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SECURITIES AND EXCHANGE COMMISSION
File No.* SR - 2013 - * 05
WASHINGTON, D.C. 20549
Amendment No. (req. for Amendments *) 1
Form 19b-4
Page 1 of * 11
Filing by
Municipal Securities Rulemaking Board
Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934
Initial *
Amendment *
Withdrawal
Section 19(b)(2) *
Section 19(b)(3)(A) *
Section 19(b)(3)(B) *
Rule
Extension of Time Period
for Commission Action *
Pilot
19b-4(f)(1)
Date Expires *
19b-4(f)(5)
19b-4(f)(3)
19b-4(f)(6)
Notice of proposed change pursuant to the Payment, Clearing, and Settlement Act of 2010
Section 806(e)(1)
Security-Based Swap Submission pursuant
to the Securities Exchange Act of 1934
Section 806(e)(2)
Exhibit 2 Sent As Paper Document
19b-4(f)(4)
19b-4(f)(2)
Section 3C(b)(2)
Exhibit 3 Sent As Paper Document
Description
Provide a brief description of the action (limit 250 characters, required when Initial is checked *).
Contact Information
Provide the name, telephone number, and e-mail address of the person on the staff of the self-regulatory organization
prepared to respond to questions and comments on the action.
First Name * Kathleen
Last Name * Miles
Title *
Associate General Counsel
E-mail *
kmiles@msrb.org
Telephone * (703) 797-6600
Fax
(703) 797-6700
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
Municipal Securities Rulemaking Board
has duly caused this filing to be signed on its behalf by the undersigned thereunto duly authorized.
(Title *)
Assistant Corporate Secretary
Date 09/06/2013
By
Amytis G. Ramos
(Name *)
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
For complete Form 19b-4 instructions please refer to the EFFS website.
Form 19b-4 Information *
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Exhibit 1 - Notice of Proposed Rule Change *
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Exhibit 1A- Notice of Proposed Rule
Change, Security-Based Swap Submission,
or Advance Notice by Clearing Agencies
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Exhibit 2 - Notices, Written Comments,
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The self-regulatory organization must provide all required information, presented in a
clear and comprehensible manner, to enable the public to provide meaningful
comment on the proposal and for the Commission to determine whether the proposal
is consistent with the Act and applicable rules and regulations under the Act.
The Notice section of this Form 19b-4 must comply with the guidelines for publication
in the Federal Register as well as any requirements for electronic filing as published
by the Commission (if applicable). The Office of the Federal Register (OFR) offers
guidance on Federal Register publication requirements in the Federal Register
Document Drafting Handbook, October 1998 Revision. For example, all references to
the federal securities laws must include the corresponding cite to the United States
Code in a footnote. All references to SEC rules must include the corresponding cite
to the Code of Federal Regulations in a footnote. All references to Securities
Exchange Act Releases must include the release number, release date, Federal
Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]
-xx-xx). A material failure to comply with these guidelines will result in the proposed
rule change being deemed not properly filed. See also Rule 0-3 under the Act (17
CFR 240.0-3)
The Notice section of this Form 19b-4 must comply with the guidelines for publication
in the Federal Register as well as any requirements for electronic filing as published
by the Commission (if applicable). The Office of the Federal Register (OFR) offers
guidance on Federal Register publication requirements in the Federal Register
Document Drafting Handbook, October 1998 Revision. For example, all references to
the federal securities laws must include the corresponding cite to the United States
Code in a footnote. All references to SEC rules must include the corresponding cite
to the Code of Federal Regulations in a footnote. All references to Securities
Exchange Act Releases must include the release number, release date, Federal
Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]
-xx-xx). A material failure to comply with these guidelines will result in the proposed
rule change, security-based swap submission, or advance notice being deemed not
properly filed. See also Rule 0-3 under the Act (17 CFR 240.0-3)
Copies of notices, written comments, transcripts, other communications. If such
documents cannot be filed electronically in accordance with Instruction F, they shall be
filed in accordance with Instruction G.
Exhibit Sent As Paper Document
Exhibit 3 - Form, Report, or Questionnaire
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proposes to use to help implement or operate the proposed rule change, or that is
referred to by the proposed rule change.
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Exhibit 5 - Proposed Rule Text
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Partial Amendment
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The full text shall be marked, in any convenient manner, to indicate additions to and
deletions from the immediately preceding filing. The purpose of Exhibit 4 is to permit
the staff to identify immediately the changes made from the text of the rule with which
it has been working.
