Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of Proposed Rule Change Relating to the Establishment of a Primary Market Disclosure Service and Trade Price Transparency Service of the Electronic Municipal Market Access System (EMMA®) and Amendments to MSRB Rules G-32 and G-36, 25790-25792 [E9-12442]
Download as PDF
25790
Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59966; File No. SR–MSRB–
2009–02]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Order Granting Approval of
Proposed Rule Change Relating to the
Establishment of a Primary Market
Disclosure Service and Trade Price
Transparency Service of the Electronic
Municipal Market Access System
(EMMA®) and Amendments to MSRB
Rules G–32 and G–36
May 21, 2009.
On March 23, 2009, the Municipal
Securities Rulemaking Board (‘‘MSRB’’),
filed with the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’),
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 implement an
electronic system for free public access
to primary market disclosure documents
and transaction price information for
the municipal securities market through
the MSRB’s Electronic Municipal
Market Access system (‘‘EMMA’’). The
proposed rule change was published for
comment in the Federal Register on
April 2, 2009.3 The Commission
received three comment letters on the
proposed rule change.4 On May 12,
2009 and May 18, 2009, the MSRB filed
responses to the comment letters.5 This
order approves the proposed rule
change.
The proposed rule change would: (i)
Establish EMMA’s permanent primary
market disclosure service for electronic
submission and public availability on
EMMA’s Internet portal of official
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 59636
(March 27, 2009), 74 FR 15190 (‘‘Commission’s
Notice’’).
4 See letters from Douglas Adamson, Executive
Vice President, Technical Services Division,
American Bankers Association (‘‘ABA’’), dated
April 24, 2009; Robert Schifellite, President,
Broadridge Financial Solutions, Inc. (‘‘BFS’’), dated
May 5, 2009; and Leslie M. Norwood, Managing
Director and Associate General Counsel, Securities
Industry and Financial Markets Association
(‘‘SIFMA’’), dated May 10, 2009.
Furthermore, on May 15, 2009, representatives of
BFS met with Martha M. Haines, Chief and Mary
N. Simpkins, Senior Special Counsel, Office of
Municipal Securities, Division of Trading and
Markets to discuss the proposed rule change and to
provide additional materials related to their
comments on the proposal. The materials may be
found at https://www.sec.gov/comments/sr-msrb2009–02/msrb200902–2.pdf.
5 See letters from Ernesto A. Lanza, General
Counsel, MSRB, to Elizabeth M. Murphy, Secretary,
SEC, dated May 12, 2009 (‘‘Response Letter I’’) and
May 18, 2009 (‘‘Response Letter II’’).
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2 17
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statements, advance refunding
documents and related primary market
documents and information; (ii)
establish EMMA’s permanent
transparency service making municipal
securities transaction price data
publicly available on the EMMA portal;
(iii) establish a real-time subscription to
the primary market document
collection; (iv) terminate the existing
pilot EMMA facility of the Municipal
Securities Information Library (MSIL)
system and suspend submissions of
official statements, advance refunding
documents and Forms G–36(OS) and G–
36(ARD) to the MSIL system and (v)
amend and consolidate current Rules G–
32 and G–36 into new Rule G–32 on
disclosures in connection with primary
offerings, replace current Forms G–
36(OS) and G–36(ARD) with new Form
G–32, provide transitional submission
requirements, and amend certain related
recordkeeping requirements, to establish
an ‘‘access equals delivery’’ standard for
electronic official statement
dissemination in the municipal
securities market.
The MSRB requested approval of this
proposed rule change, along with
MSRB–2009–03 and MSRB–2009–04, by
no later than May 22, 2009, so that the
MSRB may commence operation of the
EMMA services described therein,
including but not limited to the
permanent primary market disclosure
service and pilot continuing disclosure
service, on June 1, 2009.6 A full
description of the proposal is contained
in the Commission’s Notice.7
As previously noted, the Commission
received three comment letters relating
to the proposed rule change.8 One
commenter, the ABA, expressed
concerns regarding certain legal issues
relating to the protection of its
intellectual property and contractual
rights in the CUSIP database (the
‘‘Database’’) that it states have not yet
been resolved. The ABA noted that it
was the owner of the Database, which is
administered by the CUSIP Service
Bureau (‘‘CSB’’), as its exclusive
licensee, and believed it was critical
that these legal issues be resolved before
the MSRB be allowed to move forward
with the proposed expansion and full
implementation of EMMA. It further
requested that the operation of the
EMMA Web site incorporate a variety of
protections with respect to its
intellectual property rights, including
compliance with CSB’s current
licensing practices, permissible use
6 See
Response Letter II, supra note 5.
