Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to the Establishment of a Continuing Disclosure Service of the Electronic Municipal Market Access System (EMMA), 75778-75787 [E8-29376]
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75778
Federal Register / Vol. 73, No. 240 / Friday, December 12, 2008 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59061; File No. SR–MSRB–
2008–05]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing of Amendment
No. 1 and Order Granting Accelerated
Approval of Proposed Rule Change, as
Modified by Amendment No. 1 Thereto,
Relating to the Establishment of a
Continuing Disclosure Service of the
Electronic Municipal Market Access
System (EMMA)
December 5, 2008.
I. Introduction
On July 29, 2008, the Municipal
Securities Rulemaking Board (‘‘MSRB’’
or ‘‘Board’’) filed with the Securities
and Exchange Commission
(‘‘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
establish a continuing disclosure service
(the ‘‘continuing disclosure service’’) of
the MSRB’s Electronic Municipal
Market Access system (‘‘EMMA’’). The
proposed rule change was published for
comment in the Federal Register on
August 7, 2008.3 The Commission
received eighteen comment letters
regarding the MSRB’s proposed rule
change.4 On November 5, 2008, the
MSRB filed Amendment No. 1 to the
proposed rule change.5 The text of
Amendment No. 1 is available on the
MSRB’s Web site (https://www.msrb.org),
at the MSRB’s principal office, and at
the Commission’s Public Reference
Room. On November 24, 2008, the
MSRB submitted a letter responding to
the comment letters.6 This order
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 58256
(July 30, 2008), 73 FR 46161 (August 7, 2008)
(‘‘Release No. 34–58256’’).
4 Exhibit A contains the citation key to the
comments noted herein. Copies of the comment
letters received by the Commission are available on
the Commission’s Internet Web site, located at
https://www.sec.gov/comments/sr–msrb–2008–05/
msrb200805.shtml and in the Commission’s Public
Reference Room at its Washington, DC
headquarters.
5 In Amendment No. 1, the MSRB proposed to
establish as the operative date of the continuing
disclosure service the later of July 1, 2009 or the
effective date of any amendments to Rule 15c2–12
under the Act (‘‘Rule 15c2–12’’ or ‘‘Rule’’), 17 CFR
240.15c2–12, that provide for the MSRB to serve as
the sole repository for continuing disclosure
documents, and to establish January 1, 2010 as the
date on which submitters to the continuing
disclosure service would be required to submit
documents as word-searchable portable document
format (PDF) files.
6 See Letter from Ernesto A. Lanza, General
Counsel, MSRB, to Florence E. Harmon, Acting
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provides notice of the proposed rule
change as modified by Amendment No.
1 and approves the proposed rule
change, as amended, on an accelerated
basis.7
II. Description of the Proposed Rule
Change
Under Rule 15c2–12(b)(5), an
underwriter for a primary offering of
municipal securities subject to the Rule
currently is prohibited from
underwriting the offering unless the
underwriter has determined that the
issuer or an obligated person 8 for whom
financial information or operating data
is presented in the final official
statement has undertaken in writing to
provide certain items of information to
the marketplace.9 Rule 15c2–12(b)(5)
provides that such items include: (A)
Annual financial information
concerning obligated persons; 10 (B)
audited financial statements for
obligated persons if available and if not
included in the annual financial
information; (C) notices of certain
events, if material; 11 and (D) notices of
Secretary, Commission, dated November 24, 2008
(‘‘MSRB Response Letter’’).
7 On August 7, 2008, the Commission published
for comment in the Federal Register proposed
amendments to Rule 15c2–12 that relate to the
MSRB’s implementation of the continuing
disclosure service. See Securities Exchange Act
Release No. 58255 (July 30, 2008), 73 FR 46138
(August 7, 2008) (‘‘Release No. 34–58255’’). In a
separate release issued today, the Commission is
approving its proposed amendments to Rule 15c2–
12 (‘‘Rule 15c2–12 Amendments’’). See Securities
Exchange Act Release No. 59062 (December 5,
2008) (‘‘Rule 15c2–12 Amendments Adopting
Release’’).
8 Rule 15c2–12(f)(10) defines ‘‘obligated person’’
as any person, including an issuer of municipal
securities, who is either generally or through an
enterprise, fund, or account of such person
committed by contract or other arrangement to
support payment of all or part of the obligations on
the municipal securities sold in a primary offering
(other than providers of bond insurance, letters of
credit, or other liquidity facilities).
9 See also Rule 15c2–12(d)(2), which provides for
an exemption from the requirements of paragraph
(b)(5) of Rule 15c2–12.
10 Rule 15c2–12(f)(9) defines ‘‘annual financial
information’’ as 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.
11 Under Rule 15c2–12(b)(5)(C), such events
currently consist of principal and interest payment
delinquencies; non-payment related defaults;
unscheduled draws on debt service reserves
reflecting financial difficulties; unscheduled draws
on credit enhancements reflecting financial
difficulties; substitution of credit or liquidity
providers, or their failure to perform; adverse tax
opinions or events affecting the tax-exempt status
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Fmt 4703
Sfmt 4703
failures to provide annual financial
information on or before the date
specified in the written undertaking.12
Annual filings, material event notices,
and failure to file notices generally are
referred to as ‘‘continuing disclosure
documents.’’
The proposed rule change would
establish, as a component of EMMA, the
continuing disclosure service for the
receipt of, and for making available to
the public, continuing disclosure
documents and related information to
be submitted by issuers, obligated
persons and their agents pursuant to
continuing disclosure undertakings
entered into consistent with Rule 15c2–
12.13 As proposed, all continuing
of the security; modifications to rights of security
holders; bond calls; defeasances; release,
substitution, or sale of property securing repayment
of the securities; and rating changes.
12 Under current Rule 15c2–12(b)(5)(i),
participating underwriters must reasonably
determine whether the issuer has undertaken to
send annual filings to all existing nationally
recognized municipal securities information
repositories (‘‘NRMSIRs’’) and any applicable state
information depositories (‘‘SIDs’’), while the
undertaking with respect to material event notices
and failure to file notices must provide that they be
sent to all existing NRMSIRs or to the MSRB, as
well as to any applicable SID. Under the Rule 15c2–
12 Amendments adopted today, participating
underwriters must reasonably determine whether
the issuer has undertaken to send continuing
disclosure documents to the MSRB. See Rule 15c2–
12 Amendments Adopting Release, supra note 7.
The MSRB, which currently operates CDINet to
process and disseminate notices of material events
submitted to the MSRB, previously petitioned the
Commission to amend Rule 15c2–12 to remove the
MSRB as a recipient of material event notices due
to the very limited level of submissions received by
the MSRB, constituting a negligible percentage of
material event notices currently provided to the
marketplace. See Letter from Diane G. Klinke,
General Counsel, MSRB, to Jonathan G. Katz,
Secretary, Commission, dated September 8, 2005. In
2006, the Commission published proposed
amendments to Rule 15c2–12 to eliminate the
MSRB as a repository for material event notices. See
Exchange Act Release No. 54863 (December 4,
2006), 71 FR 71109 (December 8, 2006) (‘‘2006
Proposed Rule 15c2–12 Amendments’’). In light of
the Rule 15c2–12 Amendments and this proposal,
the MSRB has determined to withdraw its petition
and has requested that the Commission withdraw
the 2006 Proposed Rule 15c2–12 Amendments. See
Letter from Ernesto A. Lanza, General Counsel,
MSRB to Florence E. Harmon, Acting Secretary,
Commission, dated October 22, 2008. In this letter,
the MSRB also noted its intention to file a proposed
rule change with the Commission to discontinue
CDINet since its functions would be replaced by the
continuing disclosure component of EMMA.
13 EMMA was originally established, and began
operation on March 31, 2008, as a complementary
pilot facility of the MSRB’s existing Official
Statement and Advance Refunding Document (OS/
ARD) system of the Municipal Securities
Information Library (MSIL) system. See Securities
Exchange Act Release No. 57577 (March 28, 2008),
73 FR 18022 (April 2, 2008) (File No. SR–MSRB–
2007–06) (approving operation of the EMMA pilot
to provide free public access to the MSRB’s
Municipal Securities Information Library (MSIL)
system collection of official statements and advance
refunding documents and to the MSRB’s Real-Time
Transaction Reporting System (RTRS) historical and
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jlentini on PROD1PC65 with NOTICES
disclosure documents and related
information would be submitted to the
MSRB, free of charge, through an
Internet-based electronic submitter
interface or electronic computer-tocomputer data connection, at the
election of the submitter, and public
access to the documents and
information would be provided through
the continuing disclosure service on the
Internet (‘‘EMMA portal’’) at no charge,
as well as through a fee-based real-time
data stream subscription service.14
As proposed, the continuing
disclosure service would accept
submissions of (i) continuing disclosure
documents as described in Rule 15c2–
12, and (ii) other disclosure documents
specified in continuing disclosure
undertakings entered into consistent
with Rule 15c2–12 but not specifically
described in Rule 15c2–12. In
connection with documents submitted
to the continuing disclosure service, the
submitter would provide, at the time of
submission, information necessary to
accurately identify: (i) The category of
information being provided; (ii) the
period covered by any annual financial
information, financial statements or
other financial information or operating
data; (iii) the issues or specific securities
to which such document is related or
otherwise material (including CUSIP
number, issuer name, state, issue
description/securities name, dated date,
maturity date, and/or coupon rate); (iv)
the name of any obligated person other
than the issuer; (v) the name and date
of the document; and (vi) contact
information for the submitter.
Submitters would be responsible for the
accuracy and completeness of all
documents and information submitted
to EMMA.
The MSRB proposed that submissions
to the continuing disclosure service be
made as portable document format
(PDF) files configured to permit
documents to be saved, viewed, printed
and retransmitted by electronic means.
If the submitted file is a reproduction of
the original document, the submitted
file must maintain the graphical and
textual integrity of the original
document. In addition, as of January 1,
2010, the MSRB would require that such
PDF files must be word-searchable (that
is, allowing the user to search for
specific terms used within the
document through a search or find
real-time transaction price data) (‘‘pilot EMMA
portal’’). The pilot EMMA portal currently is
accessible at https://emma.msrb.org.
14 We note that the MSRB is required to file with
the Commission a proposed rule change under
Section 19(b) of the Act with respect to any fees it
intends to charge subscribers in connection with a
real-time data stream subscription service.
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function available in most standard
software packages), provided that
diagrams, images and other non-textual
elements would not be required to be
word-searchable due to current
technical hurdles to uniformly
producing such elements in wordsearchable form without incurring
undue costs.15 Although the MSRB
would strongly encourage submitters to
immediately begin making submissions
as word-searchable PDF files (preferably
as native PDF or PDF normal files,
which generally produce smaller and
more easily downloadable files as
compared to scanned PDF files),
implementation of this requirement
would be deferred as noted above to
provide issuers, obligated persons and
their agents with sufficient time to adapt
their processes and systems to provide
for the routine creation or conversion of
continuing disclosure documents as
word-searchable PDF files.
All submissions to the continuing
disclosure service pursuant to this
proposal would be made through
password-protected accounts on EMMA
by: (i) Issuers, which may submit any
documents with respect to their
municipal securities; (ii) obligated
persons, which may submit any
documents with respect to any
municipal securities for which they are
obligated; and (iii) designated agents,
which may be designated by issuers or
obligated persons to make submissions
on their behalf. Issuers and obligated
persons would be permitted under the
proposal to designate agents to submit
documents and information on their
behalf, and would be able to revoke the
designation of any such agents, through
the EMMA on-line account management
utility. Such designated agents would be
required to register to obtain passwordprotected accounts on EMMA in order
to make submissions on behalf of the
designating issuers or obligated persons.
Any party identified in a continuing
disclosure undertaking as a
dissemination agent or other party
responsible for disseminating
continuing disclosure documents on
behalf of an issuer or obligated person
would be permitted to act as a
designated agent for such issuer or
obligated person, without a designation
being made by the issuer or obligated
person as described above, if such party
certifies through the EMMA on-line
account management utility that it is
authorized to disseminate continuing
disclosure documents on behalf of the
issuer or obligated person under the
continuing disclosure undertaking. The
issuer or obligated person, through the
15 See
PO 00000
Amendment No. 1, supra note 5.
Frm 00115
Fmt 4703
Sfmt 4703
75779
EMMA on-line account management
utility, would be able to revoke the
authority of such party to act as a
designated agent.
The MSRB proposed that electronic
submissions of continuing disclosure
documents through the continuing
disclosure service would be made by
issuers, obligated persons and their
agents, at no charge, through secured,
password-protected interfaces.
Continuing disclosure submitters would
have a choice of making submissions to
the proposed continuing disclosure
service either through a Web-based
electronic submission interface or
through electronic computer-tocomputer data connections with EMMA
that would be designed to receive
submissions on a bulk or continuous
basis.
All documents and information
submitted through the continuing
disclosure service would be available to
the public at no charge through the
EMMA portal on the Internet, with
documents made available for the life of
the securities as PDF files for viewing,
printing and downloading. As proposed,
the EMMA portal would provide on-line
search functions to enable users to
readily identify and access documents
that relate to specific municipal
securities based on a broad range of
search parameters. In addition, as noted
above, the MSRB proposes that real-time
data stream subscriptions to continuing
disclosure documents submitted to
EMMA would be made available for a
fee.16 The MSRB would not be
responsible for the content of the
information or documents submitted by
submitters displayed on the EMMA
portal or distributed to subscribers
through the continuing disclosure
subscription service.
According to the MSRB, it has
designed EMMA, including the EMMA
portal, as a scalable system with
sufficient current capacity and the
ability to add further capacity to meet
foreseeable usage levels based on
reasonable estimates of expected usage,
and the MSRB would monitor usage
levels in order to assure continued
capacity in the future.