The self-regulatory organization may choose to attach as Exhibit 5 proposed changes
to rule text in place of providing it in Item I and which may otherwise be more easily
readable if provided separately from Form 19b-4. Exhibit 5 shall be considered part
of the proposed rule change.
If the self-regulatory organization is amending only part of the text of a lengthy
proposed rule change, it may, with the Commission's permission, file only those
portions of the text of the proposed rule change in which changes are being made if
the filing (i.e. partial amendment) is clearly understandable on its face. Such partial
amendment shall be clearly identified and marked to show deletions and additions.
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The Municipal Securities Rulemaking Board (“MSRB”) is filing this partial amendment
(“Amendment No. 1”) to File No. SR-MSRB-2013-05, originally filed with the Securities and
Exchange Commission (the “Commission”) on June 17, 2013, with respect to a proposed rule
change (the “original proposed rule change” and, as amended by Amendment No. 1, the
“proposed rule change”) concerning Rule G-11 (on primary offering practices), Rule G-8 (on
books and records) and Rule G-32 (on disclosures in connection with primary offerings).
The original proposed rule change consists of provisions to enhance communications
among the senior managing underwriter and syndicate and selling group members during a
primary offering of municipal securities. The original proposed rule change also includes
provisions specifically addressing retail order periods. The original proposed rule change arose
out of the MSRB’s concerns regarding, among other things, the mischaracterization of some
orders as “retail,” the failure of syndicate managers to sometimes disseminate timely notice of
the terms and conditions of a retail order period to all dealers, including selling group members,
and that pricing information that had been requested is sometimes not delivered or is sometimes
not delivered in sufficient time to allow for communication with the requesting dealer’s “retail”
customers to determine whether the investor would like to purchase the bonds. In addition, the
MSRB proposes to increase transparency for regulators regarding the use of retail order periods
by amending Form G-32 to require an underwriter to report to the Electronic Municipal Market
Access (EMMA®) 1 system when a retail order period was conducted.
Amendment No. 1 partially amends the text of the original proposed rule change to revise
the definition of “retail order period” in Rule G-11(a)(vii) to make clear that the MSRB’s intent
is that the definition of retail order period does not apply to order periods during which only
institutional orders are solicited and to revise Rule G-11(k) to clarify that dealers submitting
institutional orders are not required to submit the additional information and make the required
representations that are intended to relate to orders that meet the issuer’s designated eligibility
criteria for retail orders. The MSRB proposes this change in response to comments from the
Government Finance Officers Association, one of seven comments received by the Commission
in response to the notice for comment on the original proposed rule change 2 published in the
1
EMMA is a registered trademark of the MSRB.
2
See letters from Michael Nicholas, Chief Executive Officer, Bond Dealers of America
(“BDA”) dated July 19, 2013; Dustin McDonald, Director, Federal Liaison Center,
Government Finance Officers Association (“GFOA”) dated July 18, 2013; Dorothy
Donohue, Deputy General Counsel, Securities Regulation, Investment Company Institute
(“ICI”) dated July 19, 2013; Jeanine Rodgers Caruso, CIPFA and President, National
Association of Independent Public Finance Advisors (“NAIPFA”) dated July 19, 2013;
David L. Cohen, Managing Director, Securities Industry and Financial Markets
Association (“SIFMA”) dated July 18, 2013; Robert J. McCarthy, Director of Regulatory
Policy, Wells Fargo Advisors (“Wells Fargo”) dated July 19, 2013; and Leslie M.
Norwood, Managing Director and Associate General Counsel, Securities Industry and
Financial Markets Association and Dustin McDonald, Director, Federal Liaison Center,
Government Finance Officers Association dated August 29, 2013.
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Federal Register. 3 The GFOA comment letter raises the question of whether the proposed rule
change applies retail order period protections when retail orders are given priority over orders
from other customers. This could occur, for example, when there is one order period and orders
from both “retail” and institutional customers are solicited. The MSRB wishes to emphasize that
the definition of “retail order period” in the proposed rule change should be flexible to
accommodate an order period that runs concurrently as well as sequentially. In the original
proposed rule change, the term “issuer’s designated eligibility criteria” was intended to be a
broad term that may encompass an issuer’s decision to give priority to retail orders.