Commission Notice, supra note 3.
8 See supra note 4.
7 See
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Sfmt 4703
guidelines, appropriate copyright
notices and adequate security.9
In response to the ABA’s concerns,
the MSRB and the CSB, as the ABA’s
exclusive licensee, have entered into a
memorandum of understanding dated
May 15, 2009 (‘‘MOU’’) in which CSB
expressly permits use of the CUSIP
database for purposes, among other
things, of displaying information on the
MSRB’s EMMA public Web portal and
for inclusion in data disseminated by
the MSRB to subscribers of the EMMA
data feed.10 The MSRB has agreed in the
MOU to provide certain safeguards with
respect to the ABA’s intellectual
property and contractual rights of the
ABA in the Database. The Commission
believes that the MSRB has taken
sufficient action to ensure that all
necessary arrangements will be in place
in order to operate the permanent
primary market disclosure service and
pilot continuing disclosure service, as
anticipated by the implementation date.
Another commenter, BFS, believed
that the adoption of an ‘‘access equals
delivery’’ standard for official
statements would unintentionally result
in less viewing of information by
individual investors and suggested
alternatives to obtaining industry
efficiencies without reducing the
number of investors that view
information contained in official
statements.11 BFS cited to internal
statistics generated in connection with
the Commission’s adoption of rules on
Internet availability of proxy materials
in support of its view.12 BFS also cited
to the Commission’s recently adopted
rules on delivery of summary mutual
fund prospectuses and posting of the
statutory prospectuses on the Internet as
an alternative method of providing
disclosure to investors while realizing
cost savings.13
9 See
letter from the ABA, supra note 4.
Response Letter II, supra note 5. The MSRB
stated that this agreement would expand and
reposition existing language on the EMMA Web site
to ensure that users of the EMMA Web site have a
fuller understanding of the sources of information
displayed on the EMMA Web site and of the
proprietary rights of third parties (including but not
limited to the proprietary rights of the ABA in the
Database) in certain displayed data elements. Such
language would advise users of the limitations on
their use or re-use of any proprietary information
accessed on the EMMA Web site, and users would
be required to acknowledge such limitations before
being provided access to any portion of the
Database. Additional systemic and reporting
mechanisms would be implemented to further
protect against inappropriate use of the Database.
See Response Letter I, supra note 5.
11 See letter from the BFS, supra note 4.
12 See Securities Exchange Act Release No. 55146
(January 22, 2007), 72 FR 4148 (January 29, 2007).
13 See Securities Act Release No. 8998 (January
13, 2009), 74 FR 4546 (January 26, 2009).
10 See
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The MSRB disagreed with BFS’s
comparison of on-line access to proxy
materials with on-line access to official
statements and, in Response Letter I,
pointed out the differences between the
two materials.14 Specifically, the MSRB
argued that: proxy statements are posted
in a highly decentralized manner,
whereas official statements are available
on the centralized EMMA Web site
specifically crafted for their
presentation; proxy statements often are
posted without any additional
meaningful contextual information,
whereas official statements are posted
on EMMA along with transaction prices,
rate/yield information and other
relevant disclosures for the security
being purchased and for all other
securities in the marketplace, together
with educational information to assist
the individual investor in
understanding the information in the
official statement; proxy statements are
unsolicited communications to a large
group of investors triggered by company
action (i.e., the investor is passive),
whereas the MSRB’s official statement
dissemination requirement is triggered
by an investor taking action to purchase
a municipal security; proxy statements
typically relate to matters of a
generalized importance relating to a
company and normally do not relate
directly to an investment, whereas
official statements have direct relevance
to the investor’s investment; proxy
statements are intended to provide
information prior to an investor voting
his or her proxy, whereas official
statements (much like prospectuses)
often serve to disclose the detailed
terms of a security after the investment
decision has already been made; and
proxy statements generally have little
value once the vote occurs, whereas
official statements retain significant
value for the remaining life of the
security and would remain available to
all investors throughout that period in
EMMA’s permanent library.
