Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Amend Rules G-11 and G-32 and Form G-32 Regarding a Collection of Data Elements Provided in Electronic Format to the EMMA Dataport System in Connection With Primary Offerings, 14988-15008 [2019-07244]

Download as PDF 14988 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices submit only information that you wish to make available publicly. All submissions should refer to File Number SR–PEARL–2019–12 and should be submitted on or before May 3, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–07238 Filed 4–11–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85551; File No. SR–MSRB– 2019–07] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of a Proposed Rule Change To Amend Rules G–11 and G–32 and Form G–32 Regarding a Collection of Data Elements Provided in Electronic Format to the EMMA Dataport System in Connection With Primary Offerings April 8, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 2, 2019 the Municipal Securities Rulemaking Board (the ‘‘MSRB’’ or ‘‘Board’’) filed with the Securities and Exchange Commission (the ‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the MSRB. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change jbell on DSK30RV082PROD with NOTICES The MSRB filed with the Commission a proposed rule change to amend MSRB Rule G–11, on primary offering practices, MSRB Rule G–32, on disclosures in connection with primary offerings and Form G–32, regarding a collection of data elements provided in electronic format to the Electronic Municipal Market Access Dataport (the ‘‘EMMA Dataport’’) 3 system in connection with primary offerings (the 29 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 EMMA® is a registered trademark of the MSRB. The EMMA Dataport is the submission portal through which information is provided for display to the public on EMMA. 1 15 VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 ‘‘proposed rule change’’). The proposed rule change seeks to update and enhance the general practices undertaken by underwriters and others, as applicable, in a primary offering of municipal securities. Following the effectiveness of the proposed rule change, assuming all amendments are approved, the MSRB will publish one or more regulatory notices within 180 days of effectiveness, and such notices shall specify the compliance dates for the respective rule changes, which in any case shall be not less than 90 days nor more than one year following the date of the notice establishing each such compliance date. The MSRB will also make both amended Form G–32 as well as the updated EMMA Dataport Manual for Primary Market Submissions and the Specifications for Primary Market Submissions Service document 4 available to underwriters in advance of relevant compliance date(s) to aid them in completing the amended form. The MSRB will announce the availability of amended Form G–32 and the updated manual and specification document by publishing a regulatory notice at a later date. The text of the proposed rule change is available on the MSRB’s website at www.msrb.org/Rules-andInterpretations/SEC-Filings/2019Filings.aspx, at the MSRB’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the MSRB included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. 4 The EMMA Dataport Manual for Primary Market Submissions describes the requirements of MSRB Rule G–32 for underwriters to submit primary offering disclosure documents and information to EMMA and gives instructions for making such submissions. Rule G–32 requires that such submissions be made as set forth in the EMMA Dataport Manual. The Specifications for Primary Market Submissions Service document provides instructions for making continuous submissions of multiple offerings of securities to the EMMA Dataport and contains figures for making submissions to the EMMA Dataport through a computer-to-computer interface. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Background Rule G–11—Primary Offering Practices Rule G–11 establishes terms and conditions for sales by brokers, dealers and municipal securities dealers (together, ‘‘dealers’’) of new issues of municipal securities in primary offerings, including provisions on communications relating to the syndicate and designations and allocations of securities. The rule was first adopted by the MSRB in 1978, and was designed to increase the scope of information available to syndicate managers and members, other municipal securities professionals and the investing public, in connection with the distribution of new issues of municipal securities without impinging upon the right of syndicates to establish their own procedures for the allocation of securities and other matters.5 The MSRB noted that, in adopting Rule G–11, the Board generally chose to require the disclosure of practices of syndicates rather than dictate what those practices must be.6 Because of the evolving nature of the municipal securities market, Rule G–11 has been amended several times over the years. More recently, as part of a retrospective rule review, the MSRB considered how Rule G–11 applies in the current market and whether amendments may be needed to address changing practices in primary offerings of municipal securities. In its review, the MSRB found there were opportunities to enhance regulatory transparency, equalize information dissemination in primary offerings, reinforce aspects of Rule G–11 to selling group members regarding their existing obligations under the rule and align the mandatory time frames for certain payments to syndicate members in order to reduce credit risk. More specifically, the proposed amendments to Rule G–11 would enhance the information dissemination requirements of Rule G–11 to require the senior syndicate manager to disseminate free-to-trade information to all syndicate and selling group members at the same time, thus eliminating any potential for unfair advantages in secondary market trading that could result from having advance notice that 5 MSRB 6 See, Reports, Vol. 5, No. 6 (Nov. 1985). e.g., MSRB Reports, Vol. 2, No. 5 (Jul. 1982). E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices jbell on DSK30RV082PROD with NOTICES an issue is free-to-trade. Additionally, the proposed rule change would require the senior syndicate manager to provide the issuer with information relating to the designations, group net sales credits and allocations of the securities in a primary offering. The MSRB believes this information could assist issuers in their review of the distribution of compensation and compliance with the terms and conditions of the primary offering. The proposed rule change also would codify a selling group member’s existing obligation to comply with the issuer terms and conditions, priority provisions and order period requirements, as communicated to them, in a primary offering. Finally, the proposed rule change would further eliminate unnecessary credit risk in the market and ensure the timely payment of sales credits by aligning the timing of the payments of such credits to syndicate members in group net and net designation transactions. Rule G–32—Disclosures in Connection With Primary Offerings Rule G–32 sets forth the disclosure requirements applicable to underwriters engaged in primary offerings of municipal securities. Among other things, Rule G–32 requires underwriters in primary offerings to submit electronically to the EMMA Dataport official statements and advance refunding documents, if prepared, and related primary market documents and new issue information, such as that collected on Form G–32. The rule is designed to ensure that an investor that purchases new issue municipal securities is provided with timely access to information relevant to his or her investment decision. Rule G–32 was originally adopted by the Board in 1977,7 and has been amended periodically since then to help ensure that, as market practices evolved and other regulatory developments occurred, Rule G–32 would remain current and achieve its goal of providing timely access to relevant information about primary offerings. Again, as part of a retrospective rule review, the MSRB considered the disclosures required pursuant to Rule G–32 and whether revisions were needed to meet current market needs. The proposed changes to Rule G–32 would ensure that access to information regarding CUSIP numbers advance refunded is provided to all market participants at the same time. Additionally, the proposed changes 7 See File No. SR–MSRB–77–12 (Sept. 20, 1977). The SEC approved Rule G–32 in Release No. 34– 15247 (Oct. 19, 1978), 43 FR 50525 (Oct. 30, 1978). VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 would eliminate the requirement under Rule G–32(c) that when a dealer acting as a financial advisor, prepares the official statement, it must