Amendment No. 1 also partially amends the text of the original proposed rule change to
eliminate the use of the defined term “going away order” but will, as explained below, retain the
concept represented by the term in order to ensure that orders for dealer inventory are not
permitted to be submitted during a retail order period. The MSRB proposes this change in
response to comments from GFOA and the Securities Industry and Financial Markets
Association received by the Commission in response to the notice for comment on the original
proposed rule change published in the Federal Register. 4 GFOA and SIFMA recommend that
the MSRB delete all references to “going away orders.” In GFOA’s view, the usage in the
proposal is not consistent with the commonly accepted meaning of the term. GFOA
acknowledges that the MSRB’s definition of going away orders would suffice to eliminate orders
for dealer inventory made during a retail order period - which is one of the potential abuses that
the proposed rule change is intended to address. Given the confusion over the use of the term
“going away order,” the MSRB proposes to eliminate the use of the term and instead directly
employ the previously proposed definition language. Rule G-11(a) would be revised to delete
what had been subsection (xii) and Rule G-11(k)(ii) would be revised to read “whether the order
is one for which a customer is already conditionally committed.” The MSRB believes that,
under that language, orders for dealer inventory would not be allowed to be submitted during the
retail order period.
Wells Fargo recommends that the MSRB synchronize the effective date for the proposed
amendments to Rules G-8 and G-11 with the later effective date for the proposed amendments to
Rule G-32 (not later than March 31, 2014). The MSRB continues to believe that it is important
that these reforms be put in place as soon as practicable, but proposes to synchronize the
effective dates because six months from the approval date of the proposed rule change will likely
be in March of 2014.
A minor change to the definition of “selling group” was included to delete unnecessary
language given that the introductory language of the definition section states that the definitions
provided in Rule G-11(a) are for the purposes of the rule.
3
4
See Exchange Act Release No. 69834 (June 24, 2013), 78 FR 39038 (June 28, 2013).
See footnote 3.
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The changes made by Amendment No. 1 to the original proposed rule change are
indicated as attached in Exhibit 4. Material proposed to be added is underlined. Material
proposed to be deleted is enclosed in brackets.
The text of the proposed rule change is attached as Exhibit 5. Material proposed to be
added is underlined. Material proposed to be deleted is enclosed in brackets.
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EXHIBIT 4
Rule G-11: Primary Offering Practices
(a) Definitions. For purposes of this rule, the following terms have the following meanings:
(i)-(vi) No change.
(vii) The term “retail order period” means an order period during which [solely going
away] orders that meet the issuer’s designated eligibility criteria for retail orders and for which
the customer is already conditionally committed will be either (i) the only orders solicited or (ii)
given priority over other orders [solely from customers that meet the issuer’s designated
eligibility criteria].
(viii)-(xi) No change.
[(xii) The term “going away order” means an order for which a customer is already
conditionally committed.]
[(xiii)] (xii) The term “selling group” means [, for purposes of this rule,] a group of
brokers, dealers, or municipal securities dealers formed for the purpose of assisting in the
distribution of a new issue of municipal securities for the issuer other than members of the
syndicate.
(b)-(j) No change.
(k) Retail Order Period Representations and Required Disclosures. From the end of the retail
order period but no later than the Time of Formal Award (as defined in Rule G34(a)(ii)(C)(1)(a)), each broker, dealer, or municipal securities dealer that submits an order
during a retail order period to the senior syndicate manager or sole underwriter, as applicable,
shall provide, in writing, which may be electronic (including, but not limited to, an electronic
order entry system), the following information relating to each order designated as retail
submitted during a retail order period:
(i) No change.
(ii) whether the order is [a going away order] one for which a customer is already
conditionally committed;
(iii)-(v) No change.
The senior syndicate manager may rely on the information furnished by each broker, dealer, or
municipal securities dealer that provided the information required by (i)-(v) unless the senior
syndicate manager knows, or has reason to know, that the information is not true, accurate or
complete.
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EXHIBIT 5
Rule G-11: Primary Offering Practices
(a) Definitions. For purposes of this rule, the following terms have the following meanings:
(i)-(vi) No change.
(vii) [**Reserved for future use**] The term “retail order period” means an order period
during which orders that meet the issuer’s designated eligibility criteria for retail orders and for
which the customer is already conditionally committed will be either (i) the only orders solicited
or (ii) given priority over other orders.