Furthermore, the MSRB believed that
BFS seemed to place too much
emphasis on cost savings as a reason for
approving the proposed rule change.
While acknowledging the sizeable cost
saving associated with adoption of the
proposal, the MSRB stated that it
submitted the proposal primarily
because of the significant improvements
in the municipal securities disclosure
system that would result from it.
Specifically, the MSRB believed that the
proposal would place individual
investors on an equal footing with
investment professionals with respect to
access to key information and allow
such information to flow into the
marketplace more quickly.
In addition, in response to BFS’s
suggestion of the summary mutual fund
prospectus as a possible alternative, the
MSRB stated that it will monitor the
level of adoption of the summary
prospectus in the mutual fund market,
as well as the impact its use may have
on the quality and timeliness of
disclosure for mutual funds. Noting that
it has no authority over the nature,
content or timing of issuer disclosures
in the municipal securities market and
therefore could not adopt a requirement
for the creation and use of summary
official statements by municipal issuers,
the MSRB believed that the experience
in the mutual fund market with
summary prospectuses could be
instructive in crafting future disclosure
initiatives in the municipal securities
market. The Commission believes that
the MSRB has provided a rational
response to counter BFS’s belief that an
‘‘access equals delivery’’ standard for
official statements would reduce
viewing by individual investors of the
information, and agrees with the MSRB
that the proposal would make
information easily available to all
market participants in the municipal
securities market.
Finally, the third commenter, SIFMA,
was very supportive of the EMMA
system, but expressed concern with
certain operational and timing issues.15
Specifically, SIFMA requested that the
proposed rule change conform to the
rules applicable to the registered
securities market by not requiring
broker dealers to accommodate a
customer’s standing request for copies
of official statements for all of his or her
transactions with the dealer. SIFMA
argued that such an accommodation
would require dealers to undertake an
enormous amount of expense for such a
limited number of retail investors and
that the costs of such changes would
interfere with the ability of issuers and
other market participants to achieve
anticipated cost savings.
In response, the MSRB stated it was
important to allow investors to establish
standing instructions with their dealers
to receive paper copies of official
statements for all of their new issue
purchases and not to obligate them to
make transaction by transaction requests
for paper copies.16 Although the
potential for costs savings was an
important factor in the MSRB’s
proposal, the MSRB again indicated that
such a factor does not trump the needs
of individual investors to obtain the
15 See
14 See
Response Letter I, supra note 5.
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17:24 May 28, 2009
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16 See
PO 00000
letter from SIFMA, supra note 4.
Response Letter I, supra note 5.
Frm 00095
Fmt 4703
Sfmt 4703
25791
disclosures they are due. The MSRB
also stated that revised Rule G–32
would not obligate dealers to rely on
access to electronic official statements
on EMMA, and that those dealers who
are not yet prepared to do so upon
launch of the new rule provisions could
continue to meet their official statement
dissemination obligation through actual
delivery of the official statement to
customers as under current Rule G–32.
Therefore, the MSRB did not believe
any change was merited.
SIFMA also urged the MSRB to permit
an underwriter to designate to the
MSRB that information it has submitted
to the new issue information
dissemination system (‘‘NIIDS’’) under
revised Rule G–34 also be used for
purposes of completing new Form G–32.
SIFMA requested that the MSRB make
a firm commitment to take the outbound
information feed from NIIDS to pre-fill
the G–32 forms beginning no later than
90 days after SEC approval of the rule
change proposal.
In response, the MSRB stated that, as
noted in its proposed rule change, it
will continue working toward
permitting dealers to designate to the
MSRB that information they have
submitted to NIIDS under Rule G–34
should also be used for purposes of
completing new Form G–32. The MSRB
will publish a notice advising dealers of
the availability of such functionality
once it becomes available, but that it
was not prepared at this time to commit
to a specific timeframe for making this
functionality available and that
approval of the proposed rule change
should not be contingent on such a
commitment.
