendments to paragraphs (f)(3) and (f)(9) of the Rule would allow 
issuers to reference financial information or operating data set forth 
in specified documents available to the public from the MSRB's Internet 
Web site (or filed with the Commission) as part of the final official 
statements and annual financial information, instead of referencing 
specific documents previously provided to each NRMSIR and SID. The 
Commission requests comment on the proposed changes to the definitions 
of ``final official statement'' and ``annual financial information'' 
contained in Rule 15c2-12.

B. Submissions Required by Existing Undertakings

    The proposed amendments to Rule 15c2-12 would only impact 
continuing disclosure agreements that are entered into in connection 
with primary offerings occurring on or after the effective date of 
these proposed amendments, if they were adopted by the Commission. In 
accordance with the proposed amendments, Participating Underwriters 
would have to reasonably determine that a continuing disclosure 
agreement specifically referenced the MSRB as the sole repository to 
receive and make available the issuer's or obligated person's 
continuing disclosure documents. The Commission understands, however, 
that existing

[[Page 46146]]

undertakings by issuers and obligated persons that were entered into 
prior to the effective date of these proposed amendments may specify in 
their continuing disclosure agreements that continuing disclosure 
documents be submitted to the current NRMSIRs in existence at the time 
a submission is made.
    The Commission believes that, if the proposed amendments to Rule 
15c2-12 were adopted, it would be more efficient and effective to 
implement a sole repository expeditiously. Towards this end, the 
Commission wishes to create a mechanism by which issuers or obligated 
persons could comply with their existing undertakings by submitting the 
continuing disclosure documents to one location, thereby providing 
investors and municipal market participants with prompt and easy access 
to continuing disclosure documents at no charge.
    One approach that the Commission could consider to address this 
situation would be to direct its staff to withdraw all ``no action'' 
letters recognizing existing NRMSIRs \67\ and for the Commission to 
designate the MSRB as the only NRMSIR. As a result, continuing 
disclosure documents that are provided pursuant to existing continuing 
disclosure agreements--i.e., those agreements entered into prior to the 
effective date of the proposed amendments which typically reference the 
NRMSIRs as the location to which a submission should be made--would be 
provided to the MSRB in its capacity as the sole NRMSIR.\68\ Providing 
all submissions--for both past and future offerings--to the same 
location preliminarily would be expected to be less confusing to, and 
could simplify the submission process for, issuers and other obligated 
persons subject to continuing disclosure agreements, as well as to 
investors and others who wish to obtain such information.
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    \67\ See Letters from Brandon Becker, Director, Division of 
Market Regulation (n/k/a Division of Trading and Markets), 
Commission, to: Michael R. Bloomberg, President, Bloomberg L.P., 
dated June 26, 1995, and Aaron L. Kaplow, Vice President, Kenny S&P 
Information Services, dated June 26, 1995; and Letters from Robert 
L.D. Colby, Deputy Director, Division of Market Regulation (n/k/a 
Division of Trading and Markets), Commission, to: Peter J. Schmitt, 
President, DPC Data, Inc., dated June 23, 1997, and John King, Chief 
Operating Officer, Interactive Data, dated December 21, 1999.
    \68\ Issuers or obligated persons with existing limited 
undertakings under Rule 15c2-12(d)(2)(ii)(B) that reference the MSRB 
rather than the NRMSIRs as the location to submit material event 
notices would not be affected by this proposed approach because they 
would continue to submit such notices to the MSRB as stated in their 
limited undertaking. However, issuers or obligated persons with 
existing limited undertakings that reference the NRMSIRs as the 
location to submit material event notices would provide such notices 
to the MSRB in its capacity as the sole NRMSIR.
---------------------------------------------------------------------------

    The Commission requests comment relating to the potential 
withdrawal of the ``no action'' letters provided to the NRMSIRs and 
having one NRMSIR-- the MSRB--be the sole NRMSIR for those continuing 
disclosure agreements entered into prior to any Commission adoption of 
the proposed amendments to Rule 15c2-12. The Commission requests 
comment on the effect of the potential withdrawal of the ``no action'' 
letters on Participating Underwriters, issuers, NRMSIRs, investors and 
others. The Commission requests comment on possible alternative methods 
of transitioning from the current system of sending documents to 
multiple NRMSIRs. The Commission requests comment on whether there are 
any transition issues with respect to the proposed amendments, such as 
whether there would be any conflicts with respect to terms in existing 
continuing disclosure agreements. The Commission seeks comment on 
whether there are concerns that the NRMSIRs would not retain the 
historical continuing disclosure documents and whether commenters 
anticipate any problems in obtaining such documents from the current 
NRMSIRs, if they were no longer recognized as such. If commenters 
foresee any such problems, they should suggest alternative approaches 
for the retention of and access to historical information. The 
Commission also seeks comment on any issues or problems that could 
arise if investors seek to obtain and compare information from multiple 
repositories--e.g., historical continuing disclosure documents from the 
NRMSIRs and current continuing disclosure documents from the MSRB-- and 
whether there are any alternative methods that would allow them to 
obtain complete information about municipal securities, including 
obtaining historical information.
    The Commission seeks comment on any other transition issues in 
connection with the proposed amendments to Rule 15c2-12. In this 
regard, the Commission seeks comment on whether it would be appropriate 
to immediately move to an electronic form of submission if the 
Commission were to approve the proposed amendments to the Rule or 
whether there would be a need to maintain the option of submitting 
documents in paper form either as a temporary option during a 
transition period or as a permanent option. Finally, with respect to 
the transition to a sole repository for continuing disclosure 
documents, the Commission requests comment on whether commenters 
foresee any differences that could occur between the existing structure 
of multiple NRMSIRs and one repository regarding the scope, quantity, 
and continuity of information.

III. Request for Comments

    The Commission seeks comment on all aspects of the proposed 
amendments to the Rule. In addition to the comments requested 
throughout the proposing release, comment is requested on whether the 
proposed amendments would further the Commission's goal of enhancing 
investors' prompt and efficient access to important information 
regarding municipal issuers, and whether the proposed amendments would 
improve the access to the information. Further, the Commission seeks 
comment regarding whether the proposed amendments would simplify the 
ability of municipal issuers and other obligated persons to provide 
annual filings, material event notices, and failure to file notices. In 
addition, the Commission requests comment regarding the impact of the 
proposed amendments on Participating Underwriters and Dealers, as well 
as on the NRMSIRs and SIDs. The Commission requests comment on the 
impact on investors, vendors and others that may be affected by the 
proposed amendments. Further, the Commission requests comment on 
whether there are alternative approaches to improving the public's 
access to information about municipal securities that the Commission 
should consider. For example, the Commission seeks comment on possible 
alternatives including: Whether the Commission should retain the 
current process of collecting and making available continuing 
disclosure documents through the existing NRMSIRs and, if so, whether 
the NRMSIRs should only accept submissions in an electronic format and 
allow for electronic access to them; whether the Commission should open 
the process and allow any other person or entity be the sole repository 
for the collection and availability of continuing disclosure documents, 
rather than proposing to amend the Rule to establish the MSRB as the 
sole repository. In addition, the Commission seeks comment on the 
operation of a system of continuing disclosure by the MSRB as opposed 
to another entity, such as a private vendor that is not an SRO. In this 
regard, the Commission requests comment on whether it is appropriate 
for an SRO, such as the MSRB, to function in the capacity as the sole 
information repository under the Rule. Finally, the Commission requests 
comment on the advantages and

[[Page 46147]]

disadvantages of having one repository instead of having multiple 
NRMSIRs.

IV. Paperwork Reduction Act

    Certain provisions of the proposed amendments to the Rule contain 
``collection of information requirements'' within the meaning of the 
Paperwork Reduction Act of 1995 (``PRA'').\69\ In accordance with 44 
U.S.C. 3507 and 5 CFR 1320.11, the Commission has submitted revisions 
to the currently approved collection of information titled ``Municipal 
Securities Disclosure'' (17 CFR 240.15c2-12) (OMB Control No. 3235-
0372) to OMB. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid control number.
---------------------------------------------------------------------------

    \69\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

A. Summary of Collection of Information

    Currently, under paragraph (b) of Rule 15c2-12, a Participating 
Underwriter is required: (1) To obtain and review an official statement 
``deemed final'' by an issuer of the securities, except for the 
omission of specified information, prior to making a bid, purchase, 
offer, or sale of municipal securities; (2) in non-competitively bid 
offerings, to send, upon request, a copy of the most recent preliminary 
official statement (if one exists) to potential customers; (3) to send, 
upon request, a copy of the final official statement to potential 
customers for a specified period of time; (4) to contract with the 
issuer to receive, within a specified time, sufficient copies of the 
final official statement to comply with the Rule's delivery 
requirement, and the requirements of the rules of the MSRB; and (5) 
before purchasing or selling municipal securities in connection with an 
offering, to reasonably determine that the issuer or obligated person 
has undertaken, in a written agreement or contract, for the benefit of 
holders of such municipal securities, to provide annual filings, 
material event notices, and failure to file notices (i.e., continuing 
disclosure documents) to each NRMSIR (or, alternatively, to the MSRB in 
the case of material event notices and failure to file notices).\70\ 
Under the proposed amendments to the Rule, Participating Underwriters 
would be required to reasonably determine that the issuer or obligated 
person has undertaken in a continuing disclosure agreement to provide 
continuing disclosure documents to the MSRB, in an electronic format 
and accompanied by identifying information, in each case as prescribed 
by the MSRB. The proposed amendments to the Rule would not 
substantively change any of the current obligations of Participating 
Underwriters, except to the extent that Participating Underwriters 
would have to reasonably determine that the issuer or obligated person 
has agreed in the continuing disclosure agreement to provide continuing 
disclosure documents to a single repository instead of to multiple 
NRMSIRs.
---------------------------------------------------------------------------

    \70\ 17 CFR 240.15c2-12(b).
---------------------------------------------------------------------------

    The proposed amendments also would revise Rule 15c2-12(d)(2)(ii), 
which is part of an exemptive provision from Rule 15c2-12(b)(5). The 
exemption in Rule 15c2-12(d)(2) currently provides that paragraph 
(b)(5) of the Rule, which relates to the submission of continuing 
disclosure documents pursuant to continuing disclosure agreements, does 
not apply to a primary offering if three conditions are met: (1) The 
issuer or the obligated person has less than $10 million of debt 
outstanding; \71\ (2) the issuer or obligated person has undertaken in 
a written agreement or contract to provide: (i) Financial information 
or operating data regarding each obligated person for which financial 
information or operating data is presented in the final official 
statement, including financial information and operating data which is 
customarily prepared by such obligated person and is publicly 
available, upon request to any person or at least annually to the 
appropriate SID,\72\ and (ii) material event notices to each NRMSIR or 
the MSRB, as well as the appropriate SID; \73\ and (3) the final 
official statement identifies by name, address and telephone number the 
persons from which the foregoing information, data and notices can be 
obtained. The proposed amendments would revise the limited undertaking 
set forth in 15c2-12(d)(2)(ii)(A) and (B) by deleting references to the 
NRMSIRs and SIDs and solely referencing the MSRB. Accordingly, under 
the proposed amendment to Rule 15c2-12(d)(2)(ii), a Participating 
Underwriter would be exempt from its obligations under paragraph (b)(5) 
of the Rule as long as an issuer or obligated person has agreed in its 
limited undertaking to provide financial information, operating data 
and material event notices to the MSRB in an electronic format as 
prescribed by the MSRB, and the exemption's other conditions are 
satisfied. In conjunction with this proposed change, the Commission 
also would amend the provision of the exemption relating to the limited 
undertaking to provide that the type of financial information or 
operating data described in Rule 15c2-12(d)(2)(ii)(A) regarding each 
obligated person be submitted at least annually to the MSRB.
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    \71\ 17 CFR 240.15c2-12(d)(2)(i).
    \72\ 17 CFR 240.15c2-12(d)(2)(ii)(A).
    \73\ 17 CFR 240.15c2-12(d)(2)(ii)(B).
---------------------------------------------------------------------------

B. Proposed Use of Information

    The proposed amendments to the Rule would provide for a single 
repository that receives submissions in an electronic format to 
encourage a more efficient and effective process for the collection and 
availability of continuing disclosure documents. The proposed 
amendments to Rule 15c2-12 are intended to improve the availability of 
continuing disclosure documents that provide current information about 
municipal issuers and their securities. The proposed amendments would 
enable investors and other municipal securities market participates to 
have ready and prompt access to the continuing disclosure documents of 
municipal securities issuers. This information could be used by retail 
and institutional investors; underwriters of municipal securities; 
other market participants, including broker-dealers and municipal 
securities dealers; municipal securities issuers; vendors of 
information regarding municipal securities; the MSRB and its staff; 
Commission staff; and the public generally.