provide the official statement to the underwriter promptly after approval by the issuer. Form G–32 Information Submission Pursuant to MSRB Rule G–34, on CUSIP numbers, primary offering, and market information requirements, an underwriter of certain new issues of municipal securities must, as applicable, make the primary offering depository eligible and submit information about the new issue to the Depository Trust Company’s (DTC) New Issue Information Dissemination Service (NIIDS).8 Separately, the underwriter in primary offerings of municipal securities is required, pursuant to Rule G–32, to submit electronically to the EMMA Dataport, in a timely and accurate manner, certain primary offering disclosure documents and related information, including the data elements set forth on Form G–32.9 In 2012, the MSRB adopted amendments to Rule G–32 and Rule G– 34 to streamline the process by which underwriters submit data in connection with primary offerings. The amendments integrated the submission of certain matching data elements to NIIDS with the EMMA Dataport, obviating the need for duplicative 8 NIIDS is an automated, electronic system that receives comprehensive new issue information on a market-wide basis for the purposes of establishing depository eligibility and immediately redisseminating the information to information vendors supplying formatted municipal securities information for use in automated trade processing systems. See Rule G–34(a)(ii) regarding the application for depository eligibility and dissemination of new issue information and the exclusion of certain issues as set forth in that subsection. DTC sets forth the criteria for making a security depository eligible and thus NIIDS eligible. According to DTC, securities that can be made depository eligible include those that have been issued in a transaction that: (i) Has been registered with the SEC pursuant to the Securities Act of 1933, as amended (‘‘Securities Act’’); (ii) was exempt from registration pursuant to a Securities Act exemption that does not involve (or, at the time of the request for eligibility, no longer involves) transfer or ownership restrictions; or (iii) permits resale of the securities pursuant to Rule 144A or Regulation S under the Securities Act, and, in all cases, such securities otherwise meet DTC’s eligibility criteria. See The Depository Trust Company, Operational Arrangements p. 2 (Oct. 2018). 9 See Rule G–32(b)(i)(A), on Form G–32 information submissions, and Rule G–32(b)(vi), on procedures for submitting documents and Form G– 32 information. Form G–32 submissions may be made by the underwriter or its designated agent through the EMMA Dataport accessed via MSRB Gateway. The EMMA Dataport is the utility through which submissions of documents and related information are made to the MSRB and its Market Transparency Programs. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 14989 submissions of information in NIIDSeligible primary offerings.10 For a ‘‘NIIDS-eligible primary offering,’’ the underwriter must submit all information to NIIDS as required under Rule G–34.11 Subsequently, Form G–32 is auto-populated by the data the underwriter has input into NIIDS. Information required to be included on Form G–32 and for which no corresponding data element is available through NIIDS must be submitted manually through the EMMA Dataport on Form G–32 (i.e., it would not be autopopulated from NIIDS) pursuant to Rule G–32(b)(i)(A)(1)(a). Any correction to NIIDS data (and thus Form G–32 data) must be made promptly and, to the extent feasible, in the manner originally submitted. For a primary offering ineligible for NIIDS,12 the underwriter of the offering must submit information required by Form G–32 manually as set forth under Rule G–32(b)(i)(A)(2). The requirement under Rule G– 34(a)(ii)(C) that an underwriter of a primary offering of municipal securities that is NIIDS-eligible submit certain information about the new issue to NIIDS was designed to facilitate timely and accurate trade reporting and confirmation, among other things. Additionally, the submission of this information was meant to address difficulties dealers have in obtaining descriptive information about new issues of municipal securities.13 While underwriters of issues that are NIIDSeligible submit a great deal of information about a primary offering to NIIDS, much of this information is not currently auto-populated into Form G– 32 because not all of the fields required to be submitted to NIIDS are required fields on Form G–32.14 10 See MSRB Notice 2012–64 (Dec. 24, 2012). offerings would include, for example, private placements that are not registered under the Securities Act or issuances that are subject to restrictions on resales. 12 See supra footnote 8 regarding depository eligibility criteria. Additionally, Rule G–34(d) exempts from all Rule G–34 requirements any issue of a municipal security (and for purposes of secondary market municipal securities, any part of an outstanding maturity of an issue) which (i) does not meet the eligibility criteria for CUSIP number assignment or (ii) consists entirely of municipal fund securities. 13 The requirement to provide this information and the process for doing so are addressed in Rule G–34 and Rule G–32, respectively. While NIIDS provides the system for submitting the information, its use does not obviate the requirement that information submitted pursuant to Rule G–34 be timely, comprehensive and accurate. See MSRB Notice 2007–36 (Nov. 27, 2007). 14 The proposed rule change includes an attachment showing those NIIDS data fields the MSRB is proposing to include on Form G–32. Data fields marked with an ‘‘N’’ are not currently autopopulated into Form G–32 because Form G–32 does 11 Non-NIIDS-eligible E:\FR\FM\12APN1.SGM Continued 12APN1 14990 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices jbell on DSK30RV082PROD with NOTICES The proposed rule change would add 57 data fields to Form G–32 to capture data that an underwriter already is required to input into NIIDS, as applicable, for NIIDS-eligible offerings.15 These new Form G–32 data fields would be auto-populated, as applicable, by NIIDS submissions made by the underwriter, pursuant to G–34 or otherwise required for NIIDS eligibility.16 By adding these data fields to Form G–32, the MSRB ensures its continued access 17 to relevant and accurate new issue information. For non-NIIDS-eligible offerings, the underwriter would be required to manually complete the data field that indicates the original minimum denomination of the offering. The underwriter in a non-NIIDS-eligible offering would not be required to manually complete the other 57 additional fields. Currently, the MSRB, securities data providers, other regulators and industry participants that have set up a communications link with DTC, have access to NIIDS data in real time. Additionally, the MSRB may disseminate some or all of the information in the future. In addition to the data fields autopopulated by NIIDS submissions, the proposed rule change also would add nine data fields to Form G–32 for manual completion by underwriters in NIIDS-eligible offerings. Of these nine data fields, underwriters in non-NIIDSeligible primary offerings would be not have corresponding data fields to receive the information. While the MSRB is currently not aware of any reason NIIDS would become unavailable, the inability to auto-populate information from NIIDS would not negate the requirement that information be provided pursuant to MSRB Rule G–32. 15 See Rule G–34(a)(ii) regarding the application for depository eligibility and dissemination of new issue information. See also DTC Important Notice 3349–08 (April 9, 2008); SEC Release No. 34–57768 (May 2, 2008), 90 FR 26181 (May 8, 2008) (File No. SR–OTC–2007–10), regarding NIIDS trade and settlement eligibility requirements. 16 An underwriter currently completes data fields in NIIDS that are applicable to the particular primary offering. Not all NIIDS data fields are completed in a typical primary offering and thus, the Form G–32 data fields will not all be autopopulated for every offering. Specifically, for a newly issued municipal security an underwriter must input the key data elements required for the reporting, comparison, confirmation, and settlement of trades in municipal securities (‘‘NIIDS Data Elements’’) into NIIDS. NIIDS Data Elements are defined as data needed for trade reporting, trade matching and to set up trade confirmations (‘‘Trade Eligible Data’’). Additional data elements are also needed for a municipal security to settle at DTC and are settlement eligible data (‘‘Settlement Eligible Data’’). See The Depository Trust Company Operational Arrangements (June 2018). 17 As used herein, ‘‘continued access’’ means that MSRB would be able to obtain and, if it determines to do so, disseminate information, independent of integrated data from a third-party or utilities. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 required to complete two of these nine additional data fields. Specifically, as discussed in more detail below, underwriters in non-NIIDS-eligible offerings would be required to manually complete the data fields that provide a ‘‘yes/no’’ flag to indicate whether the minimum denomination for the issue has the ability to change and the ‘‘yes/ no’’ flag to indicate if the primary offering is being made with restrictions.18 As previously noted, the MSRB may disseminate some or all of this information, in the future. Proposed Rule Change On September 14, 2017, the MSRB published a concept proposal (‘‘Concept Proposal’’) requesting comment on possible amendments to the current primary offering practices of dealers.19 The MSRB received 12 comment letters in response to the Concept Proposal,20 which formed the foundation for a subsequent Request for Comment on Draft Rule Changes Related to Primary Offering Practices, published on July 19, 2018 (‘‘Request for Comment’’).21 The MSRB received 10 comment letters in response to the Request for Comment.22 18 See infra discussion on amending Form G–32 to include nine additional data fields not currently collected by NIIDS. 19 MSRB Regulatory Notice 2017–19 (Sept. 14, 2017). 20 Letter from Mike Nicholas, Chief Executive Officer, Bond Dealers of America, dated Nov. 16, 2017 (‘‘BDA Letter I’’); Letter from City of San Diego, undated (‘‘City of San Diego Letter I’’); Letter from Robert W. Doty, dated Nov. 2, 2017 (‘‘Doty Letter I’’); Email from Stephan Wolf, Global Legal Entity Identifier Foundation, dated Nov. 6, 2017 (‘‘GLEIF Letter I’’); Letter from Emily Brock, Director, Federal Liaison Center, Government Finance Officers Association, dated Nov. 27, 2017 (‘‘GFOA Letter I’’); Letter from Alexandra M. MacLennan, National Association of Bond Lawyers, dated Nov. 17, 2017 (‘‘NABL Letter I’’); Letter from Susan Gaffney, Executive Director, National Association of Municipal Advisors, dated Nov. 13, 2017 (‘‘NAMA Letter I’’); Letter from Julie Egan, NFMA Chair 2017 and Lisa Washburn, NFMA Industry Practices & Procedures Chair, National Federation of Municipal Analysts, dated Nov. 9, 2017 (‘‘NFMA Letter I’’); Email from Michael Paganini, dated Sept. 15, 2017 (‘‘Paganini Email I’’); Letter from Leslie M. Norwood, Managing Director and Associate General Counsel, Securities Industry Financial Markets Association, dated Nov. 15, 2017 (‘‘SIFMA Letter I’’); Letter from John S. Craft, Managing Director, TMC Bonds LLC, dated Nov. 13, 2017 (‘‘TMC Bonds Letter I’’); and Letter from Gilbert L. Southwell III, Vice President, Wells Capital Management, Inc., dated Nov. 1, 2017 (‘‘Wells Capital Letter I’’). 21 MSRB Notice 2018–15 (July 19, 2018). 22 Letter from Noreen P. White, Co-President and Kim M. Whelan, Co-President, Acacia Financial Group, Inc., dated Sept. 17, 2018 (‘‘Acacia Letter II’’); Letter from Mike Nicholas, Chief Executive Officer, Bond Dealers of America, dated Sept. 17, 2018 (‘‘BDA Letter II’’); Email from Stephen Holstein, CFI, dated Jul. 25, 2018 (‘‘CFI Email II’’); Letter from Steve Apfelbacher, Ehlers Associates, Inc., dated Sept. 17, 2018 (‘‘Ehlers Letter II’’); Letter from Emily S. Brock, Director, Federal Liaison PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 Following review of the comments, the MSRB conducted additional outreach with various market participants. The comments received and follow-up conversations formed the basis for the proposed rule change. Proposed Rule Change Under Rule G–11 Codify That Selling Group Members Have an Existing Obligation To Comply With Communications Relating to the Issuer Terms and Conditions, Priority Provisions and Order Period Requirements The proposed rule change would amend Rule G–11(f) to codify an existing obligation of selling group members to comply with the written communications they receive from the senior syndicate manager relating to, among other things, issuer requirements, priority provisions and order period requirements. Rule G–11(f) currently states that prior to the first offer of any securities by the syndicate, the senior syndicate manager is required to provide, in writing, to syndicate members and selling group members, if any, ‘‘(i) a written statement of all terms and conditions required by the issuer, (ii) a written statement of all of the issuer’s retail order period requirements, if any, [and] (iii) the priority provisions . . .’’ The senior syndicate manager must also promptly furnish in writing to the syndicate members and the selling group members any changes in the priority provisions or pricing information. Additionally, the MSRB has stated that the activities of all dealers should be viewed in light of the basic fair dealing principles of Rule G–17, on conduct of municipal securities and municipal advisor activities.23 In 2013, the MSRB amended Rule G–11 to, among other things, address concerns related to retail order period practices and required expressly that the senior syndicate manager’s written statement of all terms and conditions required by Center, Government Finance Officers Association, dated Sept. 19, 2018 (‘‘GFOA Letter II’’); Letter from Susan Gaffney, Executive Director, National Association of Municipal Advisors, dated Sept. 18, 2018 (‘‘NAMA Letter II’’); Letter from Julie Egan, NFMA Industry Practices & Procedures Chair, and Lisa Washburn, NFMA Industry Practices & Procedures Co-Chair, National Federation of Municipal Analysts, dated Sept. 17, 2018 (‘‘NFMA Letter II’’); Letter from Marianne F. Edmonds, Public Resources Advisory Group, dated Sept. 18, 2018 (‘‘PRAG Letter II’’); Letter from Leslie M. Norwood, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, dated Sept. 17, 2018 (‘‘SIFMA Letter II’’); Letter from Rick A. Fleming, Investor Advocate, U.S. Securities and Exchange Commission, Office of the Investor Advocate, dated Sept. 17, 2018 (‘‘SEC Investor Advocate Letter II’’). 23 See MSRB Notice 2009–42 (July 14, 2009). E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices the issuer also be delivered to selling group members.24 The amendment also added Rule G–11(k) to require that any dealer that submits an order designated as retail during a retail order period must provide certain information that would assist in determining if the order is a bona fide retail order. The 2013 amendments to Rule G–11 coupled with the Rule G–17 guidance indicates selling group members are subject to the issuer requirements in allocating securities to their investors.25 By codifying this existing obligation, the amendment would highlight that selling group members must comply with the priority provisions and other issuer terms and conditions when they receive written notification of such from the syndicate manager. Require That the Senior Syndicate Manager Communicate to All Syndicate and Selling Group Members, at the Same Time, When the Issue Is Free To Trade jbell on DSK30RV082PROD with NOTICES The proposed rule change would amend Rule G–11(g) to add new subsection (ii) which would require the senior syndicate manager to notify all members of the syndicate and selling group, at the same time via free-to-trade wire or electronically by other industryaccepted method of communication, that the offering is free to trade at a price other than the initial offering price.26 In a primary offering of municipal securities where a syndicate is formed (i.e., not a sole-managed offering), a freeto-trade wire is sent by the senior syndicate manager to syndicate members once all of the municipal securities in the issue or particular maturity (or maturities) are free to trade. That is, the free-to-trade wire communicates to members of the syndicate that they may trade the bonds in the secondary market at market prices which could be the same or different than the initial offering price.27 24 See Release No. 34–70532 (Sept. 26, 2013), 78 FR 60956 (Oct. 2, 2013) (File No. SR–MSRB–2013– 05). 25 See also Rule G–11(b) which requires that every dealer that submits an order to a syndicate or to a member of a syndicate for the purchase of securities must disclose at the time of submission if the order is for its dealer account or a related account of the dealer. 26 The other provisions of Rule G–11(g) would be renumbered accordingly to account for this addition. 