Finally, SIFMA requested that the
MSRB provide dealers at least 30
calendar days’ notice prior to
implementing the proposed rule change,
citing various factors regarding holiday
and vacation schedules and lack of
training and usage materials. In
response, the MSRB stated that it will
announce training sessions for use of
the EMMA submission system and
publish its user manual in the near
future, and will have staff available to
assist users in transitioning to the new
submission process. The MSRB also
indicated that, while it could not
commit to providing the length of notice
requested, it would provide notification
of the operational date as soon as it
becomes available. The Commission
believes that the MSRB has reasonably
addressed the operational and timing
concerns raised by SIFMA, and that the
changes suggested by SIFMA are not
warranted at this time.
The Commission has carefully
considered the proposed rule change,
E:\FR\FM\29MYN1.SGM
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25792
Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Notices
the comment letters received, and the
MSRB’s responses 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 and, in particular, the
requirements of Section 15B(b)(2)(C) of
the Act 17 and the rules and regulations
thereunder. 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.18
In particular, the Commission finds
that the proposed rule change is
consistent with the Act because it
would serve as an additional
mechanism by which the MSRB works
toward removing impediments to and
helping to perfect the mechanisms of a
free and open market in municipal
securities by providing a centralized
venue for free public access to primary
market disclosure documents and
transaction price information for the
municipal securities market through
EMMA. The proposed rule change
would provide greater access to primary
market disclosure documents and
transaction price information about
municipal securities information to all
participants in the municipal securities
market on an equal basis, thereby
removing potential barriers to obtaining
such information, and will allow the
municipal securities industry to
produce more accurate trade reporting
and transparency. Broad access to
primary market disclosure documents
and price transparency information
through the EMMA portal should also
assist in preventing fraudulent and
manipulative acts and practices by
improving the opportunity for public
investors to access material information
about issuers, their securities and the
prices at which such securities trade.
Furthermore, free public access to
disclosure and transaction price
information should promote a more fair
and efficient municipal securities
17 15
U.S.C. 78o-4(b)(2)(C).
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).
18 Id.
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17:24 May 28, 2009
Jkt 217001
market in which transactions are
effected on the basis of material
information available to all parties to
such transactions, and thereby allow for
fairer pricing of transactions. In
addition, the electronic dissemination of
primary market disclosure documents
should enable issuers to reduce their
issuance costs by eliminating the need
to print and to distribute in paper
official statements in connection with
their primary offerings, thereby
resulting in lower costs to issuers and
savings to their citizens, lower expenses
for underwriters, and potentially lower
prices for investors. All of these factors
serve to promote the statutory mandate
of the MSRB to protect investors and the
public interest.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–MSRB–2009–
02), be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–12442 Filed 5–28–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–59962; File No. SR–FINRA–
2009–020]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving
Proposed Rule Change Relating to the
FINRA Regulation Board Composition
and Conforming Changes to the FINRA
Regulation By-Laws
May 21, 2009.
I. Introduction
On March 27, 2009, Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) (f/k/a National Association
of Securities Dealers, Inc. (‘‘NASD’’))
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 amend the By-Laws of FINRA
Regulation, Inc. (‘‘FINRA Regulation’’)
to modify the composition of the board
of directors of FINRA Regulation
(‘‘FINRA Regulation Board’’), to adopt
changes to conform the FINRA
Regulation By-Laws to the FINRA By19 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
20 17
PO 00000
Frm 00096
Fmt 4703
Sfmt 4703
Laws, and to make various nonsubstantive or conforming changes. The
proposed rule change was published for
comment in the Federal Register on
April 8, 2009.3 The Commission
received no comments on the proposal.
This order approves the proposed rule
change.
II. Description of the Proposal
On July 30, 2007, NASD and New
York Stock Exchange Regulation, Inc.