C. Respondents

    In 2006, the Commission submitted a request to OMB for extension 
and approval of the collection of information associated with the 
existing Rule (``2006 PRA Submission''). OMB approved the extension of 
the 2006 PRA Submission on March 29, 2007. The current paperwork 
collection associated with Rule 15c2-12 applies to broker-dealers, 
issuers of municipal securities, and the NRMSIRs.\74\ Currently, there 
are four NRMSIRs. The proposal would require that a Participating 
Underwriter in a primary offering of municipal securities reasonably 
determine that the issuer or an obligated person has undertaken in a 
continuing disclosure agreement to submit specified continuing 
disclosure documents to the MSRB in an electronic format and 
accompanied by identifying information, as prescribed by the MSRB. In 
the 2006 PRA Submission, the Commission estimated that the respondents 
impacted by the paperwork collection associated with the current Rule 
would consist of: 500 broker-dealers, 10,000 issuers, and four

[[Page 46148]]

NRMSIRs.\75\ Commission staff expects that there would be a reduction 
in the number of broker-dealers included in the current paperwork 
collection associated with the Rule, based on current information it 
obtained, as described below. Commission staff expects that there would 
be no change from the current paperwork collection associated with the 
Rule in the number of respondents that are issuers. The only other 
change in the number of respondents from the current paperwork 
collection would be that, in lieu of the four existing NRMSIRs, there 
would be a single repository.
---------------------------------------------------------------------------

    \74\ NRMSIRs currently collect, index, store, retrieve and 
disseminate disclosure documents.
    \75\ See 2006 PRA Submission.
---------------------------------------------------------------------------

D. Total Annual Reporting and Recordkeeping Burden

    In the 2006 PRA Submission, the Commission included estimates for 
the hourly burdens that the Rule would impose upon broker-dealers, 
issuers of municipal securities, and the NRMSIRs. Commission staff has 
relied on these estimates and on updated information its staff has 
obtained to prepare the analysis discussed below for each of the 
aforementioned entities and to compare current paperwork burdens 
associated with the Rule to paperwork burdens associated with the Rule 
as proposed to be amended.
    Commission staff estimates the aggregate information collection 
burden for the amended Rule to consist of the following:
1. Broker-Dealers
    Under the 2006 PRA Submission, the Commission estimated that the 
Rule imposes a paperwork collection burden for 500 broker-dealers.\76\ 
In addition, the Commission estimated that it would require each of 
these broker-dealers an average burden of one hour per year to comply 
with the Rule.\77\ This burden accounted for the time it would take a 
broker-dealer to reasonably determine that the issuer or obligated 
person has undertaken, in a written agreement or contract, for the 
benefit of holders of such municipal securities, to provide annual 
filings, material event notices, and failure to file notices (i.e., 
continuing disclosure documents) to each NRMSIR (or, alternatively, to 
the MSRB in the case of material event notices and failure to file 
notices).
---------------------------------------------------------------------------

    \76\ Id.
    \77\ Id.
---------------------------------------------------------------------------

    Based on information provided to Commission staff by MSRB staff in 
a telephone conversation on April 11, 2008, Commission staff estimates 
that currently 200 to 250 broker-dealers potentially could serve as 
Participating Underwriters in an offering of municipal securities. 
Therefore, Commission staff estimates that, under the proposed 
amendments, the maximum number of broker-dealer respondents would be 
250. This estimate represents a reduction of 250 broker-dealers from 
the current paperwork collection associated with the Rule.\78\ 
Commission staff believes that this estimated reduction in the number 
of broker-dealer respondents could be attributed in part to the fact 
that it may have been over-inclusive in estimating the number of 
broker-dealer respondents in the past. Further, both large and small 
broker-dealer firms increasingly have consolidated their operations 
during the past several years and some firms have left the municipal 
securities business, which also could account for a reduction in the 
number of broker-dealer respondents. Moreover, in connection with 
developing the proposed amendments, Commission staff has attempted to 
obtain more current information with respect to the number of 
respondents that would be subject to a paperwork collection. The 
proposed amendments, however, would not alter the paperwork burden of 
broker-dealers from that of the current Rule. Accordingly, Commission 
staff estimates that 250 broker-dealers would incur an estimated 
average burden of one hour per year to comply with the Rule, as 
proposed to be amended.
---------------------------------------------------------------------------

    \78\ 500 (number of broker-dealer respondents in 2006 PRA 
Submission)-250 (maximum estimate of broker-dealers impacted by the 
proposed amendments to the Rule) = 250 (broker-dealers). In order to 
provide an estimate for the paperwork burden that would not be 
under-inclusive, Commission staff elected to use the higher end of 
the estimate for the total number of broker-dealers impacted by the 
proposed amendments.
---------------------------------------------------------------------------

    Commission staff estimates that a broker-dealer would incur a one-
time paperwork burden to have its internal compliance attorney prepare 
and issue a notice advising its employees who work on primary offerings 
of municipal securities about the proposed revisions to Rule 15c2-12, 
if they are adopted by the Commission. Commission staff estimates that 
it would take the internal compliance attorney approximately 30 minutes 
to prepare a notice describing the broker-dealer's obligations in light 
of the proposed amendments to Rule. Commission staff believes that the 
task of preparing and issuing a notice advising the broker-dealer's 
employees about the proposed amendments is consistent with the type of 
compliance work that a broker-dealer typically handles internally. 
Accordingly, Commission staff estimates that 250 broker-dealers would 
each incur a one-time, first-year burden of 30 minutes to prepare and 
issue a notice to its employees regarding the broker dealer's 
obligations under the proposed amendments.
    Therefore, under the proposed amendments, the total burden on these 
respondents would be 375 hours for the first year \79\ and 250 hours 
for each subsequent year.\80\
---------------------------------------------------------------------------

    \79\ (250 (maximum estimate of broker-dealers impacted by the 
proposed amendments to the Rule) x 1 hour) + (250 (maximum estimate 
of broker-dealers impacted by the proposed amendments to the Rule) x 
.5 hour (estimate for one-time burden to issue notice regarding 
broker-dealer's obligations under the proposed amendments to the 
Rule)) = 375 hours.
    \80\ 250 (maximum estimate of broker-dealers impacted by the 
proposed amendments to the Rule) x 1 hour = 250 hours.
---------------------------------------------------------------------------

2. Issuers
    The Commission believes that issuers prepare annual filings and 
material event notices as a usual and customary practice in the 
municipal securities market. Issuers' undertakings regarding the 
submission of annual filings, material event notices, and failure to 
file notices that are set forth in continuing disclosure agreements 
contemplated by the existing Rule, as well as the proposed amendments 
to the Rule, impose a paperwork burden on issuers of municipal 
securities.
    In the 2006 PRA Submission, the Commission estimated that Rule 
15c2-12 imposed a total paperwork burden of 5,000 hours on 10,000 
issuers in any given year.\81\ In determining the paperwork burden for 
issuers under the 2006 PRA Submission, the Commission estimated that 
each issuer would submit each year one annual filing that describes its 
finances and operations. Thus, under the 2006 PRA Submission, the 
Commission estimated that issuers would prepare approximately 10,000 
packages of annual filings yearly and that it would take each issuer 30 
minutes to do so, for a total burden of 5,000 hours.\82\ However, based 
on information provided to Commission staff by MSRB staff in a series 
of telephone conversations in February 2008, Commission staff estimates 
that, in connection with the proposed amendments, 10,000 municipal 
issuers with continuing disclosure agreements would prepare 
approximately 12,000 to 15,000 annual filings yearly.\83\
---------------------------------------------------------------------------

    \81\ See 2006 PRA Submission.
    \82\ 10,000 (annual filings) x 30 minutes = 5,000 hours.
    \83\ The revision in the number of annual filings from the 
10,000 annual filings included in the 2006 PRA Submission to 
approximately 12,000 to 15,000 annual filings reflects current 
information provided to Commission staff by MSRB staff, which 
advised that some issuers submit more than one annual filing each 
year. Also, the estimate for the number of annual filings includes 
the submission of annual financial information or operating data 
described in Rule 15c2-12(d)(2)(ii)(A).

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[[Page 46149]]

    Issuers could submit continuing disclosure documents directly to 
the single repository or could do so indirectly through a designated 
agent. Based on telephone conversations with industry sources in May 
2008, Commission staff estimates that approximately 30% of issuers 
today utilize the services of a designated agent to submit disclosure 
documents to NRMSIRS. An issuer would engage the services of a 
designated agent as a matter of convenience to advise it of the timing 
and type of continuing disclosure documents to be submitted to the 
repository. Commission staff does not believe that the percentage of 
issuers that rely on the services of a designated agent would change 
appreciably as a result of the proposed amendments because the proposed 
amendments simply would revise the location to which continuing 
disclosure documents would be submitted.
    In the 2006 PRA Submission, the Commission estimated that the 
process for an issuer to submit the annual filings to each of the four 
NRMSIRs would require approximately 30 minutes.\84\ Commission staff 
estimates that, under the proposed amendments, an issuer would take 
approximately 45 minutes to submit the same annual filings to a single 
repository in an electronic format and accompanied by identifying 
information. This estimate includes approximately 30 minutes to prepare 
the annual filing, which is consistent with the 2006 PRA Submission, 
plus a new burden of an additional 15 minutes to convert the 
information into an electronic format and add any identifying 
information that the repository may prescribe.\85\ Therefore, under the 
proposed amendments, the total burden on issuers of municipal 
securities to submit 15,000 annual filings to the MSRB is estimated to 
be 11,250 hours.\86\ This amount represents an increase of 6,250 hours 
from the 5,000 hours included in the 2006 PRA Submission.\87\
---------------------------------------------------------------------------

    \84\ See 2006 PRA Submission.
    \85\ This additional burden of 15 minutes may decrease over time 
as issuers become more efficient at converting continuing disclosure 
documents into an electronic format and preparing any identifying 
information that the repository may prescribe. Also, Commission 
staff estimates that, for the estimated 30% of issuers that utilize 
the services of a designated agent, the designated agent would 
convert the document into an electronic format (if the issuer has 
not already done so) and add the identifying information on the 
issuer's behalf and then submit the information to the MSRB. The 
additional paperwork burden of 15 minutes described above would 
remain the same whether or not an issuer utilizes a designated agent 
because the information would need to be converted into an 
electronic format and identifying information added, whether the 
issuer or the designated agent on the issuer's behalf performed 
these tasks. Commission staff has elected to use conservative 
estimates for purposes of this rulemaking but believes that 
ultimately the estimated additional paperwork burden of 15 minutes 
would be lower for those issuers that use designated agents that 
implement computer-to-computer interfaces with the MSRB.
    \86\ 15,000 (maximum estimate of annual filings) x 45 minutes = 
11,250 hours. In order to provide an estimate for the paperwork 
burden that would not be under-inclusive, Commission staff elected 
to use the higher end of the estimate for the total number of annual 
filings estimated to be submitted each year.
    \87\ Under the proposed amendments, the increase in the annual 
paperwork burden for issuers with respect to the submission of 
annual filings is a result of the 15 minute increase in time it 
would require each issuer to submit annual filings, as well as 
Commission staff's revision of the estimate for the total number of 
annual filings submitted by issuers, which increased by 5,000 over 
the Commission's estimates in the 2006 PRA Submission. Issuers' 
burden under the 2006 PRA Submission is as follows: 10,000 annual 
filings x 30 minutes = 5,000 hours. Issuers' burden under the 
proposed amendments is as follows: 15,000 annual filings x 45 
minutes = 11,250 hours. The difference in burden between the 
proposed amendments and the 2006 PRA Submission is as follows: 
11,250 hours-5,000 hours = 6,250 hours.
---------------------------------------------------------------------------