The MSRB may restrict or terminate
malicious, illegal or abusive usage for
such periods as may be necessary and
appropriate to ensure continuous and
efficient access to the EMMA portal and
to maintain the integrity of EMMA and
its operational components. Such usage
may include, without limitation, usage
16 We note that the MSRB is required to file with
the Commission a proposed rule change under
Section 19(b) of the Act with respect to any fees it
intends to charge subscribers in connection with a
real-time data stream subscription service.
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intended to cause the EMMA portal to
become inaccessible by other users; to
cause the EMMA database or
operational components to become
corrupted or otherwise unusable; to
alter the appearance or functionality of
the EMMA portal; or to hyperlink to or
otherwise use the EMMA portal or the
information provided through the
EMMA portal in furtherance of
fraudulent or other illegal activities
(such as, for example, creating any
inference of MSRB complicity with or
approval of such fraudulent or illegal
activities or creating a false impression
that information used to further such
fraudulent or illegal activities has been
obtained from the MSRB or EMMA).
Measures taken by the MSRB in
response to such unacceptable usage
would be designed to minimize any
potentially negative impact on the
ability to access the EMMA portal.
The Commission received eighteen
comment letters regarding the proposed
rule change.17 Fifteen commenters
generally supported the proposed rule
change18 and many of these commenters
also provided various observations and
suggestions. Two commenters, both of
which are NRMSIRs, opposed the
proposed rule change and suggested
alternative approaches to achieving the
Commission’s objectives.19 One
commenter neither supported nor
opposed the proposal and addressed
CUSIP licensing issues.20 The
Commission also received the MSRB’s
response to the comment letters.21
These comment letters, as well as the
MSRB’s response to the comment
letters, are more fully discussed below.
III. Discussion and Commission
Findings
The Commission has carefully
considered the proposed rule change,
the comment letters received, and the
MSRB’s response to the comment letters
and finds that the proposed rule change
is consistent with the requirements of
the Act and the rules and regulations
thereunder applicable to the MSRB 22
17 See
supra note 4.
Busby Letter, DAC Letter, Vanguard Letter,
GFOA Letter, e-certus Letter, SIFMA Letter, NABL
Letter, Treasurer of the State of Connecticut Letter,
Texas MAC Letter, OMAC Letter, ICI Letter,
NAHEFFA Letter, EDGAR Online Letter, MSRB
Letter, and NFMA Letter.
19 See SPSE Letter and DPC DATA Letter.
20 See ABA Letter.
21 See MSRB Response Letter. A copy of the
MSRB Response Letter is available on the
Commission’s Internet Web site at https://
www.sec.gov/comments/sr-msrb-2008-05/
msrb200805.shtml and in the Commission’s Public
Reference Room at its Washington, DC
headquarters.
22 In approving this proposed rule change, the
Commission notes that it has considered the
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17:56 Dec 11, 2008
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and, in particular, the requirements of
Section 15B(b)(2)(C) of the Act 23 and
the rules and regulations thereunder. In
particular, the Commission finds that
the proposal to establish the continuing
disclosure service will remove
impediments to and help perfect the
mechanisms of a free and open market
in municipal securities, assist in
preventing fraudulent and manipulative
acts and practices, and, in general, will
protect investors and the public interest
by improving access to continuing
disclosure documents by investors and
market participants, enabling them to
make informed investment decisions
regarding municipal securities.
The Commission believes that the
MSRB’s proposed continuing disclosure
service will serve as an additional
mechanism to remove impediments to
and help perfect the mechanisms of a
free and open market in municipal
securities. The continuing disclosure
service will help make information
more easily available to all participants
in the municipal securities market on an
equal basis and without charge through
a centralized, searchable Internet-based
repository, thereby removing potential
barriers to obtaining such information.
Broad availability of continuing
disclosure documents through the
continuing disclosure service should
assist in preventing fraudulent and
manipulative acts and practices by
improving the opportunity for investors
to obtain information about issuers and
their securities, and help investors make
informed investment decisions.
The continuing disclosure service also
should reduce the effort necessary for
issuers and obligated persons to comply
with their continuing disclosure
undertakings because submissions will
be made to a single venue 24 through use
proposed rule’s impact on efficiency, competition
and capital formation. 15 U.S.C. 78c(f).
23 15 U.S.C. 78o–4(b)(2)(C). Section 15B(b)(2)(C)
of the Act requires, among other things, that the
MSRB’s rules 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;
and not be designed to impose any burden on
competition not necessary or appropriate in
furtherance of the purposes of the Act.
24 Some states may require issuers and/or
obligated persons to submit disclosure information
to state information depositories (‘‘SIDs’’) or other
venues pursuant to state law. However, under the
Rule 15c2–12 Amendments, participating
underwriters no longer need to reasonably
determine that issuers and/or obligated persons
have undertaken to provide continuing disclosure
documents to SIDs. See Rule 15c2–12 Amendments
Adopting Release, supra note 7.
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Fmt 4703
Sfmt 4703
of an electronic submission process.
Similarly, a single centralized and
searchable venue that provides for free
public access to disclosure information
should promote a more fair and efficient
municipal securities market in which
transactions are effected on the basis of
information available to all parties to
such transactions, which should assist
investors in having a more complete
understanding of the terms of the
securities and the potential investment
risks. Access to this information without
charge, which was previously available
in most cases only through paid
subscription services or on a perdocument fee basis, also should help
reduce informational costs for brokerdealers and municipal securities
dealers, as well as other market
participants, analysts, retail and
institutional investors and the public
generally. These changes are expected to
further the objectives of Rule 15c2–12 of
reducing the potential for fraud in the
municipal securities market.
Indeed, we anticipate that the
accessibility of documents through the
repository will greatly benefit dealers in
satisfying their obligation to have a
reasonable basis for investment
recommendations and other regulatory
responsibilities, in addition to investors
and other market participants who seek
information about municipal securities.
This conclusion is supported by various
commenters.
As noted above, commenters
generally supported the proposed rule
change. In particular, one commenter
expressed the opinion that allowing
issuers, obligated parties and
dissemination agents to submit
information to one location,25
electronically and free of charge in order
to meet the obligations of Rule 15c2–12,
is very useful to the state and local
government community 26 and several
commenters remarked that allowing
investors to retrieve information from
this location would be advantageous to
the marketplace and investors.27
Commenters believed that the single
filing location would make the filing
process easier for filers submitting
filings and more efficient for investors
accessing documents.28 One commenter
also remarked that the availability of
continuing disclosure documents in one
venue as a component of EMMA, where
there will also be posted the final
official statement (or similar primary
25 See
id.
GFOA Letter.
27 See, e.g., GFOA Letter, SIFMA Letter, Vanguard
Letter, Treasurer of the State of Connecticut Letter,
ICI Letter.
28 Id.
26 See
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market disclosure document), and
pricing information, will provide
readers the benefit of the proper context
for reviewing the continuing
disclosure.29 Others expressed support
for the MSRB’s proposal to make the
continuing disclosure service a free
service for both issuers and other
obligated persons 30 submitting
documents as well as for investors and
other market participants 31 accessing
continuing disclosure information. One
commenter expressed a belief that the
proposed rule change would be a means
of removing impediments to and
helping to perfect the mechanisms of a
free and open market in municipal
securities within the meaning of the
Act.32
One commenter recommended that
the Commission maintain close
oversight of EMMA, ensure proper
testing of the system, and revisit this
matter in two to three years.33 A second
commenter also expressed a belief that
the Commission should establish
rigorous ongoing inspection and
oversight of EMMA.34 We note that,
because the MSRB is a self-regulatory
organization (‘‘SRO’’), the Commission
has, and exercises, oversight authority
over the MSRB. The MSRB must file
proposed rule changes with the
Commission under Section 19(b) of the
Act, including any changes to the
EMMA system and any fees relating to
the EMMA system. In addition, the
MSRB is subject to the recordkeeping
requirements of 17(a) of the Act 35 and
is subject to the Commission’s
examination authority under Section
17(b) of the Act.36 Through the
Commission’s recordkeeping
requirements and examination and rule
filing processes, the Commission
oversees the MSRB and will ascertain
whether the MSRB is implementing
EMMA appropriately and meeting
EMMA’s stated objectives, as well as
complying with all of its legal
obligations under the Act.
Eleven commenters that supported
the proposed rule change also believed
that EMMA submissions should be
accompanied by identifying
information.37 Several of these
29 See
SIFMA Letter.
GFOA Letter.
31 See, e.g., GFOA Letter, Busby Letter, NFMA
Letter, DAC Letter, Vanguard Letter, and EDGAR
Online Letter.
32 See SIFMA Letter.
33 See Treasurer of the State of Connecticut Letter.
34 See DAC Letter.
35 15 U.S.C. 78q(a).
36 15 U.S.C. 78q(b).
37 See NFMA Letter, DAC Letter, GFOA Letter,
Vanguard Letter, SIFMA Letter, NABL Letter,
Treasurer of the State of Connecticut Letter, Texas
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30 See
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17:56 Dec 11, 2008
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commenters suggested various specific
types of identifiers that were sometimes
different from, or in addition to, those
set forth in the proposed rule change. In
this regard, specific identifiers that were
suggested by commenters included: The
identification of obligated persons other
than issuers and successor parties; 38 the
issuer’s investor contact information; 39
a link to issuer’s Web site; 40 the CUSIP
numbers for all primary and secondary
market debt covered by relevant
information; 41 the use of electronic
‘‘cover sheets;’’ 42 the pre-registration of
identifying information; 43 a mechanism
to readily locate CUSIP numbers by the
issuer’s six digit prefix and at the same
time list by nine digit CUSIPs in certain
circumstances; 44 and a CUSIP catalog.45
In its response letter, the MSRB noted
that the use of accurate identifiers for
continuing disclosure submissions in
EMMA is vitally important to ensure
correct indexing and access to
continuing disclosure documents.46 The
MSRB indicated that, except as noted
below,47 documents provided to it are
required to be accompanied by
identifying information relating to the
nature of the document, the securities
and entities to which it applies, and the
entity making the submission, as
prescribed by the MSRB. In connection
with EMMA submissions, the MSRB
noted that the submitter will be required
to provide, at the time of submission,
information necessary to correctly
identify the following: The category of
information being provided; the period
covered by any financial information;
the issues or specific securities to which
such document is related or otherwise
material (including CUSIP number,
issuer name, state issue description,
securities name, dated date, maturity
date and/or coupon rate); the name of
any obligated person other than the
issuer; the name and date of the
document; and the contact information
for the submitter.48 According to the
MAC Letter, OMAC Letter, ICI Letter, and EDGAR
Online Letter.
38 See GFOA Letter, Treasurer of the State of
Connecticut Letter, Vanguard Letter, and ICI Letter.
39 See NFMA Letter.
40 Id.
41 Id.
42 See GFOA Letter.
43 See Treasurer of the State of Connecticut Letter.
44 Id.
45 See NFMA Letter.
46 See MSRB Response Letter.
47 See infra note 48.
48 As the Commission noted in its adopting
release for amendments to Rule 15c2–12 [Release
No. 34–59062; File No. S7–21–08, December 5,
2008], the commitment by an issuer to provide
identifying information exists only if it were
included in a continuing disclosure agreement. As
a result, issuers submitting continuing disclosure
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MSRB, since all continuing disclosure
documents submitted to EMMA will be
made through a unique, password
protected accounts by issuers, obligated
persons and their designated agents,
once the indexing information is
provided, the EMMA system will match
each document with the appropriate
identifying information for the
submitter. The MSRB believes that these
processes will adequately address issues
relating to the use of identifiers for the
submission process. The MSRB also
believes that the use of these identifiers
ensures both that the submission
process is not unduly burdensome and
that standardized market identifiers
commonly used in the municipal
marketplace serve as the basis on which
EMMA users would be able to conduct
document searches. Furthermore, while
the MSRB believes that the identifiers it
proposed are appropriate and cover
most of the identifying elements
recommended by the commenters, the
MSRB also will consider whether any
additional identifiers would be
appropriate. The Commission believes
that it is appropriate for the MSRB to
incorporate without change in the
continuing disclosure service the
indexing information that the MSRB
initially had proposed. The Commission
believes that the MSRB has provided
valid reasons for not incorporating at
this time the additional indexing
information that commenters suggested.
As the MSRB noted, the proposed
identifiers are standardized market
identifiers used in the municipal
marketplace, which should help ensure
that the transition to the continuing
disclosure service will not be unduly
burdensome for submitters. We note,
however, that the MSRB indicated that
it will consider additional identifiers in
the future.49
One commenter, who neither
supported nor opposed the proposal,
questioned whether the MSRB would
seek appropriate licensing for its use of
the commenter’s intellectual property
rights with respect to the CUSIP
documents pursuant to the terms of undertakings
that were entered into prior to the effective date of
the final amendments and that did not require
identifying information will be able to submit
documents without supplying identifying
information. In its response, the MSRB indicated
that the submitter making a submission pursuant to
a continuing disclosure undertaking entered into
prior to the effective date of the proposed Rule
15c2–12 amendments who seeks to make such
submission without providing identifying
information could do so.
49 We note that the MSRB is required to file with
the Commission a proposed rule change under
Section 19(b) of the Act with respect to any
additional indexing information that it may propose
to prescribe.
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database.50 The MSRB stated in its
response letter that it is continuing its
discussions with the appropriate parties
relating to the use of CUSIP data and
expects that all necessary arrangements
will be in place to operate the
continuing disclosure service as
anticipated by the July 1, 2009
implementation date.51 If there are any
unanticipated and unresolved issues in
connection with the use of the CUSIP
data, the MSRB stated that it will
consult with the Commission and, if
necessary, make any filings to modify
data usage by EMMA or to adjust the
implementation date. In light of the
MSRB’s assurances that this issue is
expected to be resolved in advance of
the continuing disclosure service’s
proposed implementation date of July 1,
2009, the Commission does not believe
that it is necessary to delay its approval
of the proposed rule change.