(‘‘NYSE Regulation’’), the regulatory
subsidiary of the New York Stock
Exchange, consolidated their member
firm regulation operations into a
combined organization, FINRA. As part
of the consolidation, the Commission
approved amendments to the NASD ByLaws to implement governance and
related changes.4 The approved changes
included a FINRA Board governance
structure that balanced public and
industry representation. FINRA
Regulation (formerly known as NASD
Regulation, Inc. (‘‘NASD Regulation’’))
is a subsidiary of FINRA that operates
according to the Plan of Allocation and
Delegation of Functions by NASD to
Subsidiaries, as amended, which NASD
adopted in 1996 when it formed NASD
Regulation. FINRA Regulation’s ByLaws were not amended at the time of
the consolidation, other than in a few
sections where those By-Laws conflicted
with the new FINRA By-Laws.
The proposed rule change would
modify the FINRA Regulation By-Laws
to parallel more closely the composition
and governance structure of the FINRA
board of directors (‘‘FINRA Board’’). In
addition, the proposed rule change
would modify the FINRA Regulation
By-Laws to reflect current business and
legal practices concerning the
administration and capital stock of
FINRA Regulation. Furthermore, the
proposed rule change would make nonsubstantive or conforming changes,
including updating the FINRA
Regulation By-Laws to reflect the
corporate name change. A more detailed
description of the proposed rule change
is provided in the Notice.5 The
Commission discusses below the most
significant aspects of the proposed
changes to the FINRA Regulation ByLaws.
3 See Securities Exchange Act Release No. 59696
(April 2, 2009), 74 FR 16020 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 56145
(July 26, 2007), 72 FR 42169 (August 1, 2007), as
amended by Securities Exchange Act Release No.
56145A (May 30, 2008), 73 FR 32377 (June 6, 2008)
(File No. SR–NASD–2007–023) (‘‘Consolidation
Approval Order’’).
5 See supra note 3.
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Agencies
[Federal Register Volume 74, Number 102 (Friday, May 29, 2009)]
[Notices]
[Pages 25790-25792]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-12442]
[[Page 25790]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59966; File No. SR-MSRB-2009-02]
Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Order Granting Approval of Proposed Rule Change Relating to the
Establishment of a Primary Market Disclosure Service and Trade Price
Transparency Service of the Electronic Municipal Market Access System
(EMMA[supreg]) and Amendments to MSRB Rules G-32 and G-36
May 21, 2009.
On March 23, 2009, the Municipal Securities Rulemaking Board
(``MSRB''), filed with the Securities and Exchange Commission
(``Commission'' or ``SEC''), 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 implement an electronic system
for free public access to primary market disclosure documents and
transaction price information for the municipal securities market
through the MSRB's Electronic Municipal Market Access system
(``EMMA''). The proposed rule change was published for comment in the
Federal Register on April 2, 2009.\3\ The Commission received three
comment letters on the proposed rule change.\4\ On May 12, 2009 and May
18, 2009, the MSRB filed responses to the comment letters.\5\ This
order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 59636 (March 27,
2009), 74 FR 15190 (``Commission's Notice'').
\4\ See letters from Douglas Adamson, Executive Vice President,
Technical Services Division, American Bankers Association (``ABA''),
dated April 24, 2009; Robert Schifellite, President, Broadridge
Financial Solutions, Inc. (``BFS''), dated May 5, 2009; and Leslie
M. Norwood, Managing Director and Associate General Counsel,
Securities Industry and Financial Markets Association (``SIFMA''),
dated May 10, 2009.
Furthermore, on May 15, 2009, representatives of BFS met with
Martha M. Haines, Chief and Mary N. Simpkins, Senior Special
Counsel, Office of Municipal Securities, Division of Trading and
Markets to discuss the proposed rule change and to provide
additional materials related to their comments on the proposal. The
materials may be found at https://www.sec.gov/comments/sr-msrb-2009-02/msrb200902-2.pdf.
\5\ See letters from Ernesto A. Lanza, General Counsel, MSRB, to
Elizabeth M. Murphy, Secretary, SEC, dated May 12, 2009 (``Response
Letter I'') and May 18, 2009 (``Response Letter II'').