27 For purposes of reporting transactions after the free-to-trade information has been disseminated, the MSRB has indicated that once a new issue has been released for trading (i.e., is free to trade), normal transaction reporting rules will apply to the syndicate managers, syndicate members and selling group members. See Release No. 34–49902; (Jun. 22, 2004), 69 FR 38925 (Jun. 29, 2004) (File No. SR– MSRB–2004–02). VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 The MSRB believes equal access to information is important to the fair and effective functioning of the market for primary offerings of municipal securities. Therefore, the MSRB believes requiring dissemination of this information for receipt by all syndicate and selling group members at the same time would prevent preferential access to the free-to-trade information (thus, understanding that they are then able to commence selling bonds at market prices) by some while other syndicate and selling group members, who are not aware of the information, are delayed in knowing that they may transact at prices other than the initial offering price. The MSRB understands that methods of communication evolve and change over time. As a result, the dissemination of free-to-trade information eventually may be made by methods other than the traditional ‘‘free-to-trade wire.’’ While the MSRB is not proposing to dictate the timing of when, or the form of how, the free-to-trade communication should be sent, requiring dissemination of this information electronically by an industry-accepted method that ensures all syndicate and selling group members receive the information at the same time would level the playing field.28 Require the Senior Syndicate Manager To Provide Information Required Under Rule G–11(g)(ii) and (iii) to Issuers in a Primary Offering Currently, the senior syndicate manager is not required to provide information to issuers regarding designations and allocations of municipal securities in a primary offering.29 The proposed rule change would amend Rule G–11(g)(ii) and (iii) 30 to require the senior syndicate manager to comply with the information-dissemination provisions of this rule with respect to issuers in 28 The MSRB reminds dealers that such distributed communication would be subject to the record retention requirements of Rule G– 9(b)(viii)(C) which requires the dealer to maintain, among other things, all written and electronic communications received and sent relating to the conduct of the municipal securities activities of such dealer and Exchange Act Rule 17a–4(b)(4) which requires dealers to maintain copes of all communications sent by the dealer relating to its business as such. 29 ‘‘Designation’’ typically refers to the percentage of the takedown or spread that a buyer directs the senior syndicate manager to credit to a particular syndicate member (or members) in a net designated order. ‘‘Allocation’’ generally refers to the process of setting securities apart for the purpose of distribution to syndicate and selling group members. See MSRB Glossary of Municipal Securities Terms. 30 Currently, these provisions are Rule G–11(g)(ii) and (iii). However, with the proposed addition of Rule G–11(g)(ii) noted above, these provisions would become Rule G–11(g)(iii) and (iv). PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 14991 addition to just syndicate members. Rule G–11(g)(ii) requires, in part, the senior syndicate manager, within two business days following the date of sale, to disclose to the syndicate, in writing, a summary by priority category, of all allocations of securities accorded priority over member orders. Rule G– 11(g)(iii) requires the senior syndicate manager to disclose, in writing and as set forth in the rule, to each member of the syndicate information on the designations paid to syndicate and nonsyndicate members. The MSRB believes that providing this information to the issuer along with information on group net sales credits, as described more fully below, would better inform all issuers of the orders and allocations of their primary offering. The MSRB believes this information would be valued particularly by those issuers who are not aware this information is available for their review. An issuer who does not wish to receive or review this information need simply delete the communication at its discretion. Align the Timeframe for the Payment of Group Net Sales Credits With the Payment of Net Designation Sales Credits The proposed rule change would amend Rule G–11(j) to align the current timeframe for the payment of group net sales credits with the existing timeframe for the payment of net designation sales credits as set forth therein. Currently, Rule G–11(i) states that the final settlement of a syndicate or similar account shall be made within 30 calendar days following the date the issuer delivers the securities to the syndicate. Group net sales credits (i.e., those sales credits for orders in which all syndicate members benefit according to their participation in the account) are paid out of the syndicate account when it settles pursuant to Rule G–11(i). As a result, syndicate members may wait 30 calendar days following receipt of the securities by the syndicate before they receive their group net sales credits. By contrast, Rule G–11(j) states that sales credits due to a syndicate member as designated by an investor in connection with the purchase of securities (‘‘net designation payments’’) shall be distributed within 10 calendar days following the date the issuer delivers the securities to the syndicate. The SEC approved amendments to Rule G–11(i) in 2009 to, among other things, shorten the timeframe for settlement of the syndicate account from 60 calendar days to 30 calendar days following the date the issuer delivers the securities to the syndicate. The E:\FR\FM\12APN1.SGM 12APN1 14992 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices amendments also shortened the timeframe for the payment of net designation orders in Rule G–11(j) from 30 calendar days to 10 calendar days. The MSRB indicated that the shortened timeframes were intended to reduce the exposure of co-managers to the credit risk of the senior manager pending settlement of the accounts.31 The proposed amendments would not impact the timing of the settlement of the syndicate account, but rather would merely align the timeframe for the payment of group net and net designation sales credits. The MSRB believes aligning the time frames for the payment and receipt of sales credits would be a minor adjustment that would ensure uniform practice in making and receiving such payments in a timely manner. In addition, this proposed rule change would reduce credit risk by decreasing the exposure of syndicate trading account members to the potential deterioration in the credit of the syndicate or account manager during the pendency of account settlements. The MSRB further believes that the time period of 10 calendar days would provide balance between reducing risk of exposure of comanagers and the credit risk of the senior manager while still providing the senior syndicate manager with the time needed to process and pay the sales credits. As a result of the alignment of these payments, the information that is currently provided within 30 calendar days of delivery of securities to the syndicate under Rule G–11(h)(ii)(B) would now be provided within 10 business days following the date of sale under revised Rule G–11(g)(iv). Thus, the proposed rule change would delete Rule G–11(h)(ii)(B), and Rule G– 11(h)(ii)(C) would be amended to become Rule G–11(h)(ii)(B). Proposed Rule Change Under Rule G–32 Provide Equal Access To Advance Refunding Documents and Related Information 32 jbell on DSK30RV082PROD with NOTICES The proposed rule change would amend Rule G–32(b)(ii) to require that in an advance refunding, where advance refunding documents are prepared, the underwriter must provide access to the documents and certain related 31 See Release No. 34–60725 (Sept. 28, 2009), 74 FR 50855 (Oct. 1, 2009) (File No. SR–MSRB–2009– 12). 