    In connection with developing the proposed amendments, the 
Commission has attempted to obtain more current information regarding 
the number of material event notices that potentially would be 
submitted annually to the proposed single repository. Based on 
information provided to Commission staff by MSRB staff in a series of 
telephone conversations in February, 2008, it is estimated that, on an 
annual basis, the MSRB would receive approximately 50,000 to 60,000 
notices of the occurrence of a material event.\88\ Commission staff 
notes that this new estimate represents a substantial increase in the 
estimated number of material event notices that issuers would file 
relative to the number of material event notices included in the 2006 
PRA Submission, and believes that the disparity could be due in part to 
the difficulty in obtaining an accurate, non-duplicative estimate of 
the number of paper documents filed with the various NRMSIRs, as well 
as Commission staff's decision to use conservative estimates for 
purposes of this rulemaking.
---------------------------------------------------------------------------

    \88\ This estimate for material event notices includes the 
submission of material event notices described in Rule 15c2-
12(d)(2)(ii)(B).
---------------------------------------------------------------------------

    Under the 2006 PRA Submission, the Commission estimated that the 
process for an issuer to submit a material event notice to a NRMSIR 
would require approximately 30 minutes.\89\ Commission staff estimates 
that, under the proposed amendments, providing this same information to 
the MSRB would require approximately 45 minutes. This estimate includes 
approximately 30 minutes to prepare the material event notice, which is 
consistent with the 2006 PRA Submission, plus a new burden of an 
additional 15 minutes to convert the information into an electronic 
format and add any identifying information that the repository may 
prescribe.\90\ Therefore, under the proposed amendments, the total 
burden on issuers to submit material event notices to the MSRB would 
require 45,000 hours.\91\ This amount represents an increase of 44,250 
hours from the 750 hours included in the 2006 PRA Submission.\92\
---------------------------------------------------------------------------

    \89\ See 2006 PRA Submission.
    \90\ Commission staff notes that this additional burden of 15 
minutes may decrease over time as issuers become more efficient at 
converting continuing disclosure documents into an electronic format 
and preparing any identifying information that the repository may 
prescribe, as set forth in the proposed amendments. Also, Commission 
staff estimates that, for the estimated 30% of issuers that utilize 
the services of a designated agent, the designated agent would 
convert the document into an electronic format (if the issuer has 
not already done so) and add the identifying information on the 
issuer's behalf and then submit the information to the MSRB. The 
additional paperwork burden of 15 minutes described above would 
remain the same whether or not an issuer utilizes a designated agent 
because the information would need to be converted into an 
electronic format and identifying information added, whether the 
issuer or the designated agent on the issuer's behalf performed 
these tasks. Commission staff has elected to use conservative 
estimates for purposes of this rulemaking but believes that 
ultimately the estimated additional paperwork burden of 15 minutes 
would be lower for those issuers that use designated agents that 
implement computer-to-computer interfaces with the MSRB.
    \91\ 60,000 (maximum estimate of material event notices) x 45 
minutes = 45,000 hours. In order to provide an estimate for the 
paperwork burden that would not be under-inclusive, Commission staff 
has elected to use the higher end of the estimate for the total 
number of material event notices estimated to be submitted each 
year.
    \92\ Under the proposed amendments, the increase in the annual 
paperwork burden for issuers with respect to the submission of 
material event notices is a result of the 15 minute increase in time 
it would require each issuer to submit material event notices, as 
well as Commission staff's upward revision of its estimate for the 
total number of material event notices that issuers would submit, 
which is estimated to increase by 58,500 notices over the 
Commission's estimate in the 2006 PRA Submission, as noted earlier. 
See text accompanying note 88. Issuers' burden under the 2006 PRA 
Submission is as follows: 1,500 material event notices x 30 minutes 
= 750 hours. Issuers' burden under the proposed amendments is as 
follows: 60,000 material event notices x 45 minutes = 45,000 hours. 
The difference in burden between the proposed amendments and the 
2006 PRA Submission is as follows: 45,000 hours-750 hours = 44,250 
hours.
---------------------------------------------------------------------------

    Based on information provided to Commission staff by MSRB staff in 
a series of telephone conversations in February, 2008, Commission staff 
estimates that, on an annual basis, the MSRB would receive 
approximately

[[Page 46150]]

1,500 to 2,000 failure to file notices. Commission staff estimates that 
the current process of preparing and submitting a failure to file 
notice to a NRMSIR would require approximately 15 minutes. Commission 
staff estimates that, under the proposed amendments, providing this 
same information to the MSRB would require approximately 30 minutes. 
This estimate includes approximately 15 minutes to prepare and submit 
the failure to file notice, plus an additional 15 minutes to convert 
the information into an electronic format and add any identifying 
information that the repository would prescribe.\93\ Therefore, under 
the proposed amendments, the total burden on issuers to prepare and 
submit failure to file notices to the MSRB would be 1,000 hours.\94\ 
Thus, the estimated 1,000 hours to prepare and submit failure to file 
notices to the MSRB represents a new paperwork burden of 1,000 hours.
---------------------------------------------------------------------------

    \93\ Commission staff notes that this additional burden of 15 
minutes may decrease over time as issuers become more efficient at 
converting continuing disclosure documents into an electronic format 
and preparing any identifying information that the repository may 
prescribe. Also, Commission staff estimates that, for the estimated 
30% of issuers that utilize the services of a designated agent, the 
designated agent would convert the document into an electronic 
format (if the issuer has not already done so) and add the 
identifying information on the issuer's behalf and then submit the 
information to the MSRB. The additional paperwork burden of 15 
minutes described above would remain the same whether or not an 
issuer utilizes a designated agent because the information would 
need to be converted into an electronic format and identifying 
information added, whether the issuer or the designated agent on the 
issuer's behalf performed these tasks. Commission staff has elected 
to use conservative estimates for purposes of this rulemaking but 
believes that ultimately the estimated additional paperwork burden 
of 15 minutes would be lower for those issuers that use designated 
agents that implement computer-to-computer interfaces with the MSRB.
    \94\ 2,000 (maximum estimate of failure to file notices) x 30 
minutes = 1,000 hours.
---------------------------------------------------------------------------

    Accordingly, under the proposed amendments, the total burden on 
issuers to submit annual filings, material event notices and failure to 
file notices to the MSRB would be 57,250 hours.\95\ This represents an 
increase in the total number of burden hours for issuers of 51,500 
hours from the 5,750 hours included in the 2006 PRA Submission.
---------------------------------------------------------------------------

    \95\ 11,250 hours (estimated burden for issuers to submit annual 
filings) + 45,000 hours (estimated burden for issuers to submit 
material event notices) + 1,000 hours (estimated burden for issuers 
to submit failure to file notices) = 57,250 hours.
---------------------------------------------------------------------------

3. The MSRB
    In the 2006 PRA Submission, the Commission estimated that the total 
burden on each NRMSIR of collecting, indexing, storing, retrieving and 
disseminating information requested by the public to be 29,400 hours 
and that the total burden on all four NRMSIRs was 117,600 hours (4 
NRMSIRs x 29,400 hours). The proposed amendments contemplate that the 
MSRB would be the sole repository and would receive disclosure 
documents in an electronic, rather than paper, format. Based on 
information provided to Commission staff by MSRB staff in a series of 
telephone conversations in February, 2008, Commission staff estimates 
that the burden to collect, index, store, retrieve, and make available 
the pertinent documents would be the number of hours that MSRB 
employees would be assigned to the system for collecting, storing, 
retrieving, and making available the documents. In a series of 
telephone conversations between MSRB staff and Commission staff in 
February 2008, the MSRB advised that three full-time employees and one 
half-time employee would be assigned to these tasks and that each full-
time employee would spend approximately 2,000 hours per year working on 
these tasks. Therefore, the total burden on the MSRB to collect, store, 
retrieve, and make available the disclosure documents covered by the 
proposed amendments would be 7,000 hours per year.\96\ Thus, the total 
burden on the MSRB to collect, store, retrieve, and make available the 
disclosure documents covered by the proposed amendments would be 22,400 
hours \97\ less than the burden for each NRMSIR to collect, index, 
store, retrieve and make available disclosure documents under the 2006 
PRA Submission, and 110,600 hours \98\ less than the burden for all 
four NRMSIRs to collect, index, store, retrieve and make available 
disclosure documents as estimated in the 2006 PRA Submission. The 
difference in the burden hour estimate for the MSRB to collect, store, 
retrieve, and make available continuing disclosure documents under the 
proposed amendments in comparison to the burden on the NRMSIRs 
estimated in the 2006 PRA Submission could be attributed to the fact 
that the proposed amendments contemplate that the continuing disclosure 
documents would be collected, stored, retrieved and made available 
electronically, whereas the 2006 PRA Submission contemplated that these 
documents would be collected, stored, retrieved and made available in 
paper format. In part, the estimate in the 2006 PRA Submission was 
based on the expectation that the documents would be collected, stored, 
retrieved and made available in paper rather than electronic format, 
which would require more people to perform these tasks.
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    \96\ 2,000 hours x 3.5 (3 full-time employees and 1 half-time 
employee) = 7,000 hours.
    \97\ 29,400 hours (estimated burden for each NRMSIR in the 2006 
PRA Submission)--7,000 hours (estimated burden for MSRB under the 
proposed amendments) = 22,400 hours (estimated reduction from 
current Rule's burden).
    \98\ 117,600 hours (estimated burden for all four NRMSIRs in the 
2006 PRA Submission)--7,000 hours (estimated burden for MSRB under 
the proposed amendments) = 110,600 hours (estimated reduction from 
current Rule's burden).
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4. Annual Aggregate Burden for Proposed Amendments
    Accordingly, Commission staff expects that the ongoing annual 
aggregate information collection burden for the proposed amendments to 
the Rule would be 64,500 hours.\99\ The current annual aggregate 
information collection burden for the Rule is 123,850 hours.\100\ 
Therefore, if the Commission were to adopt the proposed amendments, the 
ongoing annual aggregate information collection burden for Rule 15c2-12 
is estimated to be reduced by 59,350 hours.\101\
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    \99\ 250 hours (total estimated burden for broker-dealers) + 
57,250 hours (total estimated burden for issuers) + 7,000 hours 
(total estimated burden for MSRB) = 64,500 hours. The initial first-
year burden would be 64,625 hours: 375 hours (total estimated burden 
for broker-dealers in the first year) + 57,250 hours (total 
estimated burden for issuers) + 7,000 hours (total estimated burden 
for MSRB) = 64,625 hours.
    \100\ See 2006 PRA Submission.
    \101\ 123,850 hours (total burden under current Rule)--64,500 
hours (total burden under amended Rule) = 59,350 hours. In the first 
year, the aggregate burden would be reduced by 59,225 hours: 123,850 
(total burden under current Rule)--64,625 hours (total burden under 
amended Rule in the first year) = 59,225 hours.
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E. Total Annual Cost Burden