---------------------------------------------------------------------------
The proposed rule change would: (i) Establish EMMA's permanent
primary market disclosure service for electronic submission and public
availability on EMMA's Internet portal of official statements, advance
refunding documents and related primary market documents and
information; (ii) establish EMMA's permanent transparency service
making municipal securities transaction price data publicly available
on the EMMA portal; (iii) establish a real-time subscription to the
primary market document collection; (iv) terminate the existing pilot
EMMA facility of the Municipal Securities Information Library (MSIL)
system and suspend submissions of official statements, advance
refunding documents and Forms G-36(OS) and G-36(ARD) to the MSIL system
and (v) amend and consolidate current Rules G-32 and G-36 into new Rule
G-32 on disclosures in connection with primary offerings, replace
current Forms G-36(OS) and G-36(ARD) with new Form G-32, provide
transitional submission requirements, and amend certain related
recordkeeping requirements, to establish an ``access equals delivery''
standard for electronic official statement dissemination in the
municipal securities market.
The MSRB requested approval of this proposed rule change, along
with MSRB-2009-03 and MSRB-2009-04, by no later than May 22, 2009, so
that the MSRB may commence operation of the EMMA services described
therein, including but not limited to the permanent primary market
disclosure service and pilot continuing disclosure service, on June 1,
2009.\6\ A full description of the proposal is contained in the
Commission's Notice.\7\
---------------------------------------------------------------------------
\6\ See Response Letter II, supra note 5.
\7\ See Commission Notice, supra note 3.
---------------------------------------------------------------------------
As previously noted, the Commission received three comment letters
relating to the proposed rule change.\8\ One commenter, the ABA,
expressed concerns regarding certain legal issues relating to the
protection of its intellectual property and contractual rights in the
CUSIP database (the ``Database'') that it states have not yet been
resolved. The ABA noted that it was the owner of the Database, which is
administered by the CUSIP Service Bureau (``CSB''), as its exclusive
licensee, and believed it was critical that these legal issues be
resolved before the MSRB be allowed to move forward with the proposed
expansion and full implementation of EMMA. It further requested that
the operation of the EMMA Web site incorporate a variety of protections
with respect to its intellectual property rights, including compliance
with CSB's current licensing practices, permissible use guidelines,
appropriate copyright notices and adequate security.\9\
---------------------------------------------------------------------------
\8\ See supra note 4.
\9\ See letter from the ABA, supra note 4.
---------------------------------------------------------------------------
In response to the ABA's concerns, the MSRB and the CSB, as the
ABA's exclusive licensee, have entered into a memorandum of
understanding dated May 15, 2009 (``MOU'') in which CSB expressly
permits use of the CUSIP database for purposes, among other things, of
displaying information on the MSRB's EMMA public Web portal and for
inclusion in data disseminated by the MSRB to subscribers of the EMMA
data feed.\10\ The MSRB has agreed in the MOU to provide certain
safeguards with respect to the ABA's intellectual property and
contractual rights of the ABA in the Database. The Commission believes
that the MSRB has taken sufficient action to ensure that all necessary
arrangements will be in place in order to operate the permanent primary
market disclosure service and pilot continuing disclosure service, as
anticipated by the implementation date.
---------------------------------------------------------------------------
\10\ See Response Letter II, supra note 5. The MSRB stated that
this agreement would expand and reposition existing language on the
EMMA Web site to ensure that users of the EMMA Web site have a
fuller understanding of the sources of information displayed on the
EMMA Web site and of the proprietary rights of third parties
(including but not limited to the proprietary rights of the ABA in
the Database) in certain displayed data elements. Such language
would advise users of the limitations on their use or re-use of any
proprietary information accessed on the EMMA Web site, and users
would be required to acknowledge such limitations before being
provided access to any portion of the Database. Additional systemic
and reporting mechanisms would be implemented to further protect
against inappropriate use of the Database. See Response Letter I,
supra note 5.
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Another commenter, BFS, believed that the adoption of an ``access
equals delivery'' standard for official statements would
unintentionally result in less viewing of information by individual
investors and suggested alternatives to obtaining industry efficiencies
without reducing the number of investors that view information
contained in official statements.\11\ BFS cited to internal statistics
generated in connection with the Commission's adoption of rules on
Internet availability of proxy materials in support of its view.\12\
BFS also cited to the Commission's recently adopted rules on delivery
of summary mutual fund prospectuses and posting of the statutory
prospectuses on the Internet as an alternative method of providing
disclosure to investors while realizing cost savings.\13\
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\11\ See letter from the BFS, supra note 4.