(viii)-(xi) No change.
(xii) The term “selling group” means a group of brokers, dealers, or municipal securities
dealers formed for the purpose of assisting in the distribution of a new issue of municipal
securities for the issuer other than members of the syndicate.
(b)-(e) No change.
(f) Communications Relating to Issuer [Syndicate] Requirements, Priority Provisions and Order
Period. Prior to the first offer of any securities by a syndicate, the senior syndicate manager
shall furnish in writing to the other members of the syndicate and to members of the selling
group, if any, (i) a written statement of all terms and conditions required by the issuer, (ii) a
written statement of all of the issuer’s retail order period requirements, if any, (iii) the priority
provisions, (iv[iii]) the procedure, if any, by which such priority provisions may be changed,
([i]v) if the senior syndicate manager or managers are to be permitted on a case-by-case basis to
allocate securities in a manner other than in accordance with the priority provisions, the fact that
they are to be permitted to do so, [and] (vi) if there is to be an order period, whether orders may
be confirmed prior to the end of the order period, and (vii) all pricing information. Any change in
the priority provisions or pricing information shall be promptly furnished in writing by the senior
syndicate manager to the other members of the syndicate and the selling group, if any. Syndicate
and selling group members shall promptly furnish in writing the information described in this
section to others, upon request. If the senior syndicate manager, rather than the issuer, prepares
the written statement of all terms and conditions required by the issuer, such statement shall be
provided to the issuer for its approval. An underwriter shall promptly furnish in writing to any
other broker, dealer, or municipal securities dealer with which such underwriter has an
arrangement to market municipal securities that includes the issuer’s new issue, all of the
information provided to it from the senior syndicate manager as required by this section.
(g) No change.
(h) Disclosure of Syndicate Expenses and Other Information. At or before the final settlement
of a syndicate account, the senior syndicate manager shall furnish to the other members of the
syndicate:
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(i) an itemized statement setting forth the nature and amounts of all actual expenses
incurred on behalf of the syndicate. Notwithstanding the foregoing, any such statement may
include an item for miscellaneous expenses, provided that the amount shown under such item is
not disproportionately large in relation to other items of expense shown on the statement and
includes only minor items of expense which cannot be easily categorized elsewhere in the
statement. The amount of d[D]iscretionary fees for clearance costs, if any, to be imposed by a
syndicate manager and the amount of management fees, if any, shall be disclosed to syndicate
members prior to the submission of a bid, in the case of a competitive sale, or prior to the
execution of a purchase contract with the issuer, in the case of a negotiated sale. For purposes of
this section, the term "management fees" shall include, in addition to amounts categorized as
management fees by the syndicate manager, any amount to be realized by a syndicate manager,
and not shared with the other members of the syndicate, which is attributable to the difference in
price to be paid to an issuer for the purchase of a new issue of municipal securities and the price
at which such securities are to be delivered by the syndicate manager to the members of the
syndicate; and
(ii) No change.
(i)-(j) No change.
(k) Retail Order Period Representations and Required Disclosures. From the end of the retail
order period but no later than the Time of Formal Award (as defined in Rule G34(a)(ii)(C)(1)(a)), each broker, dealer, or municipal securities dealer that submits an order
during a retail order period to the senior syndicate manager or sole underwriter, as applicable,
shall provide, in writing, which may be electronic (including, but not limited to, an electronic
order entry system), the following information relating to each order designated as retail
submitted during a retail order period:
(i) whether the order is from a customer that meets the issuer’s eligibility criteria for
participation in the retail order period;
(ii) whether the order is one for which a customer is already conditionally committed;
(iii) whether the broker, dealer, or municipal securities dealer has received more than one
order from such retail customer for a security for which the same CUSIP number has been
assigned;
(iv) any identifying information required by the issuer, or the senior syndicate manager
on the issuer’s behalf, in connection with such retail order (but not including customer names or
social security numbers); and
(v) the par amount of the order.
The senior syndicate manager may rely on the information furnished by each broker, dealer, or
municipal securities dealer that provided the information required by (i)-(v) unless the senior
syndicate manager knows, or has reason to know, that the information is not true, accurate or
complete.