Nonetheless, we will continue to
monitor the progress of EMMA,
including the issue relating to licensing
rights to the CUSIP database, prior to
EMMA’s implementation.
Some commenters expressed their
belief that EMMA should have a simple
user interface and intuitive search
functionality.52 One commenter noted
that ‘‘[a]s demonstrated, we believe that
there are ample ways for the public to
locate particular documents, either
through a CUSIP number or an entity’s
name. It is imperative for these fields to
be applied to all securities and for the
MSRB to determine the most efficient
way to do so.’’ 53 The MSRB stated its
belief that its pilot of the primary
market service of the EMMA portal is
user-friendly and that the continuing
disclosure service of EMMA will also be
user-friendly, in part, because the
continuing disclosure service will
provide the same accessibility to
information to municipal market
participants and easy-to-use identifiers
for submissions as currently provided
by the pilot of the primary market
service of the EMMA portal. For
example, if users have a CUSIP number,
they will be able to go directly to the
related documents on the EMMA system
and, similarly, a user can go to the
market activity page and see all the
disclosures that were posted on a
certain date.54 The MSRB also noted its
intention to continue to make
improvements to the system.55 The
jlentini on PROD1PC65 with NOTICES
50 See
ABA Letter.
51 See MSRB Response Letter.
52 See EDGAR Online Letter, NFMA Letter and
GFOA Letter.
53 See GFOA Letter.
54 See MSRB Response Letter.
55 Id.
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Commission believes the MSRB has
proposed a reasonably efficient way to
apply identifying fields to the
continuing disclosure documents
submitted to the EMMA system and
expects that the MSRB will continue to
monitor the EMMA portal to ensure that
document submission is easy and
document access is efficient on an
ongoing basis and that the MSRB will
propose rule changes to the continuing
disclosure service pursuant to Section
19(b) of the Act as changes are needed.56
Some commenters expressed concerns
that access to previous filings made
with NRMSIRs may no longer be
available.57 Nothing in the MSRB’s
proposal will prevent the NRMSIRs
from continuing to make historical
information available. We recognize,
however, that the NRMSIRs may decide
not to do so. The MSRB stated in its
response letter that while it does not
have the authority to mandate the
submission of historical data by issuers,
issuers, obligated persons and their
agents will be free to submit to EMMA
continuing disclosure documents and
related information previously
submitted to the NRMSIRs.58 The MSRB
also stated that it is willing to
communicate with the NRMSIRs on the
continued availability of historical
documents and related information and
believes that such communication will
be fruitful.59 As a practical matter, we
believe that this is largely a transitional
issue until EMMA has collected
documents for a number of years and
anticipate that requests for such
documents from the NRMSIRs by those
persons who are not already subscribers
to their services may be expected to
decline over time.
Several commenters also made
observations and suggestions regarding
the access and security features of the
continuing disclosure service.60 One
commenter suggested that the MSRB
should distinguish between the
responsibilities of obligated persons and
submitters.61 Two commenters
recommended a special methodology for
56 We note that the MSRB is required to file with
the Commission a proposed rule change under
Section 19(b) of the Act with respect to the
operation of the continuing disclosure service and
with respect to any changes to the continuing
disclosure service.
57 See, e.g., Vanguard Letter and ICI Letter.
58 See MSRB Response Letter.
59 As discussed more fully in the Rule 15c2–12
Amendments Adopting Release, the Commission
believes that the current NRMSIRs could decide it
is in their commercial interest to make historical
information available.
60 See NABL Letter, NAHEFFA Letter, GFOA
Letter, and NFMA Letter.
61 See NABL Letter.
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conduit borrowers to access EMMA.62
Three commenters stated that issuers
and obligated persons should have the
ability to verify information submitted
to EMMA by third parties and to correct
errors either by accessing the system
directly or by reporting any errors to a
‘‘hotline.’’ 63
The MSRB noted in its response letter
that its proposal does not change the
obligations of issuers or obligated
persons and their designated agents,
which are established pursuant to the
terms of continuing disclosure
agreements, and that all persons,
including issuers, obligated persons and
designated agents will be able to access
filings on EMMA to verify their
availability and the accuracy of their
indexing. The MSRB also noted that all
submission methods will provide
appropriate feedback to submitters for
error correction and submission
confirmation purposes. The MSRB also
provides a Web site that allows
submitters to provide questions and
comments associated with submissions,
as well as a help desk with dedicated
personnel during MSRB business hours.
Furthermore, the proposal will allow
issuers and obligated persons to
maintain control over those persons
who may submit filings on their behalf.
The MSRB will permit only those
persons identified as designated agents
in continuing disclosure agreements to
submit documents without advance
approval through EMMA and will notify
issuers of the identity of those persons
who submit documents on their behalf.
Issuers and obligated persons also will
be able to revoke self-certification of
dissemination agents through the
EMMA on-line account management
utility at any time.
With respect to conduit financings,64
two commenters 65 expressed concern
that EMMA does not appropriately
accommodate issues relating to the real
parties in interest in such financings. In
conduit financings, the bond issuing
authority (e.g., a state or local
government) may issue tax exempt
bonds on behalf of certain entities (e.g.,
not-for profit organizations). Under
these arrangements, the entity for which
the tax exempt bonds were issued may
be regarded as the real obligated party
with the responsibility of submitting
continuing disclosure documents and
ensuring that such submissions are
62 See
63 See
NAHEFFA Letter and GFOA Letter.
NAHEFFA Letter, GFOA Letter, NFMA
Letter.
64 Conduit financings are financings in which
authorities with bond issuing authority issue taxexempt bonds on behalf of certain entities,
including not-for profit organizations.
65 See NAHEFFA Letter and NFMA Letter.
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accurate. Accordingly, these
commenters expressed concern that
EMMA will not appropriately
discriminate whether the bond issuing
authority, or the certain entity on behalf
of which the tax-exempt bonds are
issued, is responsible for the continuing
disclosure submissions. The MSRB
responded that the proposal establishes,
through the account opening process, a
mechanism that would permit, on an
optional basis, issuers of conduit
financings to identify obligated persons
and the securities for which such
persons are obligated.66 Furthermore,
the MSRB plans to establish methods for
submitters to contact it with questions
and to report any problems submitters
may discover with filings they
electronically send to the EMMA
system.67 The Commission believes that
the MSRB has established appropriate
measures with respect to security and
controls for the submission of
documents to the continuing disclosure
service.
Some commenters that supported the
proposed rule change suggested
incorporation of an interactive data
standard (i.e., XBRL).68 The MSRB
responded that it will take all such
suggestions under consideration for
future revisions to the continuing
disclosure service. The MSRB noted,
however, that documents need not be
created in any particular manner in
order to be saved or scanned into a PDF
format. The MSRB indicated that it does
not view establishing XBRL as a data
standard for EMMA submissions as
appropriate at this time, although it
noted that it continues to be interested
in working with the municipal market
in the future on interactive data
initiatives. The Commission believes
that, in the future, access to continuing
disclosure documents through the
EMMA system could be enhanced by
improved methods for the electronic
presentation of information, but believes
that the MSRB’s technology choices for
EMMA are appropriate at this time.
Seven of the commenters that
supported the proposed rule change
indicated that EMMA should have the
capability to accept voluntary and nonperiodic disclosures in addition to Rule
15c2–12 disclosures 69 or recommended
the addition of features such as
information regarding late or missing
filings.70 In its response letter, the
MSRB stated that although the
continuing disclosure service will not
allow for the submission of continuing
disclosure documents beyond those
currently set forth in Rule 15c2–12 or
those documents identified in an
undertaking by the issuer or obligated
person, the MSRB expects to propose in
a future filing to accept submissions of
a broader scope.71 The Commission
believes that limiting the scope of the
documents to be submitted through the
continuing disclosure service to those
referenced in continuing disclosure
agreements will fulfill the intended
purpose of Rule 15c2–12 and thus is
reasonable at this time.
One commenter expressed support for
the dissemination of information in a
bulk format.72 Some commenters
expressed concerns regarding fees to be
charged by the MSRB for subscriptions
to the real-time data feed and whether
the transfer of documents through the
data feed would be delayed.73 In
addition, three commenters suggested
that the MSRB should provide SIDs
with a data feed of filing information
and one of these commenters stated that
this data feed should be provided free
of charge.74 Further, one commenter
expressed concern that broker-dealers
would pass on fees to their customers to
support the EMMA system.75
In its response letter, the MSRB stated
that in addition to providing access to
continuing disclosure documents
through the EMMA portal without
charge to all persons on an equal basis
on its Internet website, the MSRB also
will offer real-time subscriptions to
EMMA’s continuing disclosure
documents and information as they are
submitted and processed.76 According
to the MSRB, its goal is to ensure an
efficient process for making available
real-time data subscription products at a
reasonable cost.77 The MSRB also stated
that it will work with the SIDs to ensure
that they will have reasonable access to
the documents submitted for issues in
their respective states and will not incur
costs related to the entire EMMA
subscription product.78
The Commission notes that fees
relating to the EMMA system, such as
subscription fees for a data feed for
access to documents submitted to the
continuing disclosure service, also must
71 See
MSRB Response Letter.
e.g., EDGAR Online Letter.
73 See DPC DATA Letter, NFMA Letter and GFOA
Letter.
74 See Texas Mac Letter, OMAC Letter, and GFOA
Letter.
75 See SPSE Letter.
76 See MSRB Response Letter.
77 Id.
78 Id.
75783
be filed with the Commission as a
proposed rule change under Section
19(b) of the Act. Accordingly, any fees
relating to the continuing disclosure
service would be published for public
comment by the Commission and
interested persons would have the
opportunity to offer their views on
them.
With respect to the comment that
broker-dealers would pass on fees to
their customers to support the EMMA
system, the Commission again notes that
the MSRB, as an SRO, would have to
file any fees relating to the support or
use of the continuing disclosure service
with the Commission under Section
19(b) of the Exchange Act, to the extent
such fees are not already covered by the
MSRB’s current fee schedule. The
Commission further notes that brokerdealers currently are charged fees for
access to disclosure documents obtained
from the NRMSIRs that they currently
may or may not pass on to their
customers. According to the MSRB, it
presently anticipates no increase in fees
on brokers, dealers, and municipal
securities dealers that effect transactions
in municipal securities to establish and
operate the EMMA system.79 The MSRB
has stated that it has funds on hand that,
together with amounts it will collect in
the future under its current fee
schedule, it believes will be sufficient to
establish and operate the continuing
disclosure service of the EMMA
system.80
Two commenters opposed the
proposal and suggested alternative
approaches to greater access to
continuing disclosure documents by
investors and others.81 They believed
that the MSRB’s proposal would not
improve the overall continuing
disclosure regime and that it does not
address the core problems with the
current system, such as the significant
level of delinquent filings. One of these
commenters stated that the proposal
imposes restrictions on filing formats
(i.e., single-electronic) and technology
and misstates important attributes of the
current municipal disclosure regime.
This commenter urged enforcement of
existing provisions of Rule 15c2–12 and
otherwise working within the existing
disclosure system. The other commenter
believed that a ‘‘central post office’’
approach is preferable.82
72 See,
jlentini on PROD1PC65 with NOTICES
66 See
MSRB Response Letter.
67 Id.
68 See, e.g., GFOA Letter, e-certus Letter, and
EDGAR Online Letter.
69 See ICI Letter, NFMA Letter, NABL Letter,
GFOA Letter, Vanguard Letter and SIFMA Letter,
Treasurer of the State of Connecticut Letter.
70 See, e.g., ICI Letter.
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79 See
MSRB Response Letter.
80 Id.
81 See
DPC DATA Letter and SPSE Letter.
a central post office approach, issuers
and obligors would file documents through a single
electronic venue in a standardized format. The
central post office would then forward the
82 Under
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In its response letter, the MSRB
expressed its belief that the
establishment of single submission and
dissemination venue through EMMA’s
continuing disclosure service would
significantly improve upon the current
municipal disclosure system.83 The
MSRB believed that a simple, secure
and centralized system will simplify
issuers’ submissions. According to the
MSRB, for example, the fact that
continuing disclosure documents will
be publicly available for free through a
searchable Web site in which all filings
for a particular issue are displayed as a
single collection will serve, for the first
time, to make it easy for issuers,
investors and others to determine
whether or not filings are missing,
whether due to an issuer failing to make
a filing or otherwise.
While the Commission acknowledges
that the MSRB’s proposal does not
address all of the information challenges
of the municipal market, the
Commission continues to believe that
the MSRB’s proposal is a significant
step forward in facilitating the
submission of, and access to, secondary
market municipal disclosures. As noted
previously, a large majority of the
commenters supported the MSRB’s
proposal and believed that it will
improve the overall continuing
disclosure regime. The Commission also
believes that this will be the case. We
anticipate that public access to all
continuing disclosure documents on the
Internet, as provided by the proposal,
will promote market efficiency and help
deter fraud and manipulation in the
municipal securities market by
improving the availability of
information to all investors. With
respect to one commenter’s concern that
the proposal would impose restrictions
on filing formats, impose technology
requirements that do not exist under the
current system and provide no
appreciable benefit, the Commission
notes that the availability of continuing
disclosure documents at a single
repository that can be readily accessed
and easily searched through electronic
means will provide significant benefits
that are not available under the current
NRMSIR system. The Commission notes
that the submission of continuing
disclosure documents in an electronic
format will allow the information to be
posted and disseminated promptly. The
Commission also notes that the MSRB’s
proposed filing format and choice of
technology will eliminate the need for
manual handling of paper documents,
centrally-filed documents in real time to the
NRMSIRs. See also SPSE Letter, at 3–5.
