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Notice

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

 

Table of Contents Back to Top

I. Introduction Back to Top

On December 10, 1999, the Municipal Securities Rulemaking Board (“MSRB” or the “Board”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 thereunder, [2] a proposed rule change to amend Rule G-36, on delivery of official statements, advance refunding documents and Forms G-36(OS) and G-36(ARD) to the Board or its designee. The proposed rule change was published for comment in the Federal Register on February 9, 2000. [3] The Commission received no comments on the proposal. This order approves the proposal.

II. Description of the Proposal Back to Top

The Board has filed with the Commission a proposed rule change to amend Rule G-36, on delivery of official statements, advance refunding documents and Forms G-36(OS) and G-36(ARD) to the Board or its designee. Rule G-36 requires, among other things, that a broker, dealer or municipal securities dealer (a “dealer”) acting as underwriter in a primary offering of municipal securities (with certain limited exceptions) send to the Board copies of the official statement and completed Form G-36(OS).

Originally, Rule G-36 applied to all primary offerings of municipal securities regardless of principal amount, other than primary offerings that qualified for exemption under paragraph (d)(1) of Rule 15c2-12 under the Act. [4] The Board subsequently amended Rule G-36 to include certain categories of primary offerings that are exempt under Rule 15c2-12(d)(1). [5] For any primary offering subject to Rule G-36(c)(i), the underwriter currently is required to send two copies of the official statement, if one is prepared, in final form with two copies of Form G-36(OS), to the Board by the business day after the issuer delivers the municipal securities to the underwriter (the “bond closing”).

As amended, the rule would require an underwriter in a primary offering subject to Rule G-36(c)(i) for which an official statement in final form is prepared by the issuer to send two copies of the official statement in final form, together with two copies of Form G-36(OS), to the Board by the later of (i) one business day after the bond closing or (ii) one business day after receipt of the official statement from the issuer. [6]

III. Discussion Back to Top

The Commission finds that the proposed rule change is consistent with the requirements of the Act [7] and the rules and regulations thereunder applicable to the MSRB. [8] In particular, the Commission finds the amendments to MSRB Rule G-36 consistent with the requirements of Section 15B(b)(2)(C) [9] of the Act, which provides, in part, that the Board's rules shall:

be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest.

The MSRB represents that the proposed rule change is intended to provide relief to underwriters that face violation of Rule G-36(c)(i) caused by a delay in delivery by issuers for whom no concomitant obligations exists to delivery an official statement by any particular date. The Commission believes that because underwriters and other dealers are still required to adhere to their continuing obligation under Rule G-32 to deliver official statements for new issue municipal securities to customers by settlement, the MSRB proposal will foster cooperation among persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, without adversely affecting the protection of investors and the public interest.

In general, underwriters may be exposed to a potential violation of Rule G-36 when an issuer fails to provide the official statement. The Commission notes that pursuant to Rule 15c2-12(b)(3), underwriters are required to contract to obtain official statements and thus have an enforceable mechanism to obtain the official statements. The Commission also appreciates the situation of underwriters who, because an issuer does not provide a final official statement and is not required to do so under a 15c2-12 contract, finds themselves in violation of Rule G-36(c)(i). However, the Commission expects that an underwriter that receives an official statement will provide the official statement to the Board without delay.

IV. Conclusion Back to Top

It is therefore ordered, pursuant to Section 19(b)(2) of the Act, [10] that the proposed rule change (SR-MSRB-99-11) is approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority. [11]

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00-16210 Filed 6-26-00; 8:45 am]

BILLING CODE 8010-01-M

Footnotes Back to Top

3. Securities Exchange Act Release No. 42374 (February 2, 2000), 65 FR 6427 (February 9, 2000).

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4. Originally, Rule G-36 applied to all primary offerings subject to Rule 15c2-12, as well as to Small Issue Securities for which an official statement in final form was prepared, bud did not apply to Limited Offering Securities, Short-Term Securities and Puttable Securities.

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5. See Securities Exchange Act Release No. 32086 (March 31, 1993), 58 FR 18290 (April 8, 1993); “Delivery of Official Statements to the Board: Rule G-36,”MSRB Reports, Vol. 12, No. 3 (September 1992) at 11. Thus, only primary offerings exempt from Rule 15c2-12 for which no official statement in final form is prepared and Limited Offering Securities remain exempt from Rule G-36. Currently, Small Issue Securities, Short-Term Securities, and Puttable Securities, are subject to Rule G-36(c)(1) where an official statement in final form has been prepared by or on behalf of the issuer.

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6. In contrast, Rule G-36(c)(i) currently requires that the underwriter send the official statement to the Board by the business day after the bond closing, regardless of whether the underwriter has in fact received the official statement by such day.

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7. In approving this rule, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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