1. Issuers
    The Commission expects that some issuers could be subject to some 
costs associated with the proposed electronic submission of annual 
filings, material event notices and failure to file notices, 
particularly if they (or their agent) currently submit paper copies of 
these documents to the NRMSIRs. It is likely, however, that many 
issuers of municipal securities currently have the computer equipment 
and software necessary to convert paper copies of continuing disclosure 
documents to electronic copies and to electronically transmit the 
documents to the MSRB. For issuers that currently have such capability, 
the start-up costs to provide continuing disclosure documents to the 
MSRB would be minimal because they already would possess the necessary 
resources internally. Some issuers may have the necessary computer 
equipment to transmit documents electronically to

[[Page 46151]]

the MSRB, but may need to upgrade or obtain the software necessary to 
submit documents to the MSRB in the electronic format that it 
prescribes. For these issuers, the start-up costs would be the costs of 
upgrading or acquiring the necessary software. Issuers that presently 
do not provide their annual filings, material event notices and/or 
failure to file notices in an electronic format and that are currently 
sending paper copies of their documents to the NRMSIRs pursuant to 
their continuing disclosure agreements could incur some costs to obtain 
electronic copies of such documents if they are prepared by a third 
party (e.g., accountant or attorney) or, alternatively, to have a paper 
copy converted into an electronic format. These costs would vary 
depending on how the issuer elected to convert its continuing 
disclosure documents into an electronic format. An issuer could elect 
to have a third-party vendor transfer its paper continuing disclosure 
documents into the appropriate electronic format. An issuer also could 
decide to undertake the work internally, and its costs would vary 
depending on the issuer's current technology resources.
    The cost for an issuer to have a third-party vendor transfer its 
paper continuing disclosure documents into an appropriate electronic 
format could vary depending on what resources are required to transfer 
the documents into the appropriate electronic format. One example of 
such a transfer would be the scanning of paper-based continuing 
disclosure documents into an electronic format. Based on information 
provided to Commission staff through limited inquiries to commercial 
vendors in February 2008, Commission staff estimates that the cost for 
an issuer to have a third-party vendor scan documents would be $6 for 
the first page and $2 for each page thereafter. Based on information 
provided to Commission staff by MSRB staff in a series of telephone 
conversations in February 2008, Commission staff estimates that 
material event and failure to file notices consist of one to two pages, 
while annual filings range from eight to ten pages to several hundred 
pages, but average about 30 pages in length. Accordingly, the 
approximate cost for an issuer to use a third party vendor to scan a 
material event notice or failure to file notice would be $8 each, and 
the approximate cost to scan an average-sized annual financial 
statement would be $64. Based on information provided to Commission 
staff by MSRB staff in a series of telephone conversations in February 
2008, Commission staff estimates that an issuer would submit one to 
five continuing disclosure documents annually.
    Alternatively, an issuer that currently does not have the 
appropriate technology could elect to purchase the resources to 
electronically format the disclosure documents on its own.\102\ Based 
on information obtained by Commission staff through limited inquiries 
of commercial vendors in February 2008, Commission staff estimates that 
an issuer's initial cost to acquire these technology resources could 
range from $750 to $4,300.\103\ Some issuers may have the necessary 
hardware to transmit documents electronically to the MSRB, but may need 
to upgrade or obtain the software necessary to submit documents to the 
MSRB in the electronic format that it prescribes. Based on information 
obtained by Commission staff through limited inquiries of commercial 
vendors in February 2008, Commission staff estimates that an issuer's 
cost to update or acquire this software could range from $50 to 
$300.\104\
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    \102\ Generally, the technology resources necessary to transfer 
a paper document into an electronic format are a computer, scanner 
and possibly software to convert the scanned document into the 
appropriate electronic document format. Most scanners include a 
software package that is capable of converting scanned images into 
multiple electronic document formats. An issuer would only need to 
purchase software if the issuer (i) has a scanner that does not 
include a software package that is capable of converting scanned 
images into the appropriate electronic format, or (ii) purchases a 
scanner that does not include a software package capable of 
converting documents into the appropriate electronic format.
    \103\ Commission staff estimates the cost for an issuer to 
upgrade or acquire the necessary technology to transfer its paper 
continuing disclosure documents into an electronic format are based 
upon the following estimates for purchasing the necessary equipment 
from a commercial vendor: (i) An issuer's cost for a computer would 
range from $500 to $3,000; (ii) an issuer's cost for a scanner would 
range from $200 to $1,000; and (iii) an issuer's cost for software 
to submit documents in an electronic format would range from $50 to 
$300.
    \104\ Commission staff estimates the cost for an issuer to 
upgrade or acquire the software to submit documents in an electronic 
format would range from $50 to $300. Issuers that only need to 
upgrade existing software would incur costs closer to the lower end 
of this estimate, while those issuers that need to purchase 
completely new software packages would incur costs closer to the 
higher end of this estimate.
---------------------------------------------------------------------------

    In addition, issuers without direct Internet access could incur 
some costs to obtain such access to submit the documents. However, 
Commission staff notes that Internet access is now broadly available to 
and utilized by businesses, governments, organizations and the public, 
and Commission staff expects that most issuers of municipal securities 
currently have Internet access. In the event that an issuer does not 
have Internet access, it would incur costs in obtaining such access, 
which Commission staff estimates to be approximately $50 per month, 
based on its limited inquiries to Internet service providers. 
Otherwise, there are multiple free or low cost locations that an issuer 
could utilize, such as various commercial sites, which could help an 
issuer to avoid the costs of maintaining continuous Internet access 
solely to comply with the proposed amendments to the Rule.
    Accordingly, Commission staff estimates that the costs to some 
issuers to submit continuing disclosure documents to a single 
repository in electronic format could include: (i) An approximate cost 
of $8 per notice to use a third party vendor to scan a material event 
notice or failure to file notice, and an approximate cost of $64 to use 
a third party vendor to scan an average-sized annual financial 
statement, (ii) an approximate cost ranging from $750 and $4,300 to 
acquire technology resources to convert continuing disclosure documents 
into an electronic format, (iii) $50 to $300 solely to upgrade or 
acquire the software to submit documents in an electronic format; and 
(iv) approximately $50 per month to acquire Internet access.
    For an issuer that does not have Internet access and elects to have 
a third party convert continuing disclosure documents into an 
electronic format (``Category 1''), the total maximum external cost 
such issuer would incur would be $752 per year.\105\ For an issuer that 
does not have Internet access and elects to acquire the technological 
resources to convert continuing disclosure documents into an electronic 
format internally (``Category 2''), the total maximum external cost 
such issuer would incur would be $4,900 for the first year and $600 per 
year thereafter.\106\ Accordingly, Commission

[[Page 46152]]

staff estimates that the total cost for issuers, if they all were 
classified as Category 1, would be $7,520,000 per year, and that the 
total cost for issuers, if they all were classified as Category 2, 
would be $49,000,000 for the first year and $6,000,000 per year 
thereafter.\107\
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    \105\ [$64 (cost to have third party convert annual filing into 
an electronic format) x 2 (maximum estimated number of annual 
filings filed per year per issuer)] + [$8 (cost to have third party 
convert material event notice or failure to file notice into an 
electronic format) x 3 (maximum estimated number of material event 
or failure to file notices filed per year per issuer)] + [$50 
(estimated monthly Internet charge) x 12 months] = $752. Commission 
staff estimates that an issuer would file one to five continuing 
disclosure documents per year. These documents generally consist of 
no more than two annual filings and three material event or failure 
to file notices.
    \106\ [$4300 (maximum estimated one-time cost to acquire 
technology to convert continuing disclosure documents into an 
electronic format)] + [$50 (estimated monthly Internet charge) x 12 
months] = $4900. After the initial year, issuers who acquire the 
technology to convert continuing disclosure documents into an 
electronic format internally would only have the cost of obtaining 
Internet access. $50 (estimated monthly Internet charge) x 12 months 
= $600.
    \107\ Total cost for Category 1: 10,000 issuers x $752 (annual 
cost per issuer to have a third party convert continuing disclosure 
documents into an electronic format and for Internet access) = 
$7,520,000. Total cost for Category 2: 10,000 issuers x $4,900 (one-
time cost to acquire technology to convert continuing disclosure 
documents into an electronic format and annual cost for Internet 
access) = $49,000,000. 10,000 issuers x $600 (annual cost per issuer 
for Internet access) = $6,000,000. In order to provide an estimate 
of the total costs to issuers that would not be under-inclusive, 
Commission staff elected to use all 10,000 issuers for each 
Category's estimate.
---------------------------------------------------------------------------

    Alternatively, an issuer could elect to use the services of a 
designated agent to submit continuing disclosure documents to the MSRB. 
As noted above, Commission staff believes that approximately 30% of 
municipal issuers that submit continuing disclosure documents today 
rely on the services of a designated agent. Generally, when issuers 
utilize the services of a designated agent, they enter into a contract 
with the designated agent for a package of services, including the 
submission of continuing disclosure documents, for a single fee. Based 
on information provided to Commission staff by industry sources in 
telephone conversations in May 2008, it is anticipated that five of the 
largest designated agents would submit documents electronically to the 
MSRB via a direct computer-to-computer interface. Based on information 
provided to Commission staff by MSRB staff during telephone 
conversations in May 2008, Commission staff estimates that the start-up 
cost for an entity to develop a direct computer-to-computer interface 
with the MSRB would range from approximately $69,360 to $138,720.\108\ 
Thus, the maximum estimated total start-up cost of developing a direct 
computer-to-computer interface by each of the five designated agents 
for the submission of continuing disclosure documents to the MSRB would 
be $693,600.
---------------------------------------------------------------------------

    \108\ The MSRB estimated that it would take an entity 
approximately 240 to 480 hours of computer programming to develop 
the computer-to-computer interface with the MSRB. $289 (hourly wage 
for a senior programmer) x 240 hours = $69,360. $289 (hourly wage 
for a senior programmer) x 480 hours = $138,720. The $289 per hour 
estimate for a senior programmer is from SIFMA's Office Salaries in 
the Securities Industry 2007, modified by Commission staff to 
account for an 1800-hour work-year and multiplied by 5.35 to account 
for bonuses, firm size, employee benefits and overhead.
---------------------------------------------------------------------------

    The Commission believes that, in light of the estimated cost to 
develop and implement a computer-to-computer interface with the MSRB, 
it is unlikely that issuers would elect to proceed with this approach 
given the availability of less expensive alternatives to submitting 
continuing disclosure documents electronically to the MSRB. However, 
some issuers could choose to submit their continuing disclosure 
documents to the MSRB through a designated agent. A designated agent 
could submit continuing disclosure documents along with identifying 
information to the MSRB on behalf of numerous issuers. Depending on its 
business model, a designated agent could submit continuing disclosure 
documents along with identifying information to the MSRB via the 
Internet or through a direct computer-to-computer interface. In either 
case, the issuer could incur a cost associated with the designated 
agent's electronic submission of the pertinent continuing disclosure 
document and any identifying information to the MSRB. Commission staff 
estimates that this cost could be approximately $16 per continuing 
disclosure document.\109\
---------------------------------------------------------------------------

    \109\ For this estimate, Commission staff has included the cost 
of having the designated agent's compliance clerk submit 
electronically the pertinent continuing disclosure document and any 
identifying information to the MSRB. 15 minutes (.25 hours) 
(estimated time per document to gather identifying information) x 
$62 (hourly wage for a compliance clerk) = $15.50 (approximately 
$16). The $62 per hour estimate for a compliance clerk is from 
SIFMA's Office Salaries in the Securities Industry 2007, modified by 
Commission staff to account for an 1800-hour work-year and 
multiplied by 2.93 to account for bonuses, firm size, employee 
benefits and overhead.
---------------------------------------------------------------------------