83 See MSRB Response Letter.
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17:56 Dec 11, 2008
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which is less efficient and more costly,
and will increase the potential for a
more complete record of continuing
disclosure documents that otherwise
might be misfiled or lost under a
manual system. Furthermore, the
Commission believes that submissions
in an electronic format will not be
burdensome on issuers or obligated
persons since many documents are now
routinely created in an electronic format
and can be readily transmitted by
electronic means. With respect to the
comment that the existing disclosure
system should be retained and the
existing provisions of the Rule 15c2–12
enforced, the Commission believes that
enforcement of the provisions of Rule
15c2–12 is an important mechanism for
the protection of municipal securities
investors and the efficient operation of
the marketplace. However, the
Commission also believes that the
quality, timing, and availability of
disclosure in the municipal securities
markets will be substantially improved
by the MSRB’s proposal.
With respect to the comment favoring
a ‘‘central post office,’’ the Commission
believes that this approach is less likely
to make access to continuing disclosure
documents as efficient as the MSRB’s
continuing disclosure service and
therefore would not achieve the goal.
For example, with a central post office
there would continue to be no single
location to which investors, particularly
individuals, could turn for free access to
information regarding municipal
securities. Instead, individuals or
entities that wish to obtain such
information would find it necessary first
to access the central post office to find
out what documents might be available
from NRMSIRs and SIDs and then to
contact one or more NRMSIRs or SIDs
and pay their fees to obtain the
document or documents they seek. This
would be a less efficient process than
the MSRB’s proposal, in which
interested persons could directly access,
view and print for free continuing
disclosure documents from one place—
the MSRB’s Internet site.
Moreover, a ‘‘central post office’’
would not, to the same extent as the
MSRB’s EMMA system, simplify
compliance with regulatory
requirements by, and reduce
compliance costs of, broker-dealers,
municipal securities dealers, and others.
This is because they would have to first
access the ‘‘central post office’’ to
determine what documents are available
and then contact one or more NRMSIRs
or SIDs to obtain these documents for a
fee or subscribe to commercial services
to do so on their behalf. We believe that
greater benefits will be achieved by
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providing public access to all
continuing disclosure documents on the
Internet, as provided by the proposal.
We anticipate that access to all
continuing disclosure documents
without charge through the MSRB’s
Internet site will better promote market
efficiency and help deter fraud and
manipulation in the municipal
securities market by improving the
availability of information to all
investors.
Two commenters, both of which are
NRMSIRs, also raised concerns about
the potential adverse effects on
competition and raised issues about the
proposal’s consistency with
Congressional intent regarding the
regulation of municipal securities.84
Both of these commenters believed that
the proposal is contrary to Section
15B(d) of the Act,85 commonly referred
to as the Tower Amendment. One of
these commenters also expressed its
belief that the proposal would reduce
current value-added products and
services provided by existing NRMSIRs
and other vendors; narrow competing
information services regarding
municipal securities; and result in a loss
of innovation in offering competing
information services regarding
municipal securities.86 This commenter
also expressed its belief that the
proposal is anti-competitive and would
unfairly displace private vendors that
have made significant investment under
the current system with a ‘‘quasigovernmental organization’’ that is
subsidized and could provide valueadded services for free.87 The other
commenter expressed a belief that the
proposal places the MSRB in direct
competition with commercial
vendors.88
With respect to their comments
regarding competition, the MSRB
responded that it did not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.89 The MSRB
expressed its belief that existing vendors
would continue to have rapid access to
all of the same documents they
previously received, now accompanied
by consistent indexing information, and
would fully be able to provide value
added products based on such
documents. Additionally, the MSRB
responded that it believed that the
availability of continuing disclosure
84 See
DPC DATA Letter and SPSE Letter.
U.S.C. 78o–4(d).
86 See SPSE Letter.
87 Id.
88 See DPC DATA Letter.
89 See MSRB Response Letter.
85 15
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documents through the EMMA portal
and the continuing disclosure
subscription service would promote
competition among private data vendors
and other enterprises engaged in, or
interested in becoming engaged in, the
market for information services by
eliminating existing barriers to new
entrants into the market for municipal
securities information. The MSRB
added that none of the functionalities of
the continuing disclosure service
constitute value-added services that
compete inappropriately with the
private sector. Rather, the MSRB noted
that these functionalities are critical for
the continuing disclosure services
operation as a free, centralized source of
information for retail investors that
provides investors with the necessary
tools to find the information for which
they are searching and to understand
such information once it is found.
Furthermore, the MSRB expressed its
belief that its operation of the
continuing disclosure service would
serve as a basis on which private
enterprises could themselves
concentrate more of their resources on
developing and marketing value-added
services. In the MSRB’s opinion, the
shift in the flow of continuing
disclosure documents from the current
NRMSIRs to EMMA (from which such
entities and others could still obtain
documents on a real-time basis
accompanied by indexing information)
would represent only a temporary
dislocation in the processes by which
current vendors that produce valueadded services obtain the raw
documents on which these services are
based.
Moreover, the MSRB expressed its
belief that the proposal will prove to be
of long-term benefit to such vendors.
The MSRB noted that much of the
impact of the proposed rule change on
commercial enterprises will result from
increased competition in the
marketplace resulting from the entry of
additional commercial enterprises to
compete with existing market vendors
for value-added services, rather than
from the operation of the continuing
disclosure service. Furthermore, the
MSRB stated its belief that the benefits
realized by the investing public from the
broader and easier availability of
disclosure information about municipal
securities justifies any potential
negative impact on existing enterprises
resulting from the operation of EMMA.
The MSRB emphasized that its activities
are subject to the supervision of the
Commission and that any changes to
EMMA and related systems must be
filed with the Commission. The MSRB
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17:56 Dec 11, 2008
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further commented that it has worked
closely with all of the marketplace’s key
constituencies, including issuers, bond
attorneys, financial advisers, and others
in the development of EMMA and
represented that it will continue to do
so as EMMA becomes fully operational.
The Commission believes that the
proposal will modernize the method of
availability of continuing disclosure
documents by issuers and, by making
use of the Internet, will make these
documents readily accessible to
investors and others at no charge. The
continuing disclosure service will not
alter the availability of such documents
to commercial vendors or their ability to
disseminate such information, together
with whatever value-added products
they may wish to provide. The
Commission notes that the MSRB has
represented that documents provided
through EMMA will be available to all
persons on an equal basis and that the
MSRB will continue to make the full
collection of documents available by
subscription on an equal basis, without
imposing restrictions on subscribers
from re-disseminating such documents
or from otherwise offering value-added
service and products, based on such
documents on terms determined by each
subscriber.90 Further, the Commission
notes that the MSRB has represented
that EMMA will be designed to provide
real-time access to documents and
information as they are submitted and
processed 91 and that all continuing
disclosures received by the MSRB will
be available through a data-stream
subscription simultaneously with
posting on the EMMA portal.92
The Commission believes that the
proposed rule change will encourage,
rather than restrict, competition in the
municipal securities information
marketplace. The Commission further
believes that any burdens on
competition that may result from the
proposed rule change are more than
justified by the benefits that will flow
from ready and free availability of
municipal disclosure documents to
broker-dealers, municipal securities
dealers, mutual funds, analysts, retail
and institutional investors, and the
public generally. Both existing private
vendors and new market entrants
seeking to provide value-added
products and services will be able to
access all available continuing
disclosure documents from EMMA for
free, or for a subscription fee if they
elect to receive a real-time data feed.
Consequently, existing vendors and
90 See
MSRB Response Letter.
MSRB Response Letter.
92 See Release No. 34–58256, supra note 3.
potential new market entrants no longer
will have to pay multiple subscription
fees or document charges to multiple
NRMSIRs to access the continuing
disclosure information that is necessary
for value-added products and services.
The MSRB’s proposal is designed to
help spur innovation and competition
for value-added products and services
and is expected to reduce barriers to
entry for new market participants. The
Commission also notes that because
continuing disclosure information will
be available at the MSRB, existing
vendors and new market entrants can
conserve resources that otherwise
would be utilized to obtain a full
complement of available continuing
disclosure information that is spread out
across multiple NRMSIRs. In addition,
while the Commission acknowledges
that some existing vendors may need to
make some adjustments to their line of
business or services offered, these
vendors and others may determine that
they no longer need to invest in the
infrastructure and facilities necessary to
collect and store continuing disclosure
information. The Commission believes
that the proposed rule change likely will
have a net benefit on the competitive
landscape for municipal securities
disclosure information services and
further the purposes of the Act by
deterring the potential for fraud in the
municipal securities market.
With respect to concerns that the
MSRB could control private vendors’
access to information through unfair fee
structures and biased dissemination of
information for the purpose of
conditioning the market to use EMMA
and the MSRB’s own services,93 the
Commission notes that the MSRB is
required to file its fee changes and rule
proposals relating to the EMMA system
with the Commission under Section
19(b) of the Act. Thus, interested parties
will have the opportunity to comment
on any such proposal and bring to the
Commission’s attention any potential
issues. The Commission has carefully
considered the comments of the two
NRMSIRs regarding competition, and
the MSRB’s response letter, and does
not believe that the proposed rule
change will impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. To the contrary, as
discussed above, the Commission
believes that any competitive impact
that may result from the proposed rule
change is justified by the benefits that
will be provided to investors, brokerdealers, mutual funds, vendors of
municipal information, municipal
91 See
PO 00000
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Fmt 4703
Sfmt 4703
75785
93 See
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security analysts, other market
professionals and the market generally.
With respect to the comments of the
two NRMSIRs regarding the Tower
Amendment, the MSRB responded that
it believes its proposal to create a
continuing disclosure service is
consistent with the MSRB’s statutory
authority under Section 15B(d) of the
Act, i.e., the Tower Amendment.94 The
MSRB believes that the continuing
disclosure service of EMMA will serve
as a necessary step to better facilitate the
free and timely public access to
continuing disclosure documents and
related information. The service will
remove impediments to and help perfect
the mechanisms of a free and open
market in municipal securities thereby,
effectively, promoting investor
protections and the public interest by
ensuring equal access for all market
participants to the critical disclosure
information needed by investors in the
municipal securities market. The MSRB
believes that all of the continuing
disclosure service’s functionalities
relate to the core mission of the MSRB
and such functionalities are not
inconsistent with any statutory
limitations placed on MSRB activities.
The MSRB believes that municipal
securities disclosure documents should
be made more readily and promptly
available to the public and that all
investors should have better access to
important market information.
The Commission also does not believe
that the proposed rule change is
inconsistent with the Tower
Amendment. The Tower Amendment
prohibits the MSRB from directly or
indirectly requiring an issuer of
municipal securities to file with it any
documents relating to the issuance, sale
94 Section 15B(d) of the Exchange Act states as
follows: (1) Neither the Commission nor the Board
is authorized under this title, by rule or regulation,
to require any issuer of municipal securities,
directly or indirectly through a purchaser or
prospective purchaser of securities from the issuer,
to file with the Commission or the Board prior to
the sale of such securities by the issuer any
application, report, or document in connection with
the issuance, sale, or distribution of such securities.
(2) The Board is not authorized under this title to
require any issuer of municipal securities, directly
or indirectly through a municipal securities broker
or municipal securities dealer or otherwise, to
furnish to the Board or to a purchaser or a
prospective purchaser of such securities any
application, report, document, or information with
respect to such issuer: Provided, however, That the
Board may require municipal securities brokers and
municipal securities dealers to furnish to the Board
or purchasers or prospective purchasers of
municipal securities applications, reports,
documents, and information with respect to the
issuer thereof which is generally available from a
source other than such issuer. Nothing in this
paragraph shall be construed to impair or limit the
power of the Commission under any provision of
this title. 15 U.S.C. 78o–4(d)(1) and (2).
VerDate Aug<31>2005
17:56 Dec 11, 2008
Jkt 217001
or distribution of such securities before
such securities are sold.95 The Tower
Amendment also prohibits the MSRB
from directly or indirectly requiring an
issuer of municipal securities, directly
or indirectly through a municipal
securities broker or dealer or otherwise,
to furnish to it documents relating to the
issuer, unless such information is
available from a source other than the
issuer.96 The MSRB’s proposed rule
change does not implicate Section
15B(d)(1) or (2) of the Act because it
imposes no requirements on issuers.
Instead, through the establishment of
the continuing disclosure service of
EMMA as an information venue, the
proposed rule change enhances access
to continuing disclosure information
provided to the MSRB subsequent to the
sale of municipal securities as a
consequence of continuing disclosure
agreements entered into consistent with
a rule of the Commission’s Rule 15c2–
12, which is designed to deter fraud in
the municipal securities market. The
proposed rule change does not alter
market participants’ existing
obligations, but rather it enhances the
system for the receipt of, and for making
available to the public of, the continuing
disclosure documents. For these
reasons, the Commission does not
believe that the proposed rule change is
contrary to Section 15B(d) of the Act.
Several commenters that supported
the proposed rule change also made
suggestions regarding the transition to
the proposed system.97 For example,
one commenter believed that there
should be a three- to six-month
transition period for submissions to
EMMA and a twelve-month transition
period for the submissions of searchable
PDFs.98 Another commenter believed
that there should be a nine-month
transition period to a word searchable
format.99 Another commenter believed
that parties who have made paper
filings in the past should be allowed
additional time to transition to
electronic filings.100 A fourth
commenter noted that issuers and
obligated persons may be confused as to
where they should file continuing
disclosure documents during the period
of transition and suggested that these
concerns could be addressed during a
short transition period.101 The MSRB
responded that, in view of the
95 15
U.S.C. 78o–4(d)(1).
U.S.C. 78o–4(d)(2).
97 See, e.g., GFOA Letter, e-certus Letter,
Treasurer of the State of Connecticut Letter, and
NABL Letter.
98 See GFOA Letter.
99 See Treasurer of the State of Connecticut Letter.
100 See NABL Letter.
101 See Vanguard Letter.
96 15
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Fmt 4703
Sfmt 4703
comments it received and discussions it
has had with industry participants, and
to further ensure a smooth transition for
submitters and end users of continuing
disclosures, it has filed Amendment No.