32 In general, advance refunding issues are those municipal bonds issued more than 90 days before the redemption of the refunded bonds. See MSRB Interpretive Guidance—Current Refundings (Aug. 8, 1991). VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 information to the entire market at the same time.33 Currently, Rule G–32(b)(ii) requires the advance refunding documents and applicable Form G–32 information be submitted to the EMMA Dataport, no later than five business days after the closing date for the primary offering. However, the MSRB understands that in some instances, some market participants may be informed of the advance refunding details before the information is submitted and made public on EMMA. The MSRB believes that equal access to advance refunding information is important for the efficient functioning of the primary and secondary market for municipal securities. The MSRB also believes requiring underwriters to provide information to the market regarding CUSIP numbers advance refunded in a manner that allows access to the information by the entire market at the same time would support this effort. Repeal the Requirement That a Dealer Financial Advisor That Prepares the Official Statement Must Make It Available to the Managing or Sole Underwriter After the Issuer Approves It for Distribution The proposed rule change would repeal the current requirement under Rule G–32(c) that a dealer financial advisor that prepares an official statement on behalf of an issuer with respect to a primary offering of municipal securities make the official statement available to the managing underwriter or sole underwriter in a designated electronic format, promptly after the issuer approves its distribution. In the Concept Proposal and Request for Comment the MSRB sought comment on whether the requirement under Rule G–32(c) should be extended to require all financial advisors (i.e., both dealer and non-dealer) that have prepared the official statement to provide the official statement to the underwriter promptly after approved by the issuer. Upon review of comment letters and discussions with various market participants, the MSRB is proposing to repeal this requirement under Rule G–32(c). Rule G–32 was adopted in 1977 to ensure that investors purchasing new issue municipal securities are provided 33 This means underwriters would be precluded from disseminating advance refunding documents and information to any market participant, without first submitting it to the EMMA Dataport; provided that this restriction does not prohibit communication with anyone that may require such information for purposes of facilitating the completion of the transaction. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 with all available information relevant to their investment decision by settlement of the transaction.34 The Board has recognized that the MSRB cannot prescribe the content, timing, quantity or manner of production of the official statement by the issuer or its agents.35 Thus, the MSRB crafted Rule G–32(c) to ensure that once the official statement is completed and approved by the issuer, dealers acting as financial advisors would be obligated to begin the dissemination process promptly. The Board further urged that issuers using the services of non-dealer financial advisors hold those financial advisors to the same standards for prompt delivery.36 The Board noted that the requirement under Rule G–32(c) was not meant to diminish a dealer’s obligations under Securities Exchange Act Rule 15c2–12(b)(3). Exchange Act Rule 15c2–12(b)(3) requires that an underwriter contract with the issuer or its agent to obtain copies of the official statement within the time period mandated by the rule. According to the SEC, the purpose of this provision is to ‘‘facilitate the prompt distribution of disclosure documents so that investors will have a reference document to guard against misrepresentations that may occur in the selling process.’’ 37 In adopting the rule, the SEC recognized the existing delivery requirements under Rule G–32 and noted that By adopting paragraph (b)(3), which serves as a foundation for fostering compliance with the requirements of MSRB rule G–32, the Commission wishes to emphasize the importance it places on the prompt distribution of final official statements.38 The SEC noted that in adopting Rule 15c2–12(b)(3), it was leaving the determination of the ‘‘precise method and timing of delivery’’ of the official statement to the MSRB.39 The MSRB understands that several participants in a primary offering may be responsible for preparing the official statement,40 and while dealers acting as 34 See File No. SR–MSRB–77–12 (Sept. 20, 1977). The SEC approved Rule G–32 in Release No. 34– 15247 (Oct. 19, 1978), 43 FR 50525 (1978). 35 See Release No. 34–40230 (July 17, 1998); 63 FR 40148 (July 27, 1998) (File No SR–MSRB–97– 14). 36 Id. 37 See Release No. 34–26985 (June 28, 1989); 54 FR 28799 at 28805 (Jul. 10, 1989). 38 Id. 39 See 54 FR 28799 at 28806. 40 For example, the MSRB understands that bond counsel or underwriter’s counsel frequently prepares the official statement on behalf of the issuer and may seek input on various components from the underwriter or the municipal advisor. However, Rule G–32(c) does not apply to bond E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices jbell on DSK30RV082PROD with NOTICES financial advisors and non-dealer municipal advisors may be engaged to review and contribute to portions of the document, they are less frequently engaged to ‘‘prepare’’ the official statement as they might have been in the past. Therefore, while the goal of Rule G–32(c) is consistent with the overall goal of Rule G–32 and Exchange Act Rule 15c2–12(b)(3), that is, to facilitate the prompt distribution of the official statement to the market and investors, that section of the rule itself is limited in such a way that its usefulness in the current market is questionable. The MSRB understands that Rule G–32(c) requirements apply to a limited universe of market participants (i.e., dealers acting as financial advisors that prepare the official statement). This leaves a gap such that Rule G–32(c) does not extend to parties other than dealers acting as financial advisors who prepare the official statement. In reviewing Rule G–32(c) and considering whether to expand the section of the rule to include non-dealer municipal advisors, the MSRB considered whether the existing rule and/or the expansion thereof would resolve a harm in the market. After discussions with various market participants and consideration of the actual scope of the impact of the rule, the MSRB believes any harm in the market related to the delivery of official statements would not be resolved by Rule G–32(c) regardless of whether dealers acting as financial advisors and non-dealer municipal advisors are required to comply. The MSRB believes the scope of Rule G–32(c) may be too limited to have any significant impact on the official statement delivery requirements. The MSRB understands that the obligation under Exchange Act Rule 15c2–12(b)(3) for an underwriter to contract with the issuer or its agent to receive the official statement within a defined period of time already ensures that the underwriter would receive the official statement within a certain period of time regardless of the party preparing it. counsel or underwriter’s counsel, and the MSRB does not have jurisdiction over these parties in any event. Therefore, if these parties were engaged to prepare the official statement for the issuer, they would not be subject to the requirements of Rule G–32(c). VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 Proposed Changes to Form G–32 Amend Form G–32 To Include 57 Additional Data Points Already Collected by NIIDS The proposed rule change would amend Form G–32 to include 57 additional data fields that would be auto-populated with datapoints already required to be input into NIIDS, as applicable, for NIIDS-eligible offerings. As previously noted, these data fields are currently available to regulators and certain other industry participants that have access to NIIDS. However, adding the data fields to Form G–32 would ensure the MSRB’s continued access to important primary offering information, and enhance its ability to oversee the accuracy and distribution of the information provided. At this time, however, the MSRB believes requiring the manual completion of all the above data fields for non-NIIDS-eligible issues such as private placements and other restricted offerings that are not intended for secondary market trading would be burdensome on underwriters.41 Thus, for a non-NIIDS-eligible primary offering, an underwriter would continue to be required to manually complete the same data fields on Form G–32 that it currently completes with the addition of one of the 57 data fields discussed above. The additional data field would indicate the original minimum denomination of the offering, as applicable. As with the other data points currently required on Form G–32, once an underwriter provides the information, it would be available to regulators. Regulators could use this information to determine whether a new issue of municipal securities is trading at the appropriate minimum denomination in the secondary market. Additionally, as with the other NIIDS data points discussed above, the MSRB may disseminate this information in the future. The MSRB believes that, at this time, requiring this additional information on Form G–32, as applicable, for NIIDSeligible offerings, and requiring the single additional data point for nonNIIDS-eligible offerings would not only assist the MSRB in ensuring its continued access to new issue 41 Non-NIIDS-eligible securities are less likely to trade in the secondary market because they typically are issued with trading restrictions and, therefore, less liquid. They are different from NIIDS-eligible securities, which by their nature are DTC eligible, and are