2. MSRB
    The MSRB would incur costs to develop the computer system to allow 
it to collect, store, process, retrieve, and make available continuing 
disclosure documents furnished to it by issuers of municipal 
securities. Based on information provided to Commission staff by MSRB 
staff in a series of telephone conversations in February 2008, MSRB's 
start-up costs associated with developing the portal for continuing 
disclosure documents, including hardware, an additional hosting site, 
and software licensing and acquisition costs, would be approximately 
$1,000,000. In addition, the MSRB indicated that the annual operating 
costs for this system, excluding salary and other costs related to 
employees, would be approximately $350,000. Accordingly, Commission 
staff estimates that the total costs for the MSRB would be $1,350,000 
for the first year and $350,000 per year thereafter, exclusive of 
salary and other costs related to employees.\110\
---------------------------------------------------------------------------

    \110\ $1,000,000 (cost to establish computer system) + $350,000 
(annual operation costs for computer system, excluding salary and 
other related costs for employees) = $1,350,000 (first year cost to 
MSRB). After the first year, the only cost would be the annual 
operation cost of $350,000. These costs do not include the salary 
and other overhead costs related to the employees who would maintain 
the system. MSRB staff advised Commission staff that the personnel 
costs associated with operating the portal for continuing disclosure 
documents would be approximately $400,000 per year.
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F. Retention Period of Recordkeeping Requirements

    As an SRO subject to Rule 17a-1 under the Exchange Act,\111\ if the 
proposed amendments to the Rule were adopted, the MSRB would be 
required to retain records of the collection of information for a 
period of not less than five years, the first two years in an easily 
accessible place. The proposed amendments to the Rule would contain no 
recordkeeping requirements for any other persons.
---------------------------------------------------------------------------

    \111\ 17 CFR 240.17a-1.
---------------------------------------------------------------------------

G. Collection of Information is Mandatory

    Any collection of information pursuant to the proposed amendments 
to the Rule would be a mandatory collection of information.

H. Responses to Collection of Information Will Not Be Kept Confidential

    The collection of information pursuant to the proposed amendments 
to the Rule would not be confidential and would be publicly available.

I. Request for Comments

    Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits 
comments regarding: (1) Whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
agency, including whether the information will have practical utility; 
(2) the accuracy of the Commission's estimate of the burden of the 
revised collections of information; (3) whether there are ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and (4) whether there are ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of automated collection techniques or other forms of 
information technology.
    The Commission has submitted to OMB for approval the proposed

[[Page 46153]]

revisions to the current collection of information titled ``Municipal 
Securities Disclosure.'' Persons submitting comments on the collection 
of information requirements should direct them to the Office of 
Management and Budget, Attention: Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Washington, DC 20503, and should also send a copy of their comments to 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-0609, with reference to File No. S7-21-08, and be 
submitted to the Securities and Exchange Commission, Public Reference 
Room, 100 F Street, NE., Washington, DC 20549. As OMB is required to 
make a decision concerning the collection of information between 30 and 
60 days after publication, a comment to OMB is best assured of having 
its full effect if OMB receives it within 30 days of publication. 
Requests for materials submitted to OMB by the Commission with regard 
to this collection of information should be in writing, should refer to 
File No. S7-21-08, and be submitted to the Securities and Exchange 
Commission, Public Reference Room, 100 F Street, NE., Washington, DC 
20549.

V. Costs and Benefits of Proposed Amendments to Rule 15c2-12

    The Commission is considering the costs and benefits of the 
proposed amendments to Rule 15c2-12 discussed above. As discussed 
below, the Commission believes that there would be an overall reduction 
in costs based on the proposed amendments. The Commission encourages 
commenters to identify, discuss, analyze, and supply relevant data 
regarding any such costs or benefits.

A. Benefits

    Under the proposed amendments to the Rule, a Participating 
Underwriter would be prohibited from purchasing or selling municipal 
securities covered by the Rule in a primary offering, unless it has 
reasonably determined that the issuer of a municipal security has 
undertaken in a continuing disclosure agreement to provide continuing 
disclosure documents to the MSRB.\112\ The Commission believes that 
providing for a single repository that receives submissions in an 
electronic format, rather than multiple repositories, would encourage a 
more efficient and effective process for the collection and 
availability of continuing disclosure information. In the Commission's 
view, a single electronic point of collection and accessibility of 
continuing disclosure documents could assist issuers and obligated 
persons in complying with their undertakings. Submission of continuing 
disclosure documents only to one repository rather than multiple 
repositories would reduce the resources issuers and obligated persons 
need to devote to the process of gathering and submitting continuing 
disclosure documents. Because the proposed amendments would provide for 
the electronic submission and availability of continuing disclosure 
documents, the costs to issuers and obligated persons of gathering and 
submitting this information ultimately could be reduced because they no 
longer would have to gather and submit documents in a paper format. As 
described more fully in Section IV. above, Commission staff estimates 
that the ongoing annual information collection burden under the 
proposed amendments would be 64,500 hours.\113\ This is a reduction of 
59,350 hours from the 2006 PRA Submission.\114\ This overall reduction 
in the Rule's paperwork burden--and the costs associated with that 
burden--principally would benefit issuers or obligated persons.
---------------------------------------------------------------------------

    \112\ Under the proposed amendments to paragraph (d)(2)(ii) of 
the Rule, a Participating Underwriter would be exempt from its 
obligations under paragraph (b)(5) of the Rule as long as an issuer 
or obligated person has agreed in its limited undertaking that the 
publicly available financial information or operating data described 
in paragraph (d)(2)(ii)(A) of the Rule would be submitted to the 
MSRB annually, instead of upon request to any person or at least 
annually to the appropriate SID, if any, and that the material event 
notices described in paragraph (d)(2)(ii)(B) of the Rule would be 
submitted to the MSRB, instead of to each NRMSIR or the MSRB and to 
the appropriate SID, if any, and as long as the other conditions of 
the exemption are met.
    \113\ Commission staff estimates that the annual information 
collection burden under the proposed amendments in the first year 
would be 64,625 hours.
    \114\ In the first year, this is a reduction of 59,225 from the 
2006 PRA Submission.
---------------------------------------------------------------------------

    The Commission also believes that having a single repository that 
receives and makes available submissions in an electronic format would 
provide ready and prompt access to this information by investors and 
municipal securities market participants. Investors and market 
participants would be able to go solely to one location to retrieve 
continuing disclosure documents rather than having to approach multiple 
locations, thereby allowing for a more convenient means to obtain such 
information. In addition, the Commission preliminarily believes that 
having one repository electronically collect and make available all 
continuing disclosure documents would increase the likelihood that 
investors and other market participants would obtain complete 
information.
    The Commission expects that a single repository that receives 
submissions in an electronic format could simplify compliance with 
regulatory requirements by broker-dealers and others, such as mutual 
funds, by providing them with consistent availability of continuing 
disclosure documents from a single source. Information vendors 
(including NRMSIRs and SIDs) and others also would have ready access to 
all continuing disclosure documents that they in turn could use in 
their value-added products. The Commission also expects that having a 
single repository that receives submissions in an electronic format 
would make the information available to all users.
    Under the current Rule, Commission staff estimates that the current 
annual paperwork cost for all four NRMSIRs to collect, index, store, 
retrieve and disseminate continuing disclosure information requested by 
the public to be approximately $7.3 million.\115\ Based on information 
provided to Commission staff by MSRB staff in a series of telephone 
conversations in February 2008, the MSRB staff estimated that the 
MSRB's annual total costs to collect, index, store, retrieve and make 
available continuing disclosure information, would be $1,350,000 for 
the first year and $350,000 per year thereafter. Providing for a single 
repository could reduce the paperwork costs that NRMSIRs currently 
incur because they no longer would have to maintain personnel and other 
resources solely in connection with their status as a NRMSIR.
---------------------------------------------------------------------------

    \115\ 117,600 hours (total annual hourly burden for all four 
NRMSIRs from 2006 PRA Submission) x $62 (hourly wage for a 
compliance clerk) = $7.3 million. The $62 per hour estimate for a 
compliance clerk is from SIFMA's Office Salaries in the Securities 
Industry 2007, modified by Commission staff to account for an 1,800-
hour work-year and multiplied by 2.93 to account for bonuses, firm 
size, employee benefits and overhead.
---------------------------------------------------------------------------

    Finally, the Commission preliminarily believes that the proposed 
amendments could encourage the dissemination of information in the 
information services markets by providing easier access to continuing 
disclosure documents. As a result, there potentially could be an 
increase in the number of information vendors disseminating continuing 
disclosure documents and value-added products because the cost of entry 
into the municipal securities information services market could be 
reduced.

[[Page 46154]]

    The Commission seeks comment on the anticipated benefits of the 
proposed amendments.

B. Costs

    If the amendments to the Rule were adopted, the Commission would 
not expect broker-dealers to incur any additional recurring costs 
because the proposed amendments would not alter substantively the 
existing Rule's requirements for these entities, except with respect to 
the place to which issuers would agree to make filings. The proposed 
amendments would change the location where the continuing disclosure 
documents of issuers or obligated persons would be submitted pursuant 
to continuing disclosure agreements. As noted above, Commission staff 
estimates that the annual information collection burden for each 
broker-dealer under the proposed amendments to the Rule would be one 
hour. This annual burden is identical to the burden that a broker-
dealer has under the current Rule.\116\ Accordingly, Commission staff 
estimates that it would cost each broker-dealer $270 annually to comply 
with the Rule.\117\
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    \116\ See 2006 PRA Submission.
    \117\ 1 hour (estimated annual information collection burden for 
each broker-dealer) x $270 (hourly cost for a broker-dealer's 
internal compliance attorney) = $270. The hourly rate for the 
compliance attorney is from SIFMA's Management & Professional 
Earnings in the Securities Industry 2007, modified by Commission 
staff to account for an 1,800-hour work-year and multiplied by 5.35 
to account for bonuses, firm size, employee benefits and overhead.
---------------------------------------------------------------------------

    In addition, Commission staff estimates that a broker-dealer could 
have a one-time internal cost associated with having an in-house 
compliance attorney prepare and issue a memorandum advising the broker-
dealer's employees who work on primary offerings of municipal 
securities about the proposed revisions to Rule 15c2-12, if they are 
adopted by the Commission. Commission staff estimates it would take 
internal counsel approximately 30 minutes to prepare this memorandum, 
for a cost of approximately $135.\118\
---------------------------------------------------------------------------

    \118\ See Section IV.D.1., supra.
---------------------------------------------------------------------------