1 to delay the effectiveness of the
continuing disclosure service until the
later of July 1, 2009 or the effective date
of the Rule 15c2–12 Amendments and
to extend the transition to a wordsearchable format until January 1, 2010.
Furthermore, the MSRB stated that it
expects to file with the Commission to
establish a pilot program for the
continuing disclosure service that
would allow for system testing through
voluntary submissions of continuing
disclosures prior to the effectiveness of
the amendments to Rule 15c2–12 and
the launch of the permanent continuing
disclosure service.
IV. Order Granting Accelerated
Approval of Proposed Rule Change
As noted above, the MSRB now seeks
pursuant to Amendment No. 1 to
commence operation of the EMMA
portal for continuing disclosure
documents on July 1, 2009,102 which is
commensurate with the effective date of
the Rule 15c2–12 Amendments that we
also are adopting today.103 In addition,
Amendment No. 1 requests that the
Commission delay the effectiveness of
the provision of the proposed rule
change relating to word searchable PDF
files until January 1, 2010. The MSRB
requests that the Commission find good
cause, pursuant to Section 19(b)(2) of
the Act, for approving Amendment No.
1 prior to the thirtieth day after
publication of notice of filing of
Amendment No. 1 in the Federal
Register. The MSRB believes that the
Commission has good cause for granting
accelerated approval of the proposed
rule change because the amendment
does not substantively alter the original
proposed rule change other than
changing two effective dates to allow
more time for implementation.
The Commission finds good cause to
approve the proposed rule change on an
accelerated basis. The proposed rule
change was published in the Federal
Register on August 7, 2008.104 The
Commission believes that the proposal
includes an appropriate transition
period and believes that parties that
have made paper filings in the past or
that do not presently use word
searchable formats will have sufficient
time to transition to electronic filings as
of July 1, 2009 and to a word searchable
102 See
Amendment No. 1, supra note 5.
Rule 15c2–12 Amendments Adopting
Release, supra note 7.
104 See Release No. 34–58256, supra note 3.
103 See
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PDF format as of January 1, 2010,
respectively.
V. 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.
Comments may be submitted by any of
the following methods:
jlentini on PROD1PC65 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–MSRB–2008–05 on the
subject line.
Paper Comments
• 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
Number SR–MSRB–2008–05. This file
number should be included on the
subject line if e-mail is used. To help the
Commission 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 (https://www.sec.gov/
rules/sro.shtml). 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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of the MSRB. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–MSRB–2008–05 and should
be submitted on or before January 2,
2009.
VI. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
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17:56 Dec 11, 2008
Jkt 217001
rule change is consistent with the
requirements of the Act and in
particular Section 15B(b)(2)(C) of the
Act and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,105 that the
proposed rule change (SR–MSRB–2008–
05), as modified by Amendment No. 1,
be, and it hereby is, approved on an
accelerated basis.
By the Commission.
Florence E. Harmon,
Acting Secretary.
Exhibit A
Key to Comment Letters Cited in Order
Relating to the Establishment of a
Continuing Disclosure Service of the
Electronic Municipal Market Access System
(EMMA) (File No. SR–MSRB–2008–05)
1. Letter from Fran Busby, to 21st Century
Disclosure Initiative, Commission, dated
October 7, 2008 (‘‘Busby Letter’’).
2. Letter from Paula Stuart, Chief Executive
Officer, Digital Assurance Certification,
L.L.C. (‘‘DAC’’), to Florence E. Harmon,
Acting Secretary, Commission, dated
September 25, 2008 (‘‘DAC Letter’’).
3. Letter from Christopher Alwine, Head of
Municipal Money Market and Bond
Groups, The Vanguard Group, Inc.
(‘‘Vanguard’’), to Florence E. Harmon,
Acting Secretary, Commission, dated
September 24, 2008 (‘‘Vanguard Letter’’).
4. Letter from Susan A. Gaffney, Director,
Federal Liaison Center, Government
Finance Officers Association (‘‘GFOA’’),
to Florence E. Harmon, Acting Secretary,
Commission, dated September 24, 2008
(‘‘GFOA Letter’’).
5. Letter from Louis V. Eccleston, President,
Standard & Poor’s Securities Evaluations,
Inc. (‘‘SPSE’’), to Florence E. Harmon,
Acting Secretary, Commission, dated
September 22, 2008 (‘‘SPSE Letter’’).
6. Letter from R.T. McNamar, CEO, e-certus,
Inc. (‘‘e-certus’’), to Christopher Cox,
Chairman, Commission, and Ernesto A.
Lanza, Senior Associate General
Counsel, MSRB, dated September 22,
2008 (‘‘e-certus Letter’’).
7. Letter from Leslie M. Norwood, Managing
Director and Associate General Counsel,
Securities Industry and Financial
Markets Association (‘‘SIFMA’’), to
Florence E. Harmon, Acting Secretary,
Commission, dated September 22, 2008
(‘‘SIFMA Letter’’).
8. Letter from William A. Holby, President,
National Association of Bond Lawyers
(‘‘NABL’’), to Florence E. Harmon,
Acting Secretary, Commission, dated
September 22, 2008 (‘‘NABL Letter’’).
9. Letter from Denise L. Nappier, Treasurer,
State of Connecticut, to Christopher Cox,
Chairman, Commission, dated
September 22, 2008 (‘‘Treasurer of the
State of Connecticut Letter’’).
10. Letter from J. Douglas Adamson,
Executive Vice President, Technical
105 15
PO 00000
U.S.C. 78s(b)(2).
Frm 00123
Fmt 4703
Sfmt 4703
75787
Services Division, American Bankers
Association (‘‘ABA’’), to Florence E.
Harmon, Acting Secretary, Commission,
dated September 22, 2008 (‘‘ABA
Letter’’).
11. Letter from Laura Slaughter, Executive
Director, Municipal Advisory Council of
Texas (‘‘Texas MAC’’), to Christopher
Cox, Chairman, Commission, and
Ernesto A. Lanza, Senior Associate
General Counsel, MSRB, dated
September 22, 2008 (‘‘Texas MAC
Letter’’).
12. Letter from K.W. Gurney, Director, Ohio
Municipal Advisory Council (‘‘OMAC’’),
to Christopher Cox, Chairman,
Commission, and Ernesto A. Lanza,
Senior Associate General Counsel,
MSRB, dated September 22, 2008
(‘‘OMAC Letter’’).
13. Letter from Karrie McMillan, General
Counsel, Investment Company Institute
(‘‘ICI’’), to Florence E. Harmon, Acting
Secretary, Commission, dated September
22, 2008 (‘‘ICI Letter’’).
14. Letter from Robert Donovan, Executive
Director, Rhode Island Health and
Educational Building Corporation and
Steven Fillebrown, Director of Research,
Investor Relations and Compliance, New
Jersey Healthcare Financing Authority,
on behalf of the National Association of
Health and Educational Facilities
Finance Authorities (‘‘NAHEFFA’’), to
Florence E. Harmon, Acting Secretary,
Commission, dated September 22, 2008
(‘‘NAHEFFA Letter’’).
15. Letter from Peter J. Schmitt, CEO, DPC
DATA Inc. (‘‘DPC DATA’’), to Florence
E. Harmon, Acting Secretary,
Commission, dated September 18, 2008
(‘‘DPC DATA Letter’’).
16. Letter from Philip D. Moyer, CEO &
President, EDGAR Online (‘‘EDGAR
Online’’), to Christopher Cox, Chairman,
Commission, and Ernesto A. Lanza,
Senior Associate General Counsel,
MSRB, dated September 9, 2008
(‘‘EDGAR Online Letter’’).
17. Letter from Lynette Kelly Hotchkiss,
Executive Director, MSRB, to
Christopher Cox, Chairman, and James L.
Eastman, Counsel, Commission, dated
September 8, 2008 (‘‘MSRB Letter’’).
18. Letter from Rob Yolland, Chairman,
National Federation of Municipal
Analysts (NFMA), to Ernesto A. Lanza,
Senior Associate General Counsel,
MSRB, Commission, dated March 10,
2008 (‘‘NFMA Letter’’).
[FR Doc. E8–29376 Filed 12–11–08; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice 6449]
Bureau of Educational and Cultural
Affairs (ECA) Request for Grant
Proposals: Youth Programs Academic
Year Disability Components
Announcement Type: New Grant.
Funding Opportunity Number: ECA/
PE/C/PY–09–05.
E:\FR\FM\12DEN1.SGM
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Agencies
[Federal Register Volume 73, Number 240 (Friday, December 12, 2008)]
[Notices]
[Pages 75778-75787]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-29376]
[[Page 75778]]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59061; File No. SR-MSRB-2008-05]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Amendment No. 1 and Order Granting
Accelerated Approval of Proposed Rule Change, as Modified by Amendment
No. 1 Thereto, Relating to the Establishment of a Continuing Disclosure
Service of the Electronic Municipal Market Access System (EMMA)
December 5, 2008.
I. Introduction
On July 29, 2008, the Municipal Securities Rulemaking Board
(``MSRB'' or ``Board'') filed with the Securities and Exchange
Commission (``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 establish a continuing
disclosure service (the ``continuing disclosure service'') of the
MSRB's Electronic Municipal Market Access system (``EMMA''). The
proposed rule change was published for comment in the Federal Register
on August 7, 2008.\3\ The Commission received eighteen comment letters
regarding the MSRB's proposed rule change.\4\ On November 5, 2008, the
MSRB filed Amendment No. 1 to the proposed rule change.\5\ The text of
Amendment No. 1 is available on the MSRB's Web site (https://
www.msrb.org), at the MSRB's principal office, and at the Commission's
Public Reference Room. On November 24, 2008, the MSRB submitted a
letter responding to the comment letters.\6\ This order provides notice
of the proposed rule change as modified by Amendment No. 1 and approves
the proposed rule change, as amended, on an accelerated basis.\7\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 58256 (July 30,
2008), 73 FR 46161 (August 7, 2008) (``Release No. 34-58256'').
\4\ Exhibit A contains the citation key to the comments noted
herein. Copies of the comment letters received by the Commission are
available on the Commission's Internet Web site, located at https://
www.sec.gov/comments/sr-msrb-2008-05/msrb200805.shtml and in the
Commission's Public Reference Room at its Washington, DC
headquarters.
\5\ In Amendment No. 1, the MSRB proposed to establish as the
operative date of the continuing disclosure service the later of
July 1, 2009 or the effective date of any amendments to Rule 15c2-12
under the Act (``Rule 15c2-12'' or ``Rule''), 17 CFR 240.15c2-12,
that provide for the MSRB to serve as the sole repository for
continuing disclosure documents, and to establish January 1, 2010 as
the date on which submitters to the continuing disclosure service
would be required to submit documents as word-searchable portable
document format (PDF) files.
\6\ See Letter from Ernesto A. Lanza, General Counsel, MSRB, to
Florence E. Harmon, Acting Secretary, Commission, dated November 24,
2008 (``MSRB Response Letter'').
\7\ On August 7, 2008, the Commission published for comment in
the Federal Register proposed amendments to Rule 15c2-12 that relate
to the MSRB's implementation of the continuing disclosure service.
See Securities Exchange Act Release No. 58255 (July 30, 2008), 73 FR
46138 (August 7, 2008) (``Release No. 34-58255''). In a separate
release issued today, the Commission is approving its proposed
amendments to Rule 15c2-12 (``Rule 15c2-12 Amendments''). See
Securities Exchange Act Release No. 59062 (December 5, 2008) (``Rule
15c2-12 Amendments Adopting Release'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
Under Rule 15c2-12(b)(5), an underwriter for a primary offering of
municipal securities subject to the Rule currently is prohibited from
underwriting the offering unless the underwriter has determined that
the issuer or an obligated person \8\ for whom financial information or
operating data is presented in the final official statement has
undertaken in writing to provide certain items of information to the
marketplace.\9\ Rule 15c2-12(b)(5) provides that such items include:
(A) Annual financial information concerning obligated persons; \10\ (B)
audited financial statements for obligated persons if available and if
not included in the annual financial information; (C) notices of
certain events, if material; \11\ and (D) notices of failures to
provide annual financial information on or before the date specified in
the written undertaking.\12\ Annual filings, material event notices,
and failure to file notices generally are referred to as ``continuing
disclosure documents.''
---------------------------------------------------------------------------
\8\ Rule 15c2-12(f)(10) defines ``obligated person'' as any
person, including an issuer of municipal securities, who is either
generally or through an enterprise, fund, or account of such person
committed by contract or other arrangement to support payment of all
or part of the obligations on the municipal securities sold in a
primary offering (other than providers of bond insurance, letters of
credit, or other liquidity facilities).
\9\ See also Rule 15c2-12(d)(2), which provides for an exemption
from the requirements of paragraph (b)(5) of Rule 15c2-12.
\10\ Rule 15c2-12(f)(9) defines ``annual financial information''
as 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.
\11\ Under Rule 15c2-12(b)(5)(C), such events currently consist
of principal and interest payment delinquencies; non-payment related
defaults; unscheduled draws on debt service reserves reflecting
financial difficulties; unscheduled draws on credit enhancements
reflecting financial difficulties; substitution of credit or
liquidity providers, or their failure to perform; adverse tax
opinions or events affecting the tax-exempt status of the security;
modifications to rights of security holders; bond calls;
defeasances; release, substitution, or sale of property securing
repayment of the securities; and rating changes.
\12\ Under current Rule 15c2-12(b)(5)(i), participating
underwriters must reasonably determine whether the issuer has
undertaken to send annual filings to all existing nationally
recognized municipal securities information repositories
(``NRMSIRs'') and any applicable state information depositories
(``SIDs''), while the undertaking with respect to material event
notices and failure to file notices must provide that they be sent
to all existing NRMSIRs or to the MSRB, as well as to any applicable
SID. Under the Rule 15c2-12 Amendments adopted today, participating
underwriters must reasonably determine whether the issuer has
undertaken to send continuing disclosure documents to the MSRB. See
Rule 15c2-12 Amendments Adopting Release, supra note 7. The MSRB,
which currently operates CDINet to process and disseminate notices
of material events submitted to the MSRB, previously petitioned the
Commission to amend Rule 15c2-12 to remove the MSRB as a recipient
of material event notices due to the very limited level of
submissions received by the MSRB, constituting a negligible
percentage of material event notices currently provided to the
marketplace. See Letter from Diane G. Klinke, General Counsel, MSRB,
to Jonathan G. Katz, Secretary, Commission, dated September 8, 2005.