freely tradable in the market. See supra footnote 8. The MSRB would continue to monitor the need for specific information with respect to non-NIIDS-eligible offerings to determine whether any other additional data elements may be required at a later time. PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 14993 information but would enhance MSRB regulatory transparency initiatives. Amend Form G–32 To Include Nine Additional Data Fields Not Currently Collected by NIIDS The proposed rule change would amend Form G–32 to include nine additional data fields, set forth below, for manual completion (i.e., not autopopulated from NIIDS), as applicable, by underwriters in NIIDS-eligible primary offerings of municipal securities. Underwriters in non-NIIDSeligible primary offerings would be required to manually complete two of these data fields: the ‘‘yes’’ or ‘‘no’’ indicator regarding whether the original minimum denomination for a new issue has the ability to change, and the ‘‘yes’’ or ‘‘no’’ indicator regarding whether the new issue has any restrictions. However, underwriters in non-NIIDSeligible offerings would not be required to complete the other seven data fields. The MSRB believes that the information collected by these data fields would enhance MSRB regulatory transparency initiatives as all the additional data elements would be immediately available to regulators to perform regulatory oversight of primary offerings and subsequent secondary market trading practices to ensure a fair and efficient market. Additionally, the MSRB may disseminate some or all of this information in the future. The proposed rule change would amend Form G–32 to add the following data fields: Ability for original minimum denomination to change—The MSRB believes providing a ‘‘yes’’ or ‘‘no’’ indicator at the time of issuance as to whether the original minimum denomination for an issue can change, would immediately enhance regulatory transparency and provide useful information to investors, should the MSRB disseminate this information in the future. In some primary offerings, for example, if the official statement or other offering document indicates that a municipal security is non-rated or below investment grade at the time of issuance, but the security achieves an investment grade rating at some point in the future, this could result in a change to the original minimum denomination. Because an underwriter would not be required to update this information over the life of the municipal security, having this indicator would highlight the need to check relevant disclosure documents for developments that could trigger a change in the original minimum denominations. Additional syndicate managers—The MSRB believes that having a data field E:\FR\FM\12APN1.SGM 12APN1 jbell on DSK30RV082PROD with NOTICES 14994 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices that indicates all the syndicate managers (senior and co-managers) on an underwriting would provide useful information for regulators. For example, regulators would be able to more easily identify where a particular syndicate manager was engaged or seek more information about particular syndicate managers, as needed, in performing oversight. Additionally, should the MSRB disseminate this information in the future, it could be used to evaluate the experience of a syndicate manager for an upcoming offering. The MSRB believes the complete list of underwriters typically is known at or before the pricing of an issue and, therefore, senior and co-manager information is readily available to the senior underwriter before Form G–32 is due. Call schedule—Requiring call schedule information on Form G–32 would include, for example, premium call dates and prices, and the par call date. For primary offerings with call prices stated as a percentage of the compound accreted value (CAV) the underwriter would enter the premium call dates and percentage of CAV the new issue can be called at as well as the par call date. All of which would immediately increase regulatory transparency, providing regulators with intermediate premium call dates and prices, and a means to differentiate between a call price represented in dollars as opposed to CAV. Additionally, should the MSRB disseminate this information in the future, access to all the relevant call information could help investors make more informed investment decisions. Identity of obligated person(s), other than the issuer—The MSRB believes that providing the name(s) of the obligated person(s), other than the issuer, for a primary offering of municipal securities is important because they are responsible for continuing disclosures, and this information is sometimes not easily identifiable for regulatory transparency purposes. Also, having more ways of identifying those legally committed to support payment of all or part of a primary offering would increase transparency, should the MSRB disseminate this information in the future. The MSRB recognizes that there may be confusion in identifying other obligated persons in a manner that is consistent. As a result, the MSRB believes the identity of the other obligated person(s) should be input on Form G–32 the same as it appears on the official statement, or if there is no official statement, in the manner it appears in the applicable offering VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 documents for the issue. This would ensure uniform practice in the identity of the obligated person(s), other than the issuer, with respect to that issue. LEI for credit enhancers and obligated person(s), other than the issuer,42 if readily available—The LEI provides a method to uniquely identify legally distinct entities that engage in financial transactions. The goal of this global identification system is to precisely identify parties to a financial transaction to assist regulators, policymakers and financial market participants in identifying and better understanding risk exposure in the financial markets and to allow monitoring of areas of concern. The MSRB believes that requiring this information for credit enhancers and obligated persons, other than the issuer, if readily available, would promote the value of obtaining LEIs and encourage industry participants to obtain them as a matter of course. An LEI would be considered ‘‘readily available’’ if it were easily obtainable via a general search on the internet (e.g., web pages such as https:// www.gleif.org/en/lei/search). The MSRB also believes that obtaining this information, when readily available, on credit enhancers and other obligated persons would help advance the goal of having a global identification method for these parties and improve the quality of municipal market financial data and reporting. Dollar amount of each CUSIP number advance refunded—The MSRB believes requiring information regarding the dollar amount of each CUSIP number advance refunded on Form G–32 would provide regulators important information regarding material changes to a bond’s structure and value and should the MSRB disseminate this information in the future, may assist investors in making more informed investment determinations. In the Request for Comment, the MSRB sought comment on a data field that would show the percentage of each CUSIP number advance refunded. Upon review of comments and discussions with certain market participants, the MSRB believes requiring the dollar 42 An LEI is a 20-digit alpha-numeric code that connects to key reference information providing unique identification of legal entities participating in financial transactions. Only organizations duly accredited by GLEIF are authorized to issue LEIs. The MSRB believes that, at this time, except for credit enhancers and obligated person(s), other than the issuer, the LEI information being sought is not critical in evaluating the financial risks of an issuer, and because issuers typically do not obtain an LEI, the likely time and costs associated with having to conduct a search to determine if LEI information is readily available for an issuer, would exceed any potential benefits. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 amount of each CUSIP number advance refunded instead of the percentage advance refunded would be more useful in understanding the value of the portion of an issue being advance refunded and would be less burdensome for underwriters to calculate. Retail order period by CUSIP number—Currently, primary offerings are flagged in the EMMA Dataport to indicate whether there is/was a retail order period. However, quite often not every maturity related to the offering is subject to a retail order period. The MSRB believes that requiring underwriters to mark a primary offering with a flag to indicate the existence of a retail order period for each CUSIP number would provide greater regulatory transparency as to the amount and types of bonds being offered in that retail order period. For example, a ‘‘yes’’ or ‘‘no’’ flag by CUSIP number would help regulators more easily identify orders that may not comply with a retail order period. Name of municipal advisor—The MSRB believes including this information would enhance regulatory transparency as key market participants would be more easily identifiable to regulators. Additionally, should the MSRB disseminate this information in the future, it could also assist certain market participants in evaluating the experience of the municipal advisor when reviewing primary offerings, especially for similar credits and structures. Finally, the MSRB intends to make this field autofill as the underwriter begins to input the name of the municipal advisor into the applicable text box. Restrictions on the issue—The MSRB believes adding a ‘‘yes’’ or ‘‘no’’ flag to Form G–32 for an underwriter to indicate whether the primary offering is being made with restrictions would help regulators and, should the MSRB disseminate this information in the future, it could help certain other market participants more easily identify this information. An explanation would be provided on Form G–32 indicating that ‘‘yes’’ should be selected for any offerings made with a restriction on sales, resales or transfers of securities such as, for example, sales only to qualified institutional buyers as defined under Securities Act Rule 144A and sales only to accredited investors as defined under Rule 501 of Regulation D under the Securities Act. 2. Statutory Basis The MSRB believes that the proposed rule change is consistent with the provisions of Section 15B(b)(2)(C) of the E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices Act,43 which provides that the MSRB’s rules shall: jbell on DSK30RV082PROD with NOTICES 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 and municipal financial products, to remove impediments to and perfect the mechanism of a free and open market in municipal securities and municipal financial products, and, in general, to protect investors, municipal entities, obligated persons, and the public interest. The proposed rule change would promote just and equitable principles of trade and remove impediments to and perfect the mechanism of a free and open market by amending Rule G–11 to require the senior syndicate manager to notify all syndicate and selling group members, at the same time via free-totrade wire or other industry-accepted electronic communication method, that the offering is free to trade in the secondary market. This proposed change would eliminate the potential for an unfair advantage in the secondary sales of municipal securities. Similarly, the proposed rule change would remove impediments to and perfect the mechanism of a free and open market by requiring the underwriter in an advance refunding to disclose advance refunding information, so all market participants have access to such information at the same time. The proposed rule change would promote just and equitable principles of trade by codifying in Rule G–11 the existing obligation of selling group members to comply with the issuer’s terms and conditions in a primary offering of municipal securities. The proposed rule change also would promote just and equitable principles of trade by ensuring issuers in a primary offering have information regarding the designations and allocations of their offering. Additionally, providing this information to issuers removes impediments to a free and open market in municipal securities by giving issuers valuable information they otherwise may not realize or know is available. The proposed rule change would promote just and equitable principles of trade and foster cooperation and coordination with persons engaged in processing information with respect to transactions in municipal securities and municipal financial products by aligning the payment of sales credits in net designation and group net sales transactions. Additionally, aligning 43 15 U.S.C. 78o–4(b)(2)(C). VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 these payments would remove impediments to a free and open market in municipal securities and municipal financial products by reducing credit risk in the market and allowing group net sales credit payments to be made to syndicate members on a shortened timeframe. The inclusion on Form G–32 of additional data fields would foster cooperation with persons engaged in regulating and processing information with respect to transactions in municipal securities and municipal financial products, by providing more transparency with respect to municipal securities offerings. For example, by obtaining this information, the MSRB and other regulators would have access to more fulsome and useful market data to help inform its regulation of the municipal securities markets. Finally, the proposed rule change would remove impediments to and perfect the mechanism of a free and open market in municipal securities by removing Rule G–32(c). By eliminating a rule that no longer resolves a market harm, the proposed rule change seeks to more appropriately respond to actual market practices, reduce regulatory burdens and thus encourage compliance with a more appropriate and beneficial process by which the underwriter receives the official statement in a primary offering of municipal securities. B. Self-Regulatory Organization’s Statement on Burden on Competition Section 15B(b)(2)(C) of the Exchange Act requires that MSRB rules not be designed to impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.44 The MSRB has considered the economic impact associated with the proposed amendments to Rule G–11, Rule G–32 and Form G–32 including a comparison to reasonable alternative regulatory approaches, relative to the baseline.45 The MSRB does 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 Exchange Act. The MSRB believes the proposed rule change is needed to increase regulatory transparency in the primary offering process and secondary market trading. 44 Id. 45 See Policy on the Use of Economic Analysis in MSRB Rulemaking, available at https://msrb.org/ Rules-and-Interpretations/Economic-AnalysisPolicy.aspx. In evaluating whether there was a burden on competition, the Board was guided by its principles that required the Board to consider costs and benefits of a rule change, its impact on capital formation and the main reasonable alternative regulatory approaches. PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 14995 Additionally, the MSRB believes the proposed rule change is necessary to ensure its continued access to important new issue information, address possible information asymmetry that arises from certain market practices and to improve the overall efficiency of the market. Rule G–11—Primary Offering Practices The proposed amendments to Rule G– 11 would address free-to-trade information dissemination, require information regarding designations, group net sales credits and allocations be provided to the issuer in a primary offering, align the time period for the payment of group net sales credits with the payment of net designation sales credits and explicitly state that selling group members must comply with the issuer’s terms and conditions in a primary offering. The need for the proposed amendments arises from the MSRB’s oversight of underwriters in primary offerings of municipal bonds. The MSRB believes that by not amending Rule G–11 and instead leaving the rule in its current state, certain market issues would remain unaddressed. For example, market transparency would not be enhanced, and information asymmetry would not be reduced with respect to certain areas. The MSRB also considered other alternative approaches to the proposed changes to Rule G–11. Regarding the requirement for the senior syndicate manager to provide detailed information regarding designations, group net sales credits and allocations of the securities in a primary offering to the issuer, the MSRB could also require that the information be provided to the issuer, but only upon the issuer’s request. However, the MSRB believes this alternative could result in frequent issuers having better access to information than issuers who are unaware that the information is available upon request. The proposed change to this requirement is designed to ensure that all issuers receive the relevant information on designations, group net sales credits and allocations, and the obligation can be met with the existing documents that are sent to syndicate members. A similar alternative would be to require the senior syndicate manager to provide designation, group net sales credit and allocation information to all issuers with an option to opt out of receiving the information. However, the MSRB is not aware of any