    The Commission believes that the ongoing obligations of broker-
dealers under the Rule would be handled internally because compliance 
with these obligations is consistent with the type of work that a 
broker-dealer typically handles internally. The Commission does not 
believe that a broker-dealer would have any recurring external costs 
associated with the proposed amendments to the Rule. The Commission 
requests comment on any costs broker-dealers could incur under the 
proposed amendments.
    Although Rule 15c2-12 relates to the obligations of broker-dealers, 
issuers or obligated persons indirectly could incur costs as a result 
of the proposed amendments. Pursuant to continuing disclosure 
agreements, issuers of municipal securities currently undertake to 
provide continuing disclosure documents to the NRMSIRs either directly 
or indirectly through an indenture trustee or a designated agent. In 
either case, some issuers could be subject to the costs associated with 
the proposed electronic filing of annual filings, material event 
notices and failure to file notices, particularly if they (or their 
agent) currently submit paper copies of these documents to the NRMSIRs. 
For those issuers that currently deliver their continuing disclosure 
documents electronically to the NRMSIRs, there should be minimal change 
in costs as a result of the proposed requirement that documents be 
submitted electronically.
    Issuers that presently do not provide their annual filings, 
material event notices and/or failure to file notices in an electronic 
format and that are currently sending paper copies of their documents 
to the NRMSIRs pursuant to their continuing disclosure agreements could 
incur some costs to obtain electronic copies of such documents from the 
party who prepared them or, alternatively, to have a paper copy 
converted into an electronic format. These costs would vary depending 
on how the issuer elected to convert their continuing disclosure 
documents into an electronic format. An issuer could elect to have a 
third-party vendor transfer their paper continuing disclosure documents 
into the appropriate electronic format. An issuer also could decide to 
undertake the work internally, and its costs would vary depending on 
the issuer's current technology resources. An issuer also would need to 
have Internet access to submit documents electronically and would incur 
the costs of maintaining such service, if the issuer currently does not 
have Internet access, unless it relies on other sources of Internet 
access.
    It is likely, however, that many issuers of municipal securities 
currently possess the computer equipment and software necessary to 
convert paper copies of continuing disclosure documents to electronic 
copies and to electronically transmit the documents to the MSRB. For 
issuers that currently have such capability, the start-up costs to 
provide continuing disclosure documents to the MSRB would be minimal 
because they already would have the necessary resources internally.
    As described more fully in section IV. above, Commission staff 
estimates that the costs to some issuers to submit continuing 
disclosure documents to a single repository in an electronic format may 
include: (i) An approximate cost of $8 per notice to use a third party 
vendor to scan a material event notice or failure to file notice, and 
an approximate cost of $64 to use a third party vendor to scan an 
average-sized annual financial statement; (ii) an approximate cost 
ranging from $750 and $4,300 to acquire technology resources to convert 
continuing disclosure documents into an electronic format; (iii) $50 to 
$300 to upgrade or acquire the software to submit documents in an 
electronic format; (iv) approximately $50 per month to acquire Internet 
access; and (v) an approximate cost of $16 per continuing disclosure 
document to have a designated agent submit electronically continuing 
disclosure documents and identifying information to the MSRB. Also, as 
more fully described in Section IV. above, the total estimated cost of 
five designated agents developing computer-to-computer interfaces for 
the submission of documents to the MSRB would be $693,600.
    Issuers or obligated persons also would have to provide certain 
identifying information to the repository pursuant to their 
undertakings in continuing disclosure agreements. As described more 
fully in section IV. above, Commission staff estimates that each issuer 
would submit one to five continuing disclosure documents annually to 
the MSRB, for a maximum estimated annual labor cost of approximately 
$232.50 per issuer.\119\
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    \119\ 5 (maximum estimated number of continuing disclosure filed 
per year per issuer) x $62 (hourly wage for a compliance clerk) x 45 
minutes (.75 hours) (average estimated time for compliance clerk to 
submit a continuing disclosure document electronically) = $232.50. 
The $62 per hour estimate for a compliance clerk is from SIFMA's 
Office Salaries in the Securities Industry 2007, modified by 
Commission staff to account for an 1,800-hour work-year and 
multiplied by 2.93 to account for bonuses, firm size, employee 
benefits and overhead. In order to provide an estimate of total 
costs for issuers that would not be under-inclusive, the Commission 
elected to use the higher end of the estimate of annual submissions 
of continuing disclosure documents.
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    The Commission expects that the costs to issuers could vary 
somewhat, depending on the issuer's size. The Commission believes that 
any such difference would be attributable to the fact that larger 
issuers may tend to have more issuances of municipal securities; thus, 
larger issuers may tend to submit more documents than smaller issuers. 
Thus, the costs of submitting documents

[[Page 46155]]

could be greater for larger issuers. The Commission requests comments 
on costs that issuers and obligated persons could incur as a result of 
the proposed amendments.
    Further, the Commission does not anticipate that issuers would 
incur any costs associated with the need to revise the template for 
continuing disclosure agreements, if the proposed amendments are 
adopted. Commission staff contacted National Association of Bond 
Lawyers (``NABL'') staff in April 2008 regarding the potential costs to 
issuers for bond lawyers to revise the provisions of continuing 
disclosure agreements that would be affected by the proposed 
amendments. According to NABL staff, the NABL members advised that the 
cost of revising the template for continuing disclosure agreements to 
reflect the proposed amendments would be insignificant and stated their 
belief that the costs would not be passed on to issuers.
    As discussed in section IV. above, the MSRB would incur costs to 
develop the computer system to allow it to collect, store, process, 
retrieve, and make available continuing disclosure documents furnished 
to it by issuers of municipal securities. Based on information provided 
to Commission staff by MSRB staff in a series of telephone 
conversations in February 2008, MSRB's start-up costs associated with 
developing the portal for continuing disclosure documents, including 
hardware, an additional hosting site, and software licensing and 
acquisition costs, would be approximately $1,000,000. Based on 
information provided to Commission staff by MSRB staff in a series of 
telephone conversations in February 2008, the MSRB staff estimated that 
the MSRB's ongoing costs of operating the system, including allocated 
costs associated with such items as office space and licensing fees, 
would be approximately $1,350,000 for the first year and $350,000 per 
year thereafter. In addition, MSRB staff advised Commission staff that 
the personnel costs associated with operating the portal for continuing 
disclosure documents would be approximately $400,000 per year.\120\
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    \120\ Based on information provided to Commission staff by MSRB 
staff in telephone conversations in May 2008, this amount represents 
the estimated personnel costs associated with the MSRB's having 
three and one-half persons devoted to operating the continuing 
disclosure portal.
---------------------------------------------------------------------------

    Some NRMSIRs and other vendors of municipal disclosure information 
could incur costs in transitioning their business models if the 
Commission were to adopt the proposal to establish a single repository 
for municipal disclosure documents. In fact, existing NRMSIRs could be 
adversely affected by the proposed amendments because the proposal 
contemplates a single repository. Any NRMSIR that currently provides 
municipal disclosure documents as its primary business model could face 
a significant decline in its business, and thus in income, as a result 
of the proposed amendments.\121\ In addition, to transition from 
multiple repositories to a single repository, the Commission is 
considering whether to direct its staff to withdraw the ``no action'' 
letters issued to the NRMSIRs and to designate the MSRB as the NRMSIR. 
As a result, the NRMSIRs could experience an immediate decline in 
income with respect to those parts of their business that provide 
municipal disclosure documents to persons who request them. Also, 
NRMSIRs could have some costs if they continued to maintain historical 
continuing disclosure information that they have already received under 
existing continuing disclosure agreements. The Commission requests 
comment and empirical data on any anticipated costs that NRMSIRs could 
incur.
---------------------------------------------------------------------------

    \121\ See, e.g., Letter from Peter J. Schmitt, Chief Executive 
Officer, DPC Data, dated January 23, 2008, regarding SR-MSRB-2007-
06, submitted to www.sec.gov/comments. (``DPC Data Letter'').
---------------------------------------------------------------------------

    Finally, under the proposed amendments, Rule 15c2-12 no longer 
would refer to SIDs. The proposed amendments would not affect the legal 
obligations of issuers or obligated persons to provide continuing 
disclosure documents, along with any other submissions, to the 
appropriate SID, if any, that may be required under the appropriate 
state law. In addition, the proposed amendments would have no effect on 
the obligations of issuers and obligated persons under outstanding 
continuing disclosure agreements entered into prior to any effective 
date of amendments to the Rule, if the Commission were to adopt such 
amendments, to submit continuing disclosure documents to the 
appropriate SID, if any, as stated in their existing continuing 
disclosure agreements, nor on their obligation to make any other 
submissions that may be required under the appropriate state law. 
Unlike NRMSIRs, SIDs are membership organizations and use information 
submitted to them in products for their members. While SIDs can charge 
fees for requested documents, the Commission believes, based on 
telephone conversations between Commission staff and representatives of 
SIDs in April 2008, that this is not a primary source of revenue for 
them. The Commission does not expect that SIDs would experience a 
decline in operations or incur any costs as a result of the proposed 
amendments, but seeks comment on any anticipated impact that the 
proposed amendments could have on SIDs.

C. Request for Comment on Costs and Benefits

    To assist the Commission in evaluating the costs and benefits that 
could result from the proposed amendments to the Rule, the Commission 
requests comments on the potential costs and benefits identified in 
this proposal, as well as any other costs or benefits that could result 
from the proposed amendments to the Rule. Commenters should provide 
analysis and data to support their views on the costs and benefits. In 
particular, the Commission requests comment on the costs and benefits 
of the proposed amendments on broker-dealers, issuers, the MSRB, 
NRMSIRs and other vendors, as well as any costs on others, including 
market participants and investors.

VI. Consideration of Burden and Promotion of Efficiency, Competition, 
and Capital Formation

    Section 3(f) of the Exchange Act \122\ requires the Commission, 
whenever it engages in rulemaking and is required to consider or 
determine whether an action is necessary or appropriate in the public 
interest, to consider whether the action would promote efficiency, 
competition, and capital formation. In addition, section 23(a)(2) of 
the Exchange Act \123\ requires the Commission, when adopting rules 
under the Exchange Act, to consider the impact such rules would have on 
competition. Section 23(a)(2) of the Exchange Act also prohibits the 
Commission from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act.
---------------------------------------------------------------------------

    \122\ 15 U.S.C. 78c(f).
    \123\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    The proposed amendments to the Rule would revise subparagraph 
(b)(5) of Rule 15c2-12 to require Participating Underwriters to 
reasonably determine that the issuer or obligated person has agreed at 
the time of a primary offering: (1) To provide the continuing 
disclosure documents to the MSRB instead of to each NRMSIR and 
appropriate SID; and (2) to provide the continuing disclosure documents 
in an electronic format and accompanied by identifying information as 
prescribed by the MSRB.

[[Page 46156]]

    The Commission preliminarily believes that the proposed amendments 
to the Rule should help make the municipal securities disclosure 
process more efficient and help conserve resources for municipal 
security issuers, as well as investors and market participants. Under 
the current regulatory framework, issuers of municipal securities in 
their continuing disclosure agreements undertake to submit continuing 
disclosure documents to four separate NRMSIRs, and they submit such 
documents in paper or electronic form. The Commission anticipates that 
amending the Rule could promote the efficiency of the municipal 
disclosure process by reducing the resources municipal security issuers 
would need to devote to the process of submitting continuing disclosure 
documents.
    As noted above, the Commission has long been interested in 
improving the timing and availability of disclosure in the municipal 
securities market. At the time the Commission adopted Rule 15c2-12 in 
1989 and adopted the 1994 Amendments, disclosure documents were 
submitted in paper form. The Commission believed that, in such an 
environment where document retrieval would be handled manually, the 
establishment of one or more repositories could be beneficial in 
widening the retrieval and availability of information in the secondary 
market, since the public could obtain the disclosure documents from 
multiple locations. The Commission's objective of encouraging greater 
availability of municipal securities information remains unchanged.
    However, there have been significant inefficiencies in the current 
use of multiple repositories that likely have affected the public's 
ability to retrieve continuing disclosure documents.\124\ In this 
regard, the Commission noted in the 1989 Adopting Release that ``the 
creation of multiple repositories should be accompanied by the 
development of an information linkage among these repositories'' so as 
to afford ``the widest retrieval and dissemination of information in 
the secondary market.''\125\ Although the Commission in the 1989 
Adopting Release supported the development of an information linkage 
among the repositories, none was established to help broaden the 
availability of the disclosure information. Also, since the adoption of 
the 1994 Amendments, there have been significant advancements in 
technology and information systems, including the use of the Internet, 
to provide information quickly and inexpensively to market participants 
and investors. In this regard, the Commission preliminarily believes 
that the use of a single repository to receive, in an electronic 
format, and make available continuing disclosure documents in an 
electronic format would substantially and effectively increase the 
availability of municipal securities information about municipal issues 
and enhance the efficiency of the secondary trading market for these 
securities.
---------------------------------------------------------------------------

    \124\ See note 19, supra.
    \125\ See 1989 Adopting Release, supra note 3.
---------------------------------------------------------------------------