In 2006, the Commission published proposed amendments to Rule 15c2-
12 to eliminate the MSRB as a repository for material event notices.
See Exchange Act Release No. 54863 (December 4, 2006), 71 FR 71109
(December 8, 2006) (``2006 Proposed Rule 15c2-12 Amendments''). In
light of the Rule 15c2-12 Amendments and this proposal, the MSRB has
determined to withdraw its petition and has requested that the
Commission withdraw the 2006 Proposed Rule 15c2-12 Amendments. See
Letter from Ernesto A. Lanza, General Counsel, MSRB to Florence E.
Harmon, Acting Secretary, Commission, dated October 22, 2008. In
this letter, the MSRB also noted its intention to file a proposed
rule change with the Commission to discontinue CDINet since its
functions would be replaced by the continuing disclosure component
of EMMA.
---------------------------------------------------------------------------
The proposed rule change would establish, as a component of EMMA,
the continuing disclosure service for the receipt of, and for making
available to the public, continuing disclosure documents and related
information to be submitted by issuers, obligated persons and their
agents pursuant to continuing disclosure undertakings entered into
consistent with Rule 15c2-12.\13\ As proposed, all continuing
[[Page 75779]]
disclosure documents and related information would be submitted to the
MSRB, free of charge, through an Internet-based electronic submitter
interface or electronic computer-to-computer data connection, at the
election of the submitter, and public access to the documents and
information would be provided through the continuing disclosure service
on the Internet (``EMMA portal'') at no charge, as well as through a
fee-based real-time data stream subscription service.\14\
---------------------------------------------------------------------------
\13\ EMMA was originally established, and began operation on
March 31, 2008, as a complementary pilot facility of the MSRB's
existing Official Statement and Advance Refunding Document (OS/ARD)
system of the Municipal Securities Information Library (MSIL)
system. See Securities Exchange Act Release No. 57577 (March 28,
2008), 73 FR 18022 (April 2, 2008) (File No. SR-MSRB-2007-06)
(approving operation of the EMMA pilot to provide free public access
to the MSRB's Municipal Securities Information Library (MSIL) system
collection of official statements and advance refunding documents
and to the MSRB's Real-Time Transaction Reporting System (RTRS)
historical and real-time transaction price data) (``pilot EMMA
portal''). The pilot EMMA portal currently is accessible at https://
emma.msrb.org.
\14\ We note that the MSRB is required to file with the
Commission a proposed rule change under Section 19(b) of the Act
with respect to any fees it intends to charge subscribers in
connection with a real-time data stream subscription service.
---------------------------------------------------------------------------
As proposed, the continuing disclosure service would accept
submissions of (i) continuing disclosure documents as described in Rule
15c2-12, and (ii) other disclosure documents specified in continuing
disclosure undertakings entered into consistent with Rule 15c2-12 but
not specifically described in Rule 15c2-12. In connection with
documents submitted to the continuing disclosure service, the submitter
would provide, at the time of submission, information necessary to
accurately identify: (i) The category of information being provided;
(ii) the period covered by any annual financial information, financial
statements or other financial information or operating data; (iii) the
issues or specific securities to which such document is related or
otherwise material (including CUSIP number, issuer name, state, issue
description/securities name, dated date, maturity date, and/or coupon
rate); (iv) the name of any obligated person other than the issuer; (v)
the name and date of the document; and (vi) contact information for the
submitter. Submitters would be responsible for the accuracy and
completeness of all documents and information submitted to EMMA.
The MSRB proposed that submissions to the continuing disclosure
service be made as portable document format (PDF) files configured to
permit documents to be saved, viewed, printed and retransmitted by
electronic means. If the submitted file is a reproduction of the
original document, the submitted file must maintain the graphical and
textual integrity of the original document. In addition, as of January
1, 2010, the MSRB would require that such PDF files must be word-
searchable (that is, allowing the user to search for specific terms
used within the document through a search or find function available in
most standard software packages), provided that diagrams, images and
other non-textual elements would not be required to be word-searchable
due to current technical hurdles to uniformly producing such elements
in word-searchable form without incurring undue costs.\15\ Although the
MSRB would strongly encourage submitters to immediately begin making
submissions as word-searchable PDF files (preferably as native PDF or
PDF normal files, which generally produce smaller and more easily
downloadable files as compared to scanned PDF files), implementation of
this requirement would be deferred as noted above to provide issuers,
obligated persons and their agents with sufficient time to adapt their
processes and systems to provide for the routine creation or conversion
of continuing disclosure documents as word-searchable PDF files.
---------------------------------------------------------------------------
\15\ See Amendment No. 1, supra note 5.
---------------------------------------------------------------------------
All submissions to the continuing disclosure service pursuant to
this proposal would be made through password-protected accounts on EMMA
by: (i) Issuers, which may submit any documents with respect to their
municipal securities; (ii) obligated persons, which may submit any
documents with respect to any municipal securities for which they are
obligated; and (iii) designated agents, which may be designated by
issuers or obligated persons to make submissions on their behalf.
Issuers and obligated persons would be permitted under the proposal to
designate agents to submit documents and information on their behalf,
and would be able to revoke the designation of any such agents, through
the EMMA on-line account management utility. Such designated agents
would be required to register to obtain password-protected accounts on
EMMA in order to make submissions on behalf of the designating issuers
or obligated persons. Any party identified in a continuing disclosure
undertaking as a dissemination agent or other party responsible for
disseminating continuing disclosure documents on behalf of an issuer or
obligated person would be permitted to act as a designated agent for
such issuer or obligated person, without a designation being made by
the issuer or obligated person as described above, if such party
certifies through the EMMA on-line account management utility that it
is authorized to disseminate continuing disclosure documents on behalf
of the issuer or obligated person under the continuing disclosure
undertaking. The issuer or obligated person, through the EMMA on-line
account management utility, would be able to revoke the authority of
such party to act as a designated agent.
The MSRB proposed that electronic submissions of continuing
disclosure documents through the continuing disclosure service would be
made by issuers, obligated persons and their agents, at no charge,
through secured, password-protected interfaces. Continuing disclosure
submitters would have a choice of making submissions to the proposed
continuing disclosure service either through a Web-based electronic
submission interface or through electronic computer-to-computer data
connections with EMMA that would be designed to receive submissions on
a bulk or continuous basis.
All documents and information submitted through the continuing
disclosure service would be available to the public at no charge
through the EMMA portal on the Internet, with documents made available
for the life of the securities as PDF files for viewing, printing and
downloading. As proposed, the EMMA portal would provide on-line search
functions to enable users to readily identify and access documents that
relate to specific municipal securities based on a broad range of
search parameters. In addition, as noted above, the MSRB proposes that
real-time data stream subscriptions to continuing disclosure documents
submitted to EMMA would be made available for a fee.\16\ The MSRB would
not be responsible for the content of the information or documents
submitted by submitters displayed on the EMMA portal or distributed to
subscribers through the continuing disclosure subscription service.
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\16\ We note that the MSRB is required to file with the
Commission a proposed rule change under Section 19(b) of the Act
with respect to any fees it intends to charge subscribers in
connection with a real-time data stream subscription service.
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According to the MSRB, it has designed EMMA, including the EMMA
portal, as a scalable system with sufficient current capacity and the
ability to add further capacity to meet foreseeable usage levels based
on reasonable estimates of expected usage, and the MSRB would monitor
usage levels in order to assure continued capacity in the future.
The MSRB may restrict or terminate malicious, illegal or abusive
usage for such periods as may be necessary and appropriate to ensure
continuous and efficient access to the EMMA portal and to maintain the
integrity of EMMA and its operational components. Such usage may
include, without limitation, usage
[[Page 75780]]
intended to cause the EMMA portal to become inaccessible by other
users; to cause the EMMA database or operational components to become
corrupted or otherwise unusable; to alter the appearance or
functionality of the EMMA portal; or to hyperlink to or otherwise use
the EMMA portal or the information provided through the EMMA portal in
furtherance of fraudulent or other illegal activities (such as, for
example, creating any inference of MSRB complicity with or approval of
such fraudulent or illegal activities or creating a false impression
that information used to further such fraudulent or illegal activities
has been obtained from the MSRB or EMMA). Measures taken by the MSRB in
response to such unacceptable usage would be designed to minimize any
potentially negative impact on the ability to access the EMMA portal.
The Commission received eighteen comment letters regarding the
proposed rule change.\17\ Fifteen commenters generally supported the
proposed rule change\18\ and many of these commenters also provided
various observations and suggestions. Two commenters, both of which are
NRMSIRs, opposed the proposed rule change and suggested alternative
approaches to achieving the Commission's objectives.\19\ One commenter
neither supported nor opposed the proposal and addressed CUSIP
licensing issues.\20\ The Commission also received the MSRB's response
to the comment letters.\21\ These comment letters, as well as the
MSRB's response to the comment letters, are more fully discussed below.
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\17\ See supra note 4.
\18\ See Busby Letter, DAC Letter, Vanguard Letter, GFOA Letter,
e-certus Letter, SIFMA Letter, NABL Letter, Treasurer of the State
of Connecticut Letter, Texas MAC Letter, OMAC Letter, ICI Letter,
NAHEFFA Letter, EDGAR Online Letter, MSRB Letter, and NFMA Letter.
\19\ See SPSE Letter and DPC DATA Letter.
\20\ See ABA Letter.
\21\ See MSRB Response Letter. A copy of the MSRB Response
Letter is available on the Commission's Internet Web site at https://
www.sec.gov/comments/sr-msrb-2008-05/msrb200805.shtml and in the
Commission's Public Reference Room at its Washington, DC
headquarters.
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III. Discussion and Commission Findings
The Commission has carefully considered the proposed rule change,
the comment letters received, and the MSRB's response to the comment
letters and finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to the MSRB \22\ and, in particular, the requirements of
Section 15B(b)(2)(C) of the Act \23\ and the rules and regulations
thereunder. In particular, the Commission finds that the proposal to
establish the continuing disclosure service will remove impediments to
and help perfect the mechanisms of a free and open market in municipal
securities, assist in preventing fraudulent and manipulative acts and
practices, and, in general, will protect investors and the public
interest by improving access to continuing disclosure documents by
investors and market participants, enabling them to make informed
investment decisions regarding municipal securities.
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\22\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
\23\ 15 U.S.C. 78o-4(b)(2)(C). Section 15B(b)(2)(C) of the Act
requires, among other things, that the MSRB's rules 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; and not be designed to impose any burden on competition
not necessary or appropriate in furtherance of the purposes of the
Act.
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The Commission believes that the MSRB's proposed continuing
disclosure service will serve as an additional mechanism to remove
impediments to and help perfect the mechanisms of a free and open
market in municipal securities. The continuing disclosure service will
help make information more easily available to all participants in the
municipal securities market on an equal basis and without charge
through a centralized, searchable Internet-based repository, thereby
removing potential barriers to obtaining such information. Broad
availability of continuing disclosure documents through the continuing
disclosure service should assist in preventing fraudulent and
manipulative acts and practices by improving the opportunity for
investors to obtain information about issuers and their securities, and
help investors make informed investment decisions.
The continuing disclosure service also should reduce the effort
necessary for issuers and obligated persons to comply with their
continuing disclosure undertakings because submissions will be made to
a single venue \24\ through use of an electronic submission process.
Similarly, a single centralized and searchable venue that provides for
free public access to disclosure information should promote a more fair
and efficient municipal securities market in which transactions are
effected on the basis of information available to all parties to such
transactions, which should assist investors in having a more complete
understanding of the terms of the securities and the potential
investment risks. Access to this information without charge, which was
previously available in most cases only through paid subscription
services or on a per-document fee basis, also should help reduce
informational costs for broker-dealers and municipal securities
dealers, as well as other market participants, analysts, retail and
institutional investors and the public generally. These changes are
expected to further the objectives of Rule 15c2-12 of reducing the
potential for fraud in the municipal securities market.
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\24\ Some states may require issuers and/or obligated persons to
submit disclosure information to state information depositories
(``SIDs'') or other venues pursuant to state law. However, under the
Rule 15c2-12 Amendments, participating underwriters no longer need
to reasonably determine that issuers and/or obligated persons have
undertaken to provide continuing disclosure documents to SIDs. See
Rule 15c2-12 Amendments Adopting Release, supra note 7.
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Indeed, we anticipate that the accessibility of documents through
the repository will greatly benefit dealers in satisfying their
obligation to have a reasonable basis for investment recommendations
and other regulatory responsibilities, in addition to investors and
other market participants who seek information about municipal
securities. This conclusion is supported by various commenters.
As noted above, commenters generally supported the proposed rule
change. In particular, one commenter expressed the opinion that
allowing issuers, obligated parties and dissemination agents to submit
information to one location,\25\ electronically and free of charge in
order to meet the obligations of Rule 15c2-12, is very useful to the
state and local government community \26\ and several commenters
remarked that allowing investors to retrieve information from this
location would be advantageous to the marketplace and investors.\27\
Commenters believed that the single filing location would make the
filing process easier for filers submitting filings and more efficient
for investors accessing documents.\28\ One commenter also remarked that
the availability of continuing disclosure documents in one venue as a
component of EMMA, where there will also be posted the final official
statement (or similar primary
[[Page 75781]]
market disclosure document), and pricing information, will provide
readers the benefit of the proper context for reviewing the continuing
disclosure.\29\ Others expressed support for the MSRB's proposal to
make the continuing disclosure service a free service for both issuers
and other obligated persons \30\ submitting documents as well as for
investors and other market participants \31\ accessing continuing
disclosure information. One commenter expressed a belief that the
proposed rule change would be a means of removing impediments to and
helping to perfect the mechanisms of a free and open market in
municipal securities within the meaning of the Act.\32\
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\25\ See id.