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*****
Rule G-8: Books and Records to be Made by Brokers, Dealers and Municipal Securities
Dealers
(a) Description of Books and Records Required to be Made. Except as otherwise specifically
indicated in this rule, every broker, dealer and municipal securities dealer shall make and keep
current the following books and records, to the extent applicable to the business of such broker,
dealer or municipal securities dealer:
(i)-(vii) No change.
(viii)
Records Concerning Primary Offerings.
(A) For each primary offering for which a syndicate has been formed for the
purchase of municipal securities, records shall be maintained by the syndicate manager
showing the description and aggregate par value of the securities; the name and
percentage of participation of each member of the syndicate; the terms and conditions
governing the formation and operation of the syndicate; a statement of all terms and
conditions required by the issuer (including, [whether there was a retail order period and
the issuer's definition of "retail,"] those of any retail order period, if applicable); all orders
received for the purchase of the securities from the syndicate and selling group, if any;
the information required to be submitted pursuant to Rule G-11(k); all pricing
information required to be distributed pursuant to Rule G-11(f); all allotments of
securities and the price at which sold; those instances in which the syndicate manager
allocated securities in a manner other than in accordance with the priority provisions,
including those instances in which the syndicate manager accorded equal or greater
priority over other orders to orders by syndicate members for their own accounts or their
respective related accounts; and the specific reasons for doing so; the date and amount of
any good faith deposit made to the issuer; the date of settlement with the issuer; the date
of closing of the account; and a reconciliation of profits and expenses of the account.
(B) For each primary offering for which a syndicate has not been formed for the
purchase of municipal securities, records shall be maintained by the sole underwriter
showing the description and aggregate par value of the securities; all terms and
conditions required by the issuer (including, [whether there was a retail order period and
the issuer’s definition of “retail,”] those of any retail order period, if applicable); all
orders received for the purchase of the securities from the underwriter; the information
required to be submitted pursuant to Rule G-11(k); all allotments of securities and the
price at which sold; those instances in which the underwriter accorded equal or greater
priority over other orders to orders for its own account or its related accounts, and the
specific reasons for doing so; the date and amount of any good faith deposit made to the
issuer; and the date of settlement with the issuer.
(ix)-(xxvi) No change.
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(b)-(g) No change.
*****
Rule G-32: Disclosures in Connection with Primary Offerings
(a) Customer Disclosure Requirements.
(i) No broker, dealer or municipal securities dealer shall sell, whether as [principal or
agent,] an underwriter or otherwise, any offered municipal securities to a customer unless such
broker, dealer or municipal securities dealer delivers to the customer by no later than the
settlement of the transaction a copy of the official statement or, if an official statement is not
being prepared, a written notice to that effect together with a copy of a preliminary official
statement, if any.
(ii)-(v) No change.
(b) Underwriter Submissions to EMMA.
(i)-(iv) No change.
(v) Underwriting Syndicate. In the event a syndicate or similar account has been formed
for the underwriting of a primary offering, the managing underwriter shall take the actions
required under the provisions of this rule [and comply with the recordkeeping requirements of
Rule G-8(a)(xiii)(B)].
(vi) Procedures for Submitting Documents and Form G-32 Information.
(A)-(B) No change.
(C) The underwriter in any primary offering of municipal securities for which a
document or information is required to be submitted to EMMA under this section (b)
shall submit such information in a timely and accurate manner as follows:
(1) Form G-32 information submissions pursuant to paragraph (b)(i)(A)
hereof with respect to a primary offering shall be:
(a) initiated on or prior to the date of first execution with the
submission of CUSIP numbers (except if such CUSIP numbers are not
required under Rule G-34 and have not been assigned), initial offering
prices or yields (including prices or yields for maturities designated as not
reoffered), if applicable, the expected closing date, [and] whether the
issuer or other obligated persons have agreed to undertake to provide
continuing disclosure information as contemplated by Securities Exchange
Act Rule 15c2-12, and if there was a retail order period (as defined in Rule
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G-11(a)(vii)) as part of a primary offering, information indicating whether
a retail order period was conducted, each date and each time (beginning
and end) it was conducted, together with such other items of information
as set forth in Form G-32 and the EMMA Dataport Manual; and
(b) No change.
Specific items of information required by Form G-32 shall be submitted at
such times and in such manners as set forth in the EMMA Dataport
Manual.
(2)-(4) No change.
(D) No change.
(c)-(d) No change.