    In addition, the Commission preliminarily believes that having a 
single repository for electronically submitted information would 
provide investors, market participants, and others with a more 
efficient and convenient means to obtain continuing disclosure 
documents and would help increase the likelihood that investors, market 
participants, and others would make more informed investment decisions 
regarding whether to buy, sell or hold municipal securities.
    With respect to the Exchange Act goal of promoting competition, the 
Commission notes that, when it adopted Rule 15c2-12 in 1989, it 
strongly supported the development of one or more central repositories 
for municipal disclosure documents.\126\ The Commission ``recognize[d] 
the benefits that may accrue from the creation of competing private 
repositories,'' and indicated that ``the creation of central sources 
for municipal offering documents is an important first step that may 
eventually encourage widespread use of repositories to disseminate 
annual reports and other current information about issuers to the 
secondary markets.'' \127\ Further, when it adopted the 1994 
Amendments, the Commission stated that the ``requirement to deliver 
disclosure to the NRMSIRs and the appropriate SID also allay[ed] the 
anti-competitive concerns raised by the creation of a single 
repository.'' \128\
---------------------------------------------------------------------------

    \126\ See 1989 Adopting Release at 54 FR 28807, supra note 3. 
See also 1994 Proposing Release, supra note 43.
    \127\ See 1989 Adopting Release, supra note 3. See also 1994 
Proposing Release, supra note 43.
    \128\ See 1994 Amendments, supra note 5.
---------------------------------------------------------------------------

    There have been significant advances in technology and information 
collection and delivery since that time, as discussed throughout this 
release, that indicate that having multiple repositories may not be 
necessary because the widespread availability and dissemination of 
information can be achieved through different, more efficient, means. 
Because the current environment differs markedly from the time when 
Rule 15c2-12 was adopted in 1989 and subsequently amended in 1994, the 
Commission believes that it is appropriate to propose an approach that 
utilizes the significant technological advances, such as the 
development and use of various electronic formats, that have occurred 
in the intervening years.
    The Commission's proposal to provide for the establishment of a 
single repository for continuing disclosure documents would help 
further the Exchange Act objective of promoting competition because 
information about municipal securities, provided in an electronic 
format, would be more widely available to market professionals, 
investors, information vendors, and others as a result of the proposed 
amendments. For example, the Commission believes competition among 
vendors could increase because vendors could utilize this information 
to provide value-added services to municipal market participants. The 
Commission's proposal also could promote competition in the purchase 
and sale of municipal securities because the greater availability of 
information as a result of the proposed amendments could instill 
greater investor confidence in the municipal securities market. 
Moreover, the greater availability of information also could encourage 
improvement in the completeness and timeliness of issuer disclosures 
and could foster interest in municipal securities by retail and 
institutional customers. As a result, more investors could be attracted 
to this market sector and broker-dealers could compete for their 
business.
    The Commission acknowledges that, if the proposed amendments were 
adopted to provide for a single repository, they potentially could have 
an adverse impact on one or more existing NRMSIRs, especially if their 
business models depended on their status as a NRMSIR.\129\ Moreover, 
NRMSIRs have received compensation for providing copies of continuing 
disclosure documents to persons who request them. Thus, one or more 
NRMSIRs possibly could be adversely affected by the proposal, if they 
no longer have available to them a steady flow of funds from providing 
for a fee

[[Page 46157]]

copies of continuing disclosure documents to persons who request them. 
As a result of the proposed amendments, a NRMSIR could find that it 
would have to revise its current manner of doing business or face a 
significant downturn in its business operations. Vendors of information 
about municipal securities, other than NRMSIRs, also could be affected 
by the proposed amendments if the sole repository provides information 
electronically for no charge.
---------------------------------------------------------------------------

    \129\ In responding to the MSRB's proposed rule change to revise 
its MSIL system, one NRMSIR expressed concern about the MSRB's 
proposed competition with vendors to offer what it viewed as value-
added features and services relating to disclosure documents. This 
NRMSIR stated that, if the MSRB were permitted to offer value-added 
content and features in connection with its proposed Internet-based 
portal for disclosure documents, it would inflict economic harm on 
existing data vendors. See DPC Data Letter, supra note 121.
---------------------------------------------------------------------------

    In addition, there would be just one repository, and not four 
NRMSIRs as is currently the case, if the Commission were to adopt the 
proposed Rule 15c2-12 amendments. Thus, the proposal could reduce 
competition with respect to services provided by NRMSIRs as information 
vendors. In addition to supplying municipal disclosure documents upon 
request, NRMSIRs also provide value-added market data services to 
municipal investors that incorporate continuing disclosure information. 
If NRMSIRs were adversely affected by the proposal to establish a 
single repository, it is possible that there could be a reduction in 
these value-added market data services relating to municipal securities 
or a loss of innovation in offering competing information services 
regarding municipal securities.
    The Commission preliminarily does not believe that having a single 
repository would have a significant adverse effect on the ability or 
willingness of private information vendors to compete to create and 
market value-added data products. Commercial vendors could readily 
access the information made available by the repository to re-
disseminate it or use it in whatever value-added products they may wish 
to provide. In fact, a single repository in which documents are 
submitted in an electronic format could encourage the private 
information vendors to disseminate municipal securities information by 
reducing the cost of entry into the information services market. 
Existing vendors could need to make some adjustments to their 
infrastructure or facilities. However, some vendors could determine 
that they no longer need to invest in the infrastructure and facilities 
necessary to collect and store continuing disclosure documents, and new 
entrants into the market would not need to obtain the information from 
multiple locations, but rather could readily access such information 
from one centralized source. Thus, all vendors should be able to obtain 
easily continuing disclosure documents and should be able to compete in 
providing value-added services.
    The Commission, therefore, preliminarily believes that any 
potential effect on competition that could result from the proposed 
amendments would be justified by the more efficient and effective 
process for the collection and availability of continuing disclosure 
documents. A single repository for the electronic collection and 
availability of these documents would foster the Exchange Act objective 
of promoting competition by simplifying the method of submission of 
continuing disclosure documents to one location and making the 
documents more readily accessible to investors and others by virtue of 
the documents being in an electronic format.
    The Commission previously stated that it would specifically 
consider the competitive implications of the MSRB becoming a 
repository.\130\ In addition, the Commission stated that if the 
Commission were to conclude that the MSRB's status as a repository 
might have adverse competitive implications, it would consider whether 
it should take any action to address these effects.\131\ As noted 
earlier, the Commission recognizes that competition with respect to 
certain information services regarding municipal securities that are 
provided by the existing NRMSIRs could decline should the MSRB become 
the central repository. The Commission believes that one of the 
benefits in having the MSRB be the sole repository would be its ability 
to provide a ready source of continuing disclosure documents to other 
information vendors who wish to use that information for their 
products. Private vendors could utilize the MSRB in its capacity as a 
repository as a means to collect information from the continuing 
disclosure documents to create value-added products for their 
customers.
---------------------------------------------------------------------------

    \130\ See Securities Exchange Act Release No. 28081, supra note 
55.
    \131\ Id.
---------------------------------------------------------------------------

    In addition, the Commission believes that the reasons it provided 
above regarding the competitive implications with respect to having a 
single repository similarly would apply if the MSRB were the sole 
repository. The Commission does not believe that there are competitive 
implications that would uniquely apply to the MSRB in its capacity as 
the sole repository as opposed to any another entity that could be the 
sole repository. In fact, the Commission believes that, if the MSRB 
were the sole repository, its status as an SRO would provide an 
additional level of Commission oversight, as changes to its rules 
relating to continuing disclosure documents would have to be filed for 
Commission consideration as a proposed rule change under section 19(b) 
of the Exchange Act. Accordingly, the Commission believes that any 
competitive impact that could result from the MSRB's status as the sole 
repository would be justified by the benefits that such status could 
provide.
    The Commission preliminarily believes that the proposed amendments 
could have a positive effect on capital formation by municipal 
securities issuers. The Rule is addressed to the obligations of broker-
dealers participating in a primary offering of municipal securities 
(i.e., Participating Underwriters). Because continuing disclosure 
documents would be submitted electronically to a single repository, 
investors and other market participants potentially could obtain 
information about these issuers more readily than they can today. They 
no longer would have to contact several NRMSIRs to make sure that they 
have obtained complete information about the municipal issuer. Easier 
access to continuing disclosure documents regarding municipal 
securities could provide investors and other market participants with 
more complete information about municipal issuers. Moreover, this ready 
availability of continuing disclosure documents could encourage 
investors to consider purchasing new issuances of municipal securities 
because they could readily access information from a single repository 
and review that information in making an investment decision. As a 
result, the proposed amendments could help foster the Exchange Act goal 
of capital formation.
    The Commission proposes to delete references to the SIDs in Rule 
15c2-12. Since the Commission is now proposing to amend the Rule to 
provide for a single repository for the electronic collection and 
availability of continuing disclosure documents that the Commission 
believes would efficiently and effectively improve disclosure in the 
municipal securities market, the Commission believes that it is no 
longer necessary to require in the Rule that Participating Underwriters 
reasonably determine that issuers and obligated persons have 
contractually agreed to provide continuing disclosure documents to the 
SIDs.
    The proposed amendments would not affect the legal obligations of 
issuers and obligated persons to provide continuing disclosure 
documents, along with any other submissions, to the appropriate SID, if 
any, that are required under the

[[Page 46158]]

appropriate state law. In addition, the proposed amendments would have 
no effect on the obligations of issuers and obligated persons under 
outstanding continuing disclosure agreements entered into prior to any 
effective date of the proposed amendments to the Rule to submit 
continuing disclosure documents to the appropriate SID, if any, as 
stated in their existing continuing disclosure agreements, nor on their 
obligation to make any other submissions that are required under the 
appropriate state law. The Commission preliminarily does not believe 
that its proposal to delete references to SIDs in Rule 15c2-12 would 
have any potential effect on efficiency, competition or capital 
formation.
    Based on the analysis above, the Commission preliminarily believes 
that the proposed amendments to the Rule would not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act. The Commission requests comment on all aspects of 
this analysis and, in particular, on whether the proposed amendments to 
the Rule would place a burden on competition, as well as the effect of 
the proposed amendments on efficiency, competition, and capital 
formation. The Commission specifically seeks comment on whether the 
proposed amendments would place a burden on competition or have an 
effect on efficiency, competition, and capital formation with respect 
to issuers, NRMSIRs or other vendors, the MSRB, broker-dealers, other 
market participants, investors, or others.

VII. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996, or ``SBREFA,'' \132\ the Commission must advise the OMB as 
to whether the proposed regulation constitutes a ``major'' rule. Under 
SBREFA, a rule is considered ``major'' where, if adopted, it results or 
is likely to result in: (1) An annual effect on the economy of $100 
million or more (either in the form of an increase or a decrease); (2) 
a major increase in costs or prices for consumers or individual 
industries; or (3) significant adverse effect on competition, 
investment or innovation.
---------------------------------------------------------------------------

    \132\ Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note 
to 5 U.S.C. 601).
---------------------------------------------------------------------------

    The Commission requests comment on the potential impact of the 
proposed rule amendments on the economy on an annual basis. Commenters 
are requested to provide empirical data and other factual support for 
their view to the extent possible.