\26\ See GFOA Letter.
\27\ See, e.g., GFOA Letter, SIFMA Letter, Vanguard Letter,
Treasurer of the State of Connecticut Letter, ICI Letter.
\28\ Id.
\29\ See SIFMA Letter.
\30\ See GFOA Letter.
\31\ See, e.g., GFOA Letter, Busby Letter, NFMA Letter, DAC
Letter, Vanguard Letter, and EDGAR Online Letter.
\32\ See SIFMA Letter.
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One commenter recommended that the Commission maintain close
oversight of EMMA, ensure proper testing of the system, and revisit
this matter in two to three years.\33\ A second commenter also
expressed a belief that the Commission should establish rigorous
ongoing inspection and oversight of EMMA.\34\ We note that, because the
MSRB is a self-regulatory organization (``SRO''), the Commission has,
and exercises, oversight authority over the MSRB. The MSRB must file
proposed rule changes with the Commission under Section 19(b) of the
Act, including any changes to the EMMA system and any fees relating to
the EMMA system. In addition, the MSRB is subject to the recordkeeping
requirements of 17(a) of the Act \35\ and is subject to the
Commission's examination authority under Section 17(b) of the Act.\36\
Through the Commission's recordkeeping requirements and examination and
rule filing processes, the Commission oversees the MSRB and will
ascertain whether the MSRB is implementing EMMA appropriately and
meeting EMMA's stated objectives, as well as complying with all of its
legal obligations under the Act.
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\33\ See Treasurer of the State of Connecticut Letter.
\34\ See DAC Letter.
\35\ 15 U.S.C. 78q(a).
\36\ 15 U.S.C. 78q(b).
---------------------------------------------------------------------------
Eleven commenters that supported the proposed rule change also
believed that EMMA submissions should be accompanied by identifying
information.\37\ Several of these commenters suggested various specific
types of identifiers that were sometimes different from, or in addition
to, those set forth in the proposed rule change. In this regard,
specific identifiers that were suggested by commenters included: The
identification of obligated persons other than issuers and successor
parties; \38\ the issuer's investor contact information; \39\ a link to
issuer's Web site; \40\ the CUSIP numbers for all primary and secondary
market debt covered by relevant information; \41\ the use of electronic
``cover sheets;'' \42\ the pre-registration of identifying information;
\43\ a mechanism to readily locate CUSIP numbers by the issuer's six
digit prefix and at the same time list by nine digit CUSIPs in certain
circumstances; \44\ and a CUSIP catalog.\45\ In its response letter,
the MSRB noted that the use of accurate identifiers for continuing
disclosure submissions in EMMA is vitally important to ensure correct
indexing and access to continuing disclosure documents.\46\ The MSRB
indicated that, except as noted below,\47\ documents provided to it are
required to be accompanied by identifying information relating to the
nature of the document, the securities and entities to which it
applies, and the entity making the submission, as prescribed by the
MSRB. In connection with EMMA submissions, the MSRB noted that the
submitter will be required to provide, at the time of submission,
information necessary to correctly identify the following: The category
of information being provided; the period covered by any financial
information; the issues or specific securities to which such document
is related or otherwise material (including CUSIP number, issuer name,
state issue description, securities name, dated date, maturity date
and/or coupon rate); the name of any obligated person other than the
issuer; the name and date of the document; and the contact information
for the submitter.\48\ According to the MSRB, since all continuing
disclosure documents submitted to EMMA will be made through a unique,
password protected accounts by issuers, obligated persons and their
designated agents, once the indexing information is provided, the EMMA
system will match each document with the appropriate identifying
information for the submitter. The MSRB believes that these processes
will adequately address issues relating to the use of identifiers for
the submission process. The MSRB also believes that the use of these
identifiers ensures both that the submission process is not unduly
burdensome and that standardized market identifiers commonly used in
the municipal marketplace serve as the basis on which EMMA users would
be able to conduct document searches. Furthermore, while the MSRB
believes that the identifiers it proposed are appropriate and cover
most of the identifying elements recommended by the commenters, the
MSRB also will consider whether any additional identifiers would be
appropriate. The Commission believes that it is appropriate for the
MSRB to incorporate without change in the continuing disclosure service
the indexing information that the MSRB initially had proposed. The
Commission believes that the MSRB has provided valid reasons for not
incorporating at this time the additional indexing information that
commenters suggested. As the MSRB noted, the proposed identifiers are
standardized market identifiers used in the municipal marketplace,
which should help ensure that the transition to the continuing
disclosure service will not be unduly burdensome for submitters. We
note, however, that the MSRB indicated that it will consider additional
identifiers in the future.\49\
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\37\ See NFMA Letter, DAC Letter, GFOA Letter, Vanguard Letter,
SIFMA Letter, NABL Letter, Treasurer of the State of Connecticut
Letter, Texas MAC Letter, OMAC Letter, ICI Letter, and EDGAR Online
Letter.
\38\ See GFOA Letter, Treasurer of the State of Connecticut
Letter, Vanguard Letter, and ICI Letter.
\39\ See NFMA Letter.
\40\ Id.
\41\ Id.
\42\ See GFOA Letter.
\43\ See Treasurer of the State of Connecticut Letter.
\44\ Id.
\45\ See NFMA Letter.
\46\ See MSRB Response Letter.
\47\ See infra note 48.
\48\ As the Commission noted in its adopting release for
amendments to Rule 15c2-12 [Release No. 34-59062; File No. S7-21-08,
December 5, 2008], the commitment by an issuer to provide
identifying information exists only if it were included in a
continuing disclosure agreement. As a result, issuers submitting
continuing disclosure documents pursuant to the terms of
undertakings that were entered into prior to the effective date of
the final amendments and that did not require identifying
information will be able to submit documents without supplying
identifying information. In its response, the MSRB indicated that
the submitter making a submission pursuant to a continuing
disclosure undertaking entered into prior to the effective date of
the proposed Rule 15c2-12 amendments who seeks to make such
submission without providing identifying information could do so.
\49\ We note that the MSRB is required to file with the
Commission a proposed rule change under Section 19(b) of the Act
with respect to any additional indexing information that it may
propose to prescribe.
---------------------------------------------------------------------------
One commenter, who neither supported nor opposed the proposal,
questioned whether the MSRB would seek appropriate licensing for its
use of the commenter's intellectual property rights with respect to the
CUSIP
[[Page 75782]]
database.\50\ The MSRB stated in its response letter that it is
continuing its discussions with the appropriate parties relating to the
use of CUSIP data and expects that all necessary arrangements will be
in place to operate the continuing disclosure service as anticipated by
the July 1, 2009 implementation date.\51\ If there are any
unanticipated and unresolved issues in connection with the use of the
CUSIP data, the MSRB stated that it will consult with the Commission
and, if necessary, make any filings to modify data usage by EMMA or to
adjust the implementation date. In light of the MSRB's assurances that
this issue is expected to be resolved in advance of the continuing
disclosure service's proposed implementation date of July 1, 2009, the
Commission does not believe that it is necessary to delay its approval
of the proposed rule change. Nonetheless, we will continue to monitor
the progress of EMMA, including the issue relating to licensing rights
to the CUSIP database, prior to EMMA's implementation.
---------------------------------------------------------------------------
\50\ See ABA Letter.
\51\ See MSRB Response Letter.
---------------------------------------------------------------------------
Some commenters expressed their belief that EMMA should have a
simple user interface and intuitive search functionality.\52\ One
commenter noted that ``[a]s demonstrated, we believe that there are
ample ways for the public to locate particular documents, either
through a CUSIP number or an entity's name. It is imperative for these
fields to be applied to all securities and for the MSRB to determine
the most efficient way to do so.'' \53\ The MSRB stated its belief that
its pilot of the primary market service of the EMMA portal is user-
friendly and that the continuing disclosure service of EMMA will also
be user-friendly, in part, because the continuing disclosure service
will provide the same accessibility to information to municipal market
participants and easy-to-use identifiers for submissions as currently
provided by the pilot of the primary market service of the EMMA portal.
For example, if users have a CUSIP number, they will be able to go
directly to the related documents on the EMMA system and, similarly, a
user can go to the market activity page and see all the disclosures
that were posted on a certain date.\54\ The MSRB also noted its
intention to continue to make improvements to the system.\55\ The
Commission believes the MSRB has proposed a reasonably efficient way to
apply identifying fields to the continuing disclosure documents
submitted to the EMMA system and expects that the MSRB will continue to
monitor the EMMA portal to ensure that document submission is easy and
document access is efficient on an ongoing basis and that the MSRB will
propose rule changes to the continuing disclosure service pursuant to
Section 19(b) of the Act as changes are needed.\56\
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\52\ See EDGAR Online Letter, NFMA Letter and GFOA Letter.
\53\ See GFOA Letter.
\54\ See MSRB Response Letter.
\55\ Id.
\56\ We note that the MSRB is required to file with the
Commission a proposed rule change under Section 19(b) of the Act
with respect to the operation of the continuing disclosure service
and with respect to any changes to the continuing disclosure
service.
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Some commenters expressed concerns that access to previous filings
made with NRMSIRs may no longer be available.\57\ Nothing in the MSRB's
proposal will prevent the NRMSIRs from continuing to make historical
information available. We recognize, however, that the NRMSIRs may
decide not to do so. The MSRB stated in its response letter that while
it does not have the authority to mandate the submission of historical
data by issuers, issuers, obligated persons and their agents will be
free to submit to EMMA continuing disclosure documents and related
information previously submitted to the NRMSIRs.\58\ The MSRB also
stated that it is willing to communicate with the NRMSIRs on the
continued availability of historical documents and related information
and believes that such communication will be fruitful.\59\ As a
practical matter, we believe that this is largely a transitional issue
until EMMA has collected documents for a number of years and anticipate
that requests for such documents from the NRMSIRs by those persons who
are not already subscribers to their services may be expected to
decline over time.
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\57\ See, e.g., Vanguard Letter and ICI Letter.
\58\ See MSRB Response Letter.
\59\ As discussed more fully in the Rule 15c2-12 Amendments
Adopting Release, the Commission believes that the current NRMSIRs
could decide it is in their commercial interest to make historical
information available.
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Several commenters also made observations and suggestions regarding
the access and security features of the continuing disclosure
service.\60\ One commenter suggested that the MSRB should distinguish
between the responsibilities of obligated persons and submitters.\61\
Two commenters recommended a special methodology for conduit borrowers
to access EMMA.\62\ Three commenters stated that issuers and obligated
persons should have the ability to verify information submitted to EMMA
by third parties and to correct errors either by accessing the system
directly or by reporting any errors to a ``hotline.'' \63\
---------------------------------------------------------------------------
\60\ See NABL Letter, NAHEFFA Letter, GFOA Letter, and NFMA
Letter.
\61\ See NABL Letter.
\62\ See NAHEFFA Letter and GFOA Letter.
\63\ See NAHEFFA Letter, GFOA Letter, NFMA Letter.
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The MSRB noted in its response letter that its proposal does not
change the obligations of issuers or obligated persons and their
designated agents, which are established pursuant to the terms of
continuing disclosure agreements, and that all persons, including
issuers, obligated persons and designated agents will be able to access
filings on EMMA to verify their availability and the accuracy of their
indexing. The MSRB also noted that all submission methods will provide
appropriate feedback to submitters for error correction and submission
confirmation purposes. The MSRB also provides a Web site that allows
submitters to provide questions and comments associated with
submissions, as well as a help desk with dedicated personnel during
MSRB business hours. Furthermore, the proposal will allow issuers and
obligated persons to maintain control over those persons who may submit
filings on their behalf. The MSRB will permit only those persons
identified as designated agents in continuing disclosure agreements to
submit documents without advance approval through EMMA and will notify
issuers of the identity of those persons who submit documents on their
behalf. Issuers and obligated persons also will be able to revoke self-
certification of dissemination agents through the EMMA on-line account
management utility at any time.
With respect to conduit financings,\64\ two commenters \65\
expressed concern that EMMA does not appropriately accommodate issues
relating to the real parties in interest in such financings. In conduit
financings, the bond issuing authority (e.g., a state or local
government) may issue tax exempt bonds on behalf of certain entities
(e.g., not-for profit organizations). Under these arrangements, the
entity for which the tax exempt bonds were issued may be regarded as
the real obligated party with the responsibility of submitting
continuing disclosure documents and ensuring that such submissions are
[[Page 75783]]
accurate. Accordingly, these commenters expressed concern that EMMA
will not appropriately discriminate whether the bond issuing authority,
or the certain entity on behalf of which the tax-exempt bonds are
issued, is responsible for the continuing disclosure submissions. The
MSRB responded that the proposal establishes, through the account
opening process, a mechanism that would permit, on an optional basis,
issuers of conduit financings to identify obligated persons and the
securities for which such persons are obligated.\66\ Furthermore, the
MSRB plans to establish methods for submitters to contact it with
questions and to report any problems submitters may discover with
filings they electronically send to the EMMA system.\67\ The Commission
believes that the MSRB has established appropriate measures with
respect to security and controls for the submission of documents to the
continuing disclosure service.
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\64\ Conduit financings are financings in which authorities with
bond issuing authority issue tax-exempt bonds on behalf of certain
entities, including not-for profit organizations.
\65\ See NAHEFFA Letter and NFMA Letter.
\66\ See MSRB Response Letter.
\67\ Id.