\12\ See Securities Exchange Act Release No. 55146 (January 22,
2007), 72 FR 4148 (January 29, 2007).
\13\ See Securities Act Release No. 8998 (January 13, 2009), 74
FR 4546 (January 26, 2009).
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[[Page 25791]]
The MSRB disagreed with BFS's comparison of on-line access to proxy
materials with on-line access to official statements and, in Response
Letter I, pointed out the differences between the two materials.\14\
Specifically, the MSRB argued that: proxy statements are posted in a
highly decentralized manner, whereas official statements are available
on the centralized EMMA Web site specifically crafted for their
presentation; proxy statements often are posted without any additional
meaningful contextual information, whereas official statements are
posted on EMMA along with transaction prices, rate/yield information
and other relevant disclosures for the security being purchased and for
all other securities in the marketplace, together with educational
information to assist the individual investor in understanding the
information in the official statement; proxy statements are unsolicited
communications to a large group of investors triggered by company
action (i.e., the investor is passive), whereas the MSRB's official
statement dissemination requirement is triggered by an investor taking
action to purchase a municipal security; proxy statements typically
relate to matters of a generalized importance relating to a company and
normally do not relate directly to an investment, whereas official
statements have direct relevance to the investor's investment; proxy
statements are intended to provide information prior to an investor
voting his or her proxy, whereas official statements (much like
prospectuses) often serve to disclose the detailed terms of a security
after the investment decision has already been made; and proxy
statements generally have little value once the vote occurs, whereas
official statements retain significant value for the remaining life of
the security and would remain available to all investors throughout
that period in EMMA's permanent library.
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\14\ See Response Letter I, supra note 5.
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Furthermore, the MSRB believed that BFS seemed to place too much
emphasis on cost savings as a reason for approving the proposed rule
change. While acknowledging the sizeable cost saving associated with
adoption of the proposal, the MSRB stated that it submitted the
proposal primarily because of the significant improvements in the
municipal securities disclosure system that would result from it.
Specifically, the MSRB believed that the proposal would place
individual investors on an equal footing with investment professionals
with respect to access to key information and allow such information to
flow into the marketplace more quickly.
In addition, in response to BFS's suggestion of the summary mutual
fund prospectus as a possible alternative, the MSRB stated that it will
monitor the level of adoption of the summary prospectus in the mutual
fund market, as well as the impact its use may have on the quality and
timeliness of disclosure for mutual funds. Noting that it has no
authority over the nature, content or timing of issuer disclosures in
the municipal securities market and therefore could not adopt a
requirement for the creation and use of summary official statements by
municipal issuers, the MSRB believed that the experience in the mutual
fund market with summary prospectuses could be instructive in crafting
future disclosure initiatives in the municipal securities market. The
Commission believes that the MSRB has provided a rational response to
counter BFS's belief that an ``access equals delivery'' standard for
official statements would reduce viewing by individual investors of the
information, and agrees with the MSRB that the proposal would make
information easily available to all market participants in the
municipal securities market.
Finally, the third commenter, SIFMA, was very supportive of the
EMMA system, but expressed concern with certain operational and timing
issues.\15\ Specifically, SIFMA requested that the proposed rule change
conform to the rules applicable to the registered securities market by
not requiring broker dealers to accommodate a customer's standing
request for copies of official statements for all of his or her
transactions with the dealer. SIFMA argued that such an accommodation
would require dealers to undertake an enormous amount of expense for
such a limited number of retail investors and that the costs of such
changes would interfere with the ability of issuers and other market
participants to achieve anticipated cost savings.
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\15\ See letter from SIFMA, supra note 4.
