On March 2, 2000, the Municipal Securities Rulemaking Board (“Board” or “MSRB”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) a proposed rule change, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder. The proposed rule change is described in Items, I, II, and III below, which Items have been prepared by the Board. The purpose of the proposed rule change is to provide interpretive guidance concerning Rule G-37, on political contributions and prohibitions on municipal securities business. The Board has designated this proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the Board under Section 19(b)(3)(A) of the Act, which renders the proposed rule change effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.Start Printed Page 15400
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Board has filed a proposed rule change consisting of a notice of interpretation, in question-and-answer format, concerning Rule G-37 (hereafter referred to as “the proposed rule change”). The proposed rule change is as follows in italic:
SCOPE OF WAIVER PROVISION IN RULE G-37(i)
Q: If an enforcement agency grants an exemption from a ban on municipal securities business pursuant to Rule G-37(i), may this exemption be applied retroactively so that any municipal securities business engaged in after the ban had gone into effect but prior to the date on which the exemption was granted would not be viewed as a Rule G-37 violation?
A: Rule G-37(i) allows the enforcement agencies to exempt a dealer from a ban on municipal securities business. It is the Board's view that such an exemption is only effective as of the date of the exemption. Rule G-37(i) does not contain a provision allowing for the retroactive application of the exemption. Thus, a dealer would violate Rule G-37 if, prior to the date of the exemption, the dealer engaged in municipal securities business with an issuer while subject to a ban with this issuer because of a political contribution. As with any violation of a Board rule, the enforcement agencies have discretion in determining the type and extent of enforcement action appropriate for such violation, in light of the specific facts and circumstances. If an enforcement agency has granted an exemption to a dealer from the ban on municipal securities business, the facts and circumstances considered by such agency in granting the exemption could appropriately also be considered (together with any other relevant facts and circumstances) in determining what, if any, enforcement action should be taken against such dealer if it had engaged in municipal securities business after the ban on such business became effective but prior to the date on which the exemption was granted.
II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Board included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The texts of these statements may be examined at the places specified in Item IV below. The Board has prepared summaries, set forth in Section A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
On April 7, 1994, the Commission approved Board Rule G-37, on political contributions and prohibitions on municipal securities business. Since that time, the Board has received numerous inquiries concerning the application of the rule. In order to assist the municipal securities industry and, in particular, brokers, dealers, and municipal securities dealers in understanding and complying with the provisions of the rule, the Board published nine prior notices of interpretation which set forth, in question-and-answer format, general guidance on Rule G-37. In prior filings with the Commission, the Board stated that it will continue to monitor the application of Rule G-37 and, from time to time, will publish additional notices of interpretations, as necessary. Recently, the Board was asked about the scope of the waiver provision in Rule G-37(i). Accordingly, the Board is publishing this tenth set of questions and answers.
The Board believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act, which requires, in pertinent 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Board does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the proposes of the Act since it applies equally to all brokers, dealers and municipal securities dealers.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The Board has designated this proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing Board rule under Section 19(b)(3)(A) of the Act, which renders the proposed rule change effective upon receipt of this filing by the Commission.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing will also be available for inspection and copying at the Board's principal offices. All submissions should refer to File No. SR-MSRB-00-04 and should be submitted by April 12, 2000.Start Signature
Margaret H. McFarland,
4. Securities Exchange Act Release No. 33868, 59 FR 17621 (April 13, 1994). The rule applies to contributions made on and after April 25, 1994.Back to Citation
5. See MSRB Reports, Vol. 14, No. 3 (June 1994) at 11-16; Vol. 14, No. 4 (Aug. 1994) at 27-31; Vol. 14, No. 5 (Dec. 1994) at 8; Vol. 15, No. 1 (April 1995) at 21; Vol. 15, No. 2 (July 1995) at 3-4; Vol. 16, No. 1 (Jan. 1996) at 31; Vol. 16, No. 3 (Sept. 1996) at 35-36; Vol. 17, No. 3 (Oct. 1997) at 11-12; and Vol. 18, No. 2 (Aug. 1998) at 11-12. See also MSRB Rule Book (January 1, 2000) at 195-204.Back to Citation
6. See Securities Exchange Act Release No. 34161 (June 6, 1994, 59 FR 30379 (June 13, 1994) (File No. SR-MSRB-94-6) and Securities Exchange Act Release No. 34603 (August 25, 1994), 59 FR 45049 (August 31, 1994) (File No. SR-MSRB-94-15).Back to Citation
[FR Doc. 00-7034 Filed 3-21-00; 8:45 am]
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