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Some commenters that supported the proposed rule change suggested
incorporation of an interactive data standard (i.e., XBRL).\68\ The
MSRB responded that it will take all such suggestions under
consideration for future revisions to the continuing disclosure
service. The MSRB noted, however, that documents need not be created in
any particular manner in order to be saved or scanned into a PDF
format. The MSRB indicated that it does not view establishing XBRL as a
data standard for EMMA submissions as appropriate at this time,
although it noted that it continues to be interested in working with
the municipal market in the future on interactive data initiatives. The
Commission believes that, in the future, access to continuing
disclosure documents through the EMMA system could be enhanced by
improved methods for the electronic presentation of information, but
believes that the MSRB's technology choices for EMMA are appropriate at
this time.
---------------------------------------------------------------------------
\68\ See, e.g., GFOA Letter, e-certus Letter, and EDGAR Online
Letter.
---------------------------------------------------------------------------
Seven of the commenters that supported the proposed rule change
indicated that EMMA should have the capability to accept voluntary and
non-periodic disclosures in addition to Rule 15c2-12 disclosures \69\
or recommended the addition of features such as information regarding
late or missing filings.\70\ In its response letter, the MSRB stated
that although the continuing disclosure service will not allow for the
submission of continuing disclosure documents beyond those currently
set forth in Rule 15c2-12 or those documents identified in an
undertaking by the issuer or obligated person, the MSRB expects to
propose in a future filing to accept submissions of a broader
scope.\71\ The Commission believes that limiting the scope of the
documents to be submitted through the continuing disclosure service to
those referenced in continuing disclosure agreements will fulfill the
intended purpose of Rule 15c2-12 and thus is reasonable at this time.
---------------------------------------------------------------------------
\69\ See ICI Letter, NFMA Letter, NABL Letter, GFOA Letter,
Vanguard Letter and SIFMA Letter, Treasurer of the State of
Connecticut Letter.
\70\ See, e.g., ICI Letter.
\71\ See MSRB Response Letter.
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One commenter expressed support for the dissemination of
information in a bulk format.\72\ Some commenters expressed concerns
regarding fees to be charged by the MSRB for subscriptions to the real-
time data feed and whether the transfer of documents through the data
feed would be delayed.\73\ In addition, three commenters suggested that
the MSRB should provide SIDs with a data feed of filing information and
one of these commenters stated that this data feed should be provided
free of charge.\74\ Further, one commenter expressed concern that
broker-dealers would pass on fees to their customers to support the
EMMA system.\75\
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\72\ See, e.g., EDGAR Online Letter.
\73\ See DPC DATA Letter, NFMA Letter and GFOA Letter.
\74\ See Texas Mac Letter, OMAC Letter, and GFOA Letter.
\75\ See SPSE Letter.
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In its response letter, the MSRB stated that in addition to
providing access to continuing disclosure documents through the EMMA
portal without charge to all persons on an equal basis on its Internet
website, the MSRB also will offer real-time subscriptions to EMMA's
continuing disclosure documents and information as they are submitted
and processed.\76\ According to the MSRB, its goal is to ensure an
efficient process for making available real-time data subscription
products at a reasonable cost.\77\ The MSRB also stated that it will
work with the SIDs to ensure that they will have reasonable access to
the documents submitted for issues in their respective states and will
not incur costs related to the entire EMMA subscription product.\78\
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\76\ See MSRB Response Letter.
\77\ Id.
\78\ Id.
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The Commission notes that fees relating to the EMMA system, such as
subscription fees for a data feed for access to documents submitted to
the continuing disclosure service, also must be filed with the
Commission as a proposed rule change under Section 19(b) of the Act.
Accordingly, any fees relating to the continuing disclosure service
would be published for public comment by the Commission and interested
persons would have the opportunity to offer their views on them.
With respect to the comment that broker-dealers would pass on fees
to their customers to support the EMMA system, the Commission again
notes that the MSRB, as an SRO, would have to file any fees relating to
the support or use of the continuing disclosure service with the
Commission under Section 19(b) of the Exchange Act, to the extent such
fees are not already covered by the MSRB's current fee schedule. The
Commission further notes that broker-dealers currently are charged fees
for access to disclosure documents obtained from the NRMSIRs that they
currently may or may not pass on to their customers. According to the
MSRB, it presently anticipates no increase in fees on brokers, dealers,
and municipal securities dealers that effect transactions in municipal
securities to establish and operate the EMMA system.\79\ The MSRB has
stated that it has funds on hand that, together with amounts it will
collect in the future under its current fee schedule, it believes will
be sufficient to establish and operate the continuing disclosure
service of the EMMA system.\80\
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\79\ See MSRB Response Letter.
\80\ Id.
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Two commenters opposed the proposal and suggested alternative
approaches to greater access to continuing disclosure documents by
investors and others.\81\ They believed that the MSRB's proposal would
not improve the overall continuing disclosure regime and that it does
not address the core problems with the current system, such as the
significant level of delinquent filings. One of these commenters stated
that the proposal imposes restrictions on filing formats (i.e., single-
electronic) and technology and misstates important attributes of the
current municipal disclosure regime. This commenter urged enforcement
of existing provisions of Rule 15c2-12 and otherwise working within the
existing disclosure system. The other commenter believed that a
``central post office'' approach is preferable.\82\
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\81\ See DPC DATA Letter and SPSE Letter.
\82\ Under a central post office approach, issuers and obligors
would file documents through a single electronic venue in a
standardized format. The central post office would then forward the
centrally-filed documents in real time to the NRMSIRs. See also SPSE
Letter, at 3-5.
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[[Page 75784]]
In its response letter, the MSRB expressed its belief that the
establishment of single submission and dissemination venue through
EMMA's continuing disclosure service would significantly improve upon
the current municipal disclosure system.\83\ The MSRB believed that a
simple, secure and centralized system will simplify issuers'
submissions. According to the MSRB, for example, the fact that
continuing disclosure documents will be publicly available for free
through a searchable Web site in which all filings for a particular
issue are displayed as a single collection will serve, for the first
time, to make it easy for issuers, investors and others to determine
whether or not filings are missing, whether due to an issuer failing to
make a filing or otherwise.
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\83\ See MSRB Response Letter.
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While the Commission acknowledges that the MSRB's proposal does not
address all of the information challenges of the municipal market, the
Commission continues to believe that the MSRB's proposal is a
significant step forward in facilitating the submission of, and access
to, secondary market municipal disclosures. As noted previously, a
large majority of the commenters supported the MSRB's proposal and
believed that it will improve the overall continuing disclosure regime.
The Commission also believes that this will be the case. We anticipate
that public access to all continuing disclosure documents on the
Internet, as provided by the proposal, will promote market efficiency
and help deter fraud and manipulation in the municipal securities
market by improving the availability of information to all investors.
With respect to one commenter's concern that the proposal would impose
restrictions on filing formats, impose technology requirements that do
not exist under the current system and provide no appreciable benefit,
the Commission notes that the availability of continuing disclosure
documents at a single repository that can be readily accessed and
easily searched through electronic means will provide significant
benefits that are not available under the current NRMSIR system. The
Commission notes that the submission of continuing disclosure documents
in an electronic format will allow the information to be posted and
disseminated promptly. The Commission also notes that the MSRB's
proposed filing format and choice of technology will eliminate the need
for manual handling of paper documents, which is less efficient and
more costly, and will increase the potential for a more complete record
of continuing disclosure documents that otherwise might be misfiled or
lost under a manual system. Furthermore, the Commission believes that
submissions in an electronic format will not be burdensome on issuers
or obligated persons since many documents are now routinely created in
an electronic format and can be readily transmitted by electronic
means. With respect to the comment that the existing disclosure system
should be retained and the existing provisions of the Rule 15c2-12
enforced, the Commission believes that enforcement of the provisions of
Rule 15c2-12 is an important mechanism for the protection of municipal
securities investors and the efficient operation of the marketplace.
However, the Commission also believes that the quality, timing, and
availability of disclosure in the municipal securities markets will be
substantially improved by the MSRB's proposal.
With respect to the comment favoring a ``central post office,'' the
Commission believes that this approach is less likely to make access to
continuing disclosure documents as efficient as the MSRB's continuing
disclosure service and therefore would not achieve the goal. For
example, with a central post office there would continue to be no
single location to which investors, particularly individuals, could
turn for free access to information regarding municipal securities.
Instead, individuals or entities that wish to obtain such information
would find it necessary first to access the central post office to find
out what documents might be available from NRMSIRs and SIDs and then to
contact one or more NRMSIRs or SIDs and pay their fees to obtain the
document or documents they seek. This would be a less efficient process
than the MSRB's proposal, in which interested persons could directly
access, view and print for free continuing disclosure documents from
one place--the MSRB's Internet site.
Moreover, a ``central post office'' would not, to the same extent
as the MSRB's EMMA system, simplify compliance with regulatory
requirements by, and reduce compliance costs of, broker-dealers,
municipal securities dealers, and others. This is because they would
have to first access the ``central post office'' to determine what
documents are available and then contact one or more NRMSIRs or SIDs to
obtain these documents for a fee or subscribe to commercial services to
do so on their behalf. We believe that greater benefits will be
achieved by providing public access to all continuing disclosure
documents on the Internet, as provided by the proposal. We anticipate
that access to all continuing disclosure documents without charge
through the MSRB's Internet site will better promote market efficiency
and help deter fraud and manipulation in the municipal securities
market by improving the availability of information to all investors.
Two commenters, both of which are NRMSIRs, also raised concerns
about the potential adverse effects on competition and raised issues
about the proposal's consistency with Congressional intent regarding
the regulation of municipal securities.\84\ Both of these commenters
believed that the proposal is contrary to Section 15B(d) of the
Act,\85\ commonly referred to as the Tower Amendment. One of these
commenters also expressed its belief that the proposal would reduce
current value-added products and services provided by existing NRMSIRs
and other vendors; narrow competing information services regarding
municipal securities; and result in a loss of innovation in offering
competing information services regarding municipal securities.\86\ This
commenter also expressed its belief that the proposal is anti-
competitive and would unfairly displace private vendors that have made
significant investment under the current system with a ``quasi-
governmental organization'' that is subsidized and could provide value-
added services for free.\87\ The other commenter expressed a belief
that the proposal places the MSRB in direct competition with commercial
vendors.\88\
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\84\ See DPC DATA Letter and SPSE Letter.
\85\ 15 U.S.C. 78o-4(d).
\86\ See SPSE Letter.
\87\ Id.
\88\ See DPC DATA Letter.
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With respect to their comments regarding competition, the MSRB
responded that it did not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.\89\ The MSRB expressed its
belief that existing vendors would continue to have rapid access to all
of the same documents they previously received, now accompanied by
consistent indexing information, and would fully be able to provide
value added products based on such documents. Additionally, the MSRB
responded that it believed that the availability of continuing
disclosure
[[Page 75785]]
documents through the EMMA portal and the continuing disclosure
subscription service would promote competition among private data
vendors and other enterprises engaged in, or interested in becoming
engaged in, the market for information services by eliminating existing
barriers to new entrants into the market for municipal securities
information. The MSRB added that none of the functionalities of the
continuing disclosure service constitute value-added services that
compete inappropriately with the private sector. Rather, the MSRB noted
that these functionalities are critical for the continuing disclosure
services operation as a free, centralized source of information for
retail investors that provides investors with the necessary tools to
find the information for which they are searching and to understand
such information once it is found. Furthermore, the MSRB expressed its
belief that its operation of the continuing disclosure service would
serve as a basis on which private enterprises could themselves
concentrate more of their resources on developing and marketing value-
added services. In the MSRB's opinion, the shift in the flow of
continuing disclosure documents from the current NRMSIRs to EMMA (from
which such entities and others could still obtain documents on a real-
time basis accompanied by indexing information) would represent only a
temporary dislocation in the processes by which current vendors that
produce value-added services obtain the raw documents on which these
services are based.
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\89\ See MSRB Response Letter.
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Moreover, the MSRB expressed its belief that the proposal will
prove to be of long-term benefit to such vendors. The MSRB noted that
much of the impact of the proposed rule change on commercial
enterprises will result from increased competition in the marketplace
resulting from the entry of additional commercial enterprises to
compete with existing market vendors for value-added services, rather
than from the operation of the continuing disclosure service.
Furthermore, the MSRB stated its belief that the benefits realized by
the investing public from the broader and easier availability of
disclosure information about municipal securities justifies any
potential negative impact on existing enterprises resulting from the
operation of EMMA. The MSRB emphasized that its activities are subject
to the supervision of the Commission and that any changes to EMMA and
related systems must be filed with the Commission. The MSRB further
commented that it has worked closely with all of the marketplace's key
constituencies, including issuers, bond attorneys, financial advisers,
and others in the development of EMMA and represented that it will
continue to do so as EMMA becomes fully operational.
The Commission believes that the proposal will modernize the method
of availability of continuing disclosure documents by issuers and, by
making use of the Internet, will make these documents readily
accessible to investors and others at no charge. The continuing
disclosure service will not alter the availability of such documents to
commercial vendors or their ability to disseminate such information,
together with whatever value-added products they may wish to provide.
The Commission notes that the MSRB has represented that documents
provided through EMMA will be available to all persons on an equal
basis and that the MSRB will continue to make the full collection of
documents available by subscription on an equal basis, without imposing
restrictions on subscribers from re-disseminating such documents or
from otherwise offering value-added service and products, based on such
documents on terms determined by each subscriber.\90\ Further, the
Commission notes that the MSRB has represented that EMMA will be
designed to provide real-time access to documents and information as
they are submitted and processed \91\ and that all continuing
disclosures received by the MSRB will be available through a data-
stream subscription simultaneously with posting on the EMMA portal.\92\
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\90\ See MSRB Response Letter.
\91\ See MSRB Response Letter.
\92\ See Release No. 34-58256, supra note 3.
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The Commission believes that the proposed rule change will
encourage, rather than restrict, competition in the municipal
securities information marketplace. The Commission further believes
that any burdens on competition that may result from the proposed rule
change are more than justif