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In response, the MSRB stated it was important to allow investors to
establish standing instructions with their dealers to receive paper
copies of official statements for all of their new issue purchases and
not to obligate them to make transaction by transaction requests for
paper copies.\16\ Although the potential for costs savings was an
important factor in the MSRB's proposal, the MSRB again indicated that
such a factor does not trump the needs of individual investors to
obtain the disclosures they are due. The MSRB also stated that revised
Rule G-32 would not obligate dealers to rely on access to electronic
official statements on EMMA, and that those dealers who are not yet
prepared to do so upon launch of the new rule provisions could continue
to meet their official statement dissemination obligation through
actual delivery of the official statement to customers as under current
Rule G-32. Therefore, the MSRB did not believe any change was merited.
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\16\ See Response Letter I, supra note 5.
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SIFMA also urged the MSRB to permit an underwriter to designate to
the MSRB that information it has submitted to the new issue information
dissemination system (``NIIDS'') under revised Rule G-34 also be used
for purposes of completing new Form G-32. SIFMA requested that the MSRB
make a firm commitment to take the outbound information feed from NIIDS
to pre-fill the G-32 forms beginning no later than 90 days after SEC
approval of the rule change proposal.
In response, the MSRB stated that, as noted in its proposed rule
change, it will continue working toward permitting dealers to designate
to the MSRB that information they have submitted to NIIDS under Rule G-
34 should also be used for purposes of completing new Form G-32. The
MSRB will publish a notice advising dealers of the availability of such
functionality once it becomes available, but that it was not prepared
at this time to commit to a specific timeframe for making this
functionality available and that approval of the proposed rule change
should not be contingent on such a commitment.
Finally, SIFMA requested that the MSRB provide dealers at least 30
calendar days' notice prior to implementing the proposed rule change,
citing various factors regarding holiday and vacation schedules and
lack of training and usage materials. In response, the MSRB stated that
it will announce training sessions for use of the EMMA submission
system and publish its user manual in the near future, and will have
staff available to assist users in transitioning to the new submission
process. The MSRB also indicated that, while it could not commit to
providing the length of notice requested, it would provide notification
of the operational date as soon as it becomes available. The Commission
believes that the MSRB has reasonably addressed the operational and
timing concerns raised by SIFMA, and that the changes suggested by
SIFMA are not warranted at this time.
The Commission has carefully considered the proposed rule change,
[[Page 25792]]
the comment letters received, and the MSRB's responses 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 and, in particular, the requirements of Section
15B(b)(2)(C) of the Act \17\ and the rules and regulations thereunder.
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.\18\
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\17\ 15 U.S.C. 78o-4(b)(2)(C).
\18\ Id. 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).
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In particular, the Commission finds that the proposed rule change
is consistent with the Act because it would serve as an additional
mechanism by which the MSRB works toward removing impediments to and
helping to perfect the mechanisms of a free and open market in
municipal securities by providing a centralized venue for free public
access to primary market disclosure documents and transaction price
information for the municipal securities market through EMMA. The
proposed rule change would provide greater access to primary market
disclosure documents and transaction price information about municipal
securities information to all participants in the municipal securities
market on an equal basis, thereby removing potential barriers to
obtaining such information, and will allow the municipal securities
industry to produce more accurate trade reporting and transparency.
Broad access to primary market disclosure documents and price
transparency information through the EMMA portal should also assist in
preventing fraudulent and manipulative acts and practices by improving
the opportunity for public investors to access material information
about issuers, their securities and the prices at which such securities
trade. Furthermore, free public access to disclosure and transaction
price information should promote a more fair and efficient municipal
securities market in which transactions are effected on the basis of
material information available to all parties to such transactions, and
thereby allow for fairer pricing of transactions. In addition, the
electronic dissemination of primary market disclosure documents should
enable issuers to reduce their issuance costs by eliminating the need
to print and to distribute in paper official statements in connection
with their primary offerings, thereby resulting in lower costs to
issuers and savings to their citizens, lower expenses for underwriters,
and potentially lower prices for investors. All of these factors serve
to promote the statutory mandate of the MSRB to protect investors and
the public interest.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-MSRB-2009-02), be, and it
hereby is, approved.
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\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
Florence E. Harmon,
Deputy Secretary.
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\20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-12442 Filed 5-28-09; 8:45 am]
BILLING CODE 8010-01-P