VIII. Regulatory Flexibility Act Certification

    Section 603(a) of the Regulatory Flexibility Act \133\ (``RFA'') 
requires the Commission to undertake an initial regulatory flexibility 
analysis of the proposed amendments to the Rule on small entities, 
unless the Commission certifies that the proposed amendments, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities.\134\
---------------------------------------------------------------------------

    \133\ 5 U.S.C. 603(a).
    \134\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    For purposes of Commission rulemaking in connection with the RFA, a 
broker-dealer is a small business if its total capital (net worth plus 
subordinated liabilities) on the last day of its most recent fiscal 
year was $500,000 or less, and is not affiliated with any entity that 
is not a ``small business.'' \135\ Some broker-dealers that would be 
subject to the proposed amendments meet these definitions of a ``small 
business.'' In addition, for purposes of Commission rulemaking in 
connection with the RFA, a ``small business'' may also include a 
municipal securities dealer that is a bank (including a separately 
identifiable department or division of a bank) which has total assets 
of less than $10 million at all times during the preceding fiscal year; 
had an average monthly volume of municipal securities transactions in 
the preceding fiscal year of less than $100,000; and is not affiliated 
with any entity that is not a ``small business.'' \136\
---------------------------------------------------------------------------

    \135\ 17 CFR 240.0-10(c).
    \136\ 17 CFR 240.0-10(f).
---------------------------------------------------------------------------

    The proposed amendments to the Rule would not substantively change 
any of the current obligations of broker-dealers or municipal 
securities dealers, except to the extent that they would have to 
reasonably determine that the issuer or obligated person has agreed in 
writing to provide continuing disclosure documents to a single 
repository instead of to multiple NRMSIRs. The paperwork burden for 
broker-dealers or municipal securities dealers would not be altered by 
the proposed amendments, except to the extent that the firm's 
compliance attorney would need to prepare and issue a notice to members 
or a memorandum explaining the impact of the proposed amendments to 
pertinent personnel, if the proposal is adopted by the Commission.\137\
---------------------------------------------------------------------------

    \137\ See Section IV.D.1., supra.
---------------------------------------------------------------------------

    For purposes of Commission rulemaking in connection with the RFA, 
an issuer or person, other than an investment company, is a ``small 
business'' or ``small organization'' if its ``total assets on the last 
day of its most recent fiscal year were $5 million or less.'' \138\ The 
Commission believes that at least three of the four NRMSIRs are part of 
large business entities that have assets in excess of $5 million.\139\ 
One of the current four NRMSIRs and possibly one or more vendors of 
continuing disclosure documents may be a ``small business'' for 
purposes of the RFA. As noted above, the proposed amendments could have 
a significant economic impact on the business model of one NRMSIR and 
possibly on the business models of one or more other vendors of 
municipal securities information. While the Commission acknowledges 
that the proposed amendments to the Rule could have a significant 
economic impact on certain vendors of municipal securities information, 
the Commission does not believe that the number of such vendors that 
could be affected by the proposed amendments represents a substantial 
number of small businesses.
---------------------------------------------------------------------------

    \138\ 17 CFR 230.157. See also 17 CFR 240.0-10(a).
    \139\ Commission staff based this determination on its review of 
various public sources of financial information about these three 
NRMSIRs.
---------------------------------------------------------------------------

    In addition, the Commission believes that two of the three SIDS may 
be a ``small business'' or ``small organization'' for purposes of the 
RFA. The proposed amendments, however, would not affect any legal 
obligations issuers or obligated persons may have to provide continuing 
disclosure documents, along with any other submissions, to the 
appropriate SID, if any, that may be required under the appropriate 
state law.
    A ``small governmental jurisdiction'' is defined by the RFA to 
include ``governments of cities, counties, towns, townships, villages, 
school districts, or special districts, with a population of less than 
fifty thousand.'' \140\ Since the Rule applies to primary offerings of 
municipal securities with an aggregate principal amount of at least 
$1,000,000 or more, some issuances by small governmental jurisdictions 
would not be covered by the Rule. For those small issuers whose primary 
offerings of municipal securities are impacted by the Rule, the 
Commission notes that issuers of municipal securities currently are 
familiar with, and provide, pursuant to their continuing disclosure 
agreements, continuing disclosure documents. Under the proposal, 
issuers would submit, pursuant to their undertakings in continuing 
disclosure agreements, continuing disclosure documents to the MSRB in 
an electronic

[[Page 46159]]

format and accompanied by identifying information, instead of to each 
of the four existing NRMSIRs. Accordingly, to the extent a small 
governmental jurisdiction has conducted a primary offering of municipal 
securities for which a Participating Underwriter has reasonably 
determined that the issuer has entered into a contractual undertaking 
covered by the Rule, its continuing disclosure documents would be 
submitted to one repository, instead of multiple ones as is the case 
today, and thus the small governmental jurisdiction would incur no 
significant additional economic impact as a result of the proposed 
amendments to the Rule. The Commission believes that many municipal 
issuers currently have the capability to convert paper documents to 
electronic documents. Those small governmental jurisdictions that: (i) 
Do not have continuing disclosure information in an electronic format; 
or (ii) do not have the internal means to convert continuing disclosure 
information into an electronic format, would have to incur a cost to 
convert their paper documents into an electronic file.\141\ Although 
some small governmental jurisdictions could incur costs to submit 
documents electronically to a single repository, the Commission does 
not believe that these costs would result in a significant economic 
impact for a substantial number of small governmental 
jurisdictions.\142\
---------------------------------------------------------------------------

    \140\ 5 U.S.C. 601(5).
    \141\ See Section V.B., supra.
    \142\ Id.
---------------------------------------------------------------------------

    In the Commission's view, the proposed amendments would not have a 
significant economic impact on a substantial number of small entities, 
including broker-dealers, municipal securities dealers, small 
governmental jurisdictions, NRMSIRs and other vendors of municipal 
disclosure documents, SIDs, or other small businesses or small 
organizations. For the above reasons, the Commission certifies that the 
proposed amendment to the Rule would not have a significant economic 
impact on a substantial number of small entities. The Commission 
requests comments regarding this certification. The Commission requests 
that commenters describe the nature of any impact on small entities, 
including broker-dealers and municipal securities dealers, small 
governmental jurisdictions, NRMSIRs and other vendors of municipal 
disclosure documents, SIDS, or other small businesses or small 
organizations, and provide empirical data to support the extent of the 
impact.

IX. Statutory Authority

    Pursuant to the Exchange Act, and particularly sections 3(b), 
15(c), 15B and 23(a)(1) thereof, 15 U.S.C. 78c(b), 78o(c), 78o-4, and 
78w(a)(1), the Commission is proposing amendments to Sec.  240.15c2-12 
of Title 17 of the Code of Federal Regulations in the manner set forth 
below.

List of Subjects in 17 CFR Part 240

    Brokers, Reporting and recordkeeping requirements, Securities.

Text of Proposed Rule Amendments

    For the reasons set out in the preamble, Title 17, Chapter II, of 
the Code of Federal Regulations is proposed to be amended as follows.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    1. The general authority citation for part 240 continues to read in 
part as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 
80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise 
noted.

* * * * *
    2. Section 240.15c2-12 is amended by the following:
    A. Revise paragraph (b)(4)(ii), the introductory text of paragraph 
(b)(5)(i), and paragraphs (b)(5)(i)(A) and (B);
    B. In the introductory text of paragraph (b)(5)(i)(C) and in 
paragraph (b)(5)(i)(D) remove the phrase ``to each nationally 
recognized municipal securities information repository or to the 
Municipal Securities Rulemaking Board, and to the appropriate state 
information depository, if any,'';
    C. In paragraph (b)(5)(ii)(C) remove the phrase ``, and to whom it 
will be provided'';
    D. Add new paragraph (b)(5)(iv);
    E. Revise paragraph (d)(2)(ii); and
    F. Revise paragraphs (f)(3) and (f)(9).
    The additions and revisions read as follows.


Sec.  240.15c2-12  Municipal securities disclosure.

* * * * *
    (b) * * *
    (4) * * *
    (ii) The time when the official statement is available to any 
person from the Municipal Securities Rulemaking Board, but in no case 
less than twenty-five days following the end of the underwriting 
period, the Participating Underwriter in an Offering shall send no 
later than the next business day, by first-class mail or other equally 
prompt means, to any potential customer, on request, a single copy of 
the final official statement.
    (5)(i) A Participating Underwriter shall not purchase or sell 
municipal securities in connection with an Offering unless the 
Participating Underwriter has reasonably determined that an issuer of 
municipal securities, or an obligated person for whom financial or 
operating data is presented in the final official statement has 
undertaken, either individually or in combination with other issuers of 
such municipal securities or obligated persons, in a written agreement 
or contract for the benefit of holders of such securities, to provide 
the following to the Municipal Securities Rulemaking Board in an 
electronic format as prescribed by the Municipal Securities Rulemaking 
Board, either directly or indirectly through an indenture trustee or a 
designated agent:
    (A) Annual financial information for each obligated person for whom 
financial information or operating data is presented in the final 
official statement, or, for each obligated person meeting the objective 
criteria specified in the undertaking and used to select the obligated 
persons for whom financial information or operating data is presented 
in the final official statement, except that, in the case of pooled 
obligations, the undertaking shall specify such objective criteria;
    (B) If not submitted as part of the annual financial information, 
then when and if available, audited financial statements for each 
obligated person covered by paragraph (b)(5)(i)(A) of this section;
* * * * *
    (iv) Such written agreement or contract for the benefit of holders 
of such securities also shall provide that all documents provided to 
the Municipal Securities Rulemaking Board shall be accompanied by 
identifying information as prescribed by the Municipal Securities 
Rulemaking Board.
* * * * *
    (d) * * *
    (2) * * *
    (ii) An issuer of municipal securities or obligated person has 
undertaken, either individually or in combination with other issuers of 
municipal securities or obligated persons, in a written agreement or 
contract for the benefit of holders of such municipal securities, to 
provide the following to the Municipal Securities Rulemaking Board in 
an electronic format as

[[Page 46160]]

prescribed by the Municipal Securities Rulemaking Board:
    (A) At least annually, financial information or operating data 
regarding each obligated person for which financial information or 
operating data is presented in the final official statement, as 
specified in the undertaking, which financial information and operating 
data shall include, at a minimum, that financial information and 
operating data which is customarily prepared by such obligated person 
and is publicly available; and
    (B) In a timely manner, notice of events specified in paragraph 
(b)(5)(i)(C) of this section with respect to the securities that are 
the subject of the Offering, if material; and
    (C) Such written agreement or contract for the benefit of holders 
of such securities also shall provide that all documents provided to 
the Municipal Securities Rulemaking Board shall be accompanied by 
identifying information as prescribed by the Municipal Securities 
Rulemaking Board; and
* * * * *
    (f) * * *
    (3) The term final official statement means a document or set of 
documents prepared by an issuer of municipal securities or its 
representatives that is complete as of the date delivered to the 
Participating Underwriter(s) and that sets forth information concerning 
the terms of the proposed issue of securities; information, including 
financial information or operating data, concerning such issuers of 
municipal securities and those other entities, enterprises, funds, 
accounts, and other persons material to an evaluation of the Offering; 
and a description of the undertakings to be provided pursuant to 
paragraph (b)(5)(i), paragraph (d)(2)(ii), and paragraph (d)(2)(iii) of 
this section, if applicable, and of any instances in the previous five 
years in which each person specified pursuant to paragraph (b)(5)(ii) 
of this section failed to comply, in all material respects, with any 
previous undertakings in a written contract or agreement specified in 
paragraph (b)(5)(i) of this section. Financial information or operating 
data may be set forth in the document or set of documents, or may be 
included by specific reference to documents available to the public on 
the Municipal Securities Rulemaking Board's Internet Web site or filed 
with the Commission.
* * * * *
    (9) The term annual financial information means financial 
information or operating data, provided at least annually, of the type 
included in the final official statement with respect to an obligated 
person, or in the case where no financial information or operating data 
was provided in the final official statement with respect to such 
obligated person, of the type included in the final official statement 
with respect to those obligated persons that meet the objective 
criteria applied to select the persons for which financial information 
or operating data will be provided on an annual basis. Financial 
information or operating data may be set forth in the document or set 
of documents, or may be included by specific reference to documents 
available to the public on the Municipal Securities Rulemaking Board's 
Internet Web site or filed with the Commission.
* * * * *

    By the Commission.

    Dated: July 30, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-17856 Filed 8-6-08; 8:45 am]
BILLING CODE 8010-01-P


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