likely rationale behind an issuer’s decision to decline the information other than the fact that the issuer may decide the burden of E:\FR\FM\12APN1.SGM 12APN1 14996 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices reviewing the information exceeds the benefits of the information itself.46 The MSRB has taken into consideration the likely costs and benefits associated with the proposed rule change and provides the following analysis for each specific proposal.47 Benefits and Costs—Free-to-Trade Information Dissemination Requiring senior syndicate managers to disseminate free-to-trade information to all syndicate and selling group members at the same time should ensure timely access to critical information. As is the case for all asymmetric information transactions, when a participant does not have the same information as others in a transaction, they are at a disadvantage. All syndicate and selling group members need to receive the information simultaneously to reduce any risk of unfair practices. The free-to-trade information is typically issued by the senior syndicate manager to all members of the syndicate. However, the MSRB understands that the timing of receipt of the free-to-trade information can vary such that information is not always received by all syndicate members at the same time. It is the MSRB’s understanding that, typically, the freeto-trade information is sent electronically and would be simple to provide to all syndicate and selling group members at the same time. Therefore, above-the-baseline costs 48 to senior syndicate managers associated with this requirement are expected to be insignificant. Syndicate and selling group members currently receiving the free-to-trade information after others in the syndicate have already received it would benefit from being notified earlier that they may trade in the secondary market at market prices equal to or different than the offering price. Thus, the MSRB believes that the likely benefits of this requirement significantly outweigh its likely costs. jbell on DSK30RV082PROD with NOTICES Benefits and Costs—Additional Information for the Issuer The main benefit of providing information regarding designations, group net sales credits and allocations to the issuer is to provide transparency 46 Issuers could choose to delete the information to avoid the burden. 47 In addition to the costs to dealers for compliance with the proposed amendments to Rule G–11, the MSRB believes that there also would be a small one-time cost associated with revising policies and procedures by syndicate managers as a result of these proposals. 48 For economic evaluation the proposed rule changes, the baseline is the current state under existing MSRB rules. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 to the issuer by giving them the same information received by the syndicate members. This information is beneficial to the issuer because it provides the issuer with relevant details regarding the issue and assists the issuer in determining whether certain syndicate rules or terms have been followed. Additionally, providing this information, in the aggregate, may help issuers understand the syndicate structures, the distinct responsibility of syndicate managers and members and fees earned by each syndicate participant, which may benefit issuers when they come to market again in the future. Because the senior syndicate manager is already required to provide these disclosures to each syndicate member and could meet this requirement with the same information that is sent to the syndicate members, the incremental cost of providing this information to the issuers as well should be negligible. The information on net designations, group net sales credits and allocations is typically provided electronically and therefore is easy to disseminate to additional parties. Benefits and Costs—Alignment of the Timeframe for the Payment of Group Net Sales Credits With the Payment of Net Designation Sales Credits Aligning the timeframe for the payment of group net sales credits to syndicate members with the timeframe for the payment of net designation sales credits would promote a uniform practice among payments of sales credits for syndicate members and limit the delay in getting paid for group net orders, while reducing syndicate members’ exposure to the senior syndicate manager’s credit risk. It is the MSRB’s understanding that many firms acting as a senior syndicate manager are already operating on the ten-day deadline for the payment of group net sales credits. For the limited number of firms who are not currently operating on the ten-day deadline, in order to meet the new timeframe for the payment of group net sales credits, those firms initially may need to revise certain internal processes, and thus may incur some upfront costs. However, the MSRB is not proposing to change the timeframe related to settlement of the syndicate or similar account, but rather, the timeframe within which payment of the group net sales credits occurs. Therefore, the associated costs should not be significant once the new process is in place. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 Benefits and Costs—Reinforce Selling Group Members’ Existing Obligations Currently, syndicate managers under Rule G–11(f) are required to promptly furnish in writing the issuer’s terms and conditions information described in this section to other members of the syndicate and selling group members. The benefit of this proposed rule change would be to reinforce selling group members’ existing obligation to comply with the issuer’s terms and conditions in a primary offering of municipal securities. Without this change, the issuer has much less certainty that their terms and conditions would be met. Selling group members presumably have a choice to become a member if they determine that the benefits from the ability to participant in a deal exceeds the compliance costs. This cost increase, however, would not be applicable to selling group members who are already in compliance with Rule G–11(f) when participating in a primary offering of municipal securities. The MSRB is unable to quantify the percentage of selling group members who are presently not in compliance and thus provide an estimate of the material increase of costs. However, the MSRB believes the overall benefits of full compliance by all selling group members should exceed the costs borne by non-compliant selling group members, as this has been the intended application of Rule G–11(f). Proposed Rule Change Under Rule G– 11—Effect on Competition, Efficiency and Capital Formation Since all four proposed changes to Rule G–11 would apply equally to all primary offerings of municipal securities and associated underwriters, they should not impose a burden on competition, efficiency or capital formation. The proposed changes are meant to improve the fairness and efficiency of the underwriting process and thus should improve capital formation. Specifically, the proposed changes are intended to protect issuers, syndicate members and investors, and thus to increase confidence in the capital markets by enhancing transparency and promoting fairness of the competition in the primary offering process. Rule G–32—Disclosures in Connection With Primary Offerings The proposed rule change as it relates to Rule G–32 would provide equal access to market participants regarding CUSIP numbers advance refunded and repeal the requirement for dealers acting as financial advisors that prepare the E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices official statement to make the official statement available to the underwriter promptly after approval by the issuer. jbell on DSK30RV082PROD with NOTICES Benefits and Costs—Equal Access to the Disclosure of the CUSIP Numbers Advance Refunded Currently, Rule G–32 requires underwriters of an advance refunding to provide the advance refunding document, which only includes a list of the advance refunded CUSIPs, to the EMMA Dataport and related information on Form G–32, no later than five business days after the closing date. The proposed change is needed to reduce information asymmetry that may arise in the secondary markets. In the case of advance refundings, information regarding the CUSIPs advance refunded may currently be available to certain market participants before it is available to others. This could result in negative consequences for the less informed market participants by forcing them to make investment decisions with less information than other market participants. The MSRB has considered the alternative of requiring the advance refunding document to be submitted to the EMMA Dataport sooner than five business days after closing to minimize the chance of discrepancy in the timing of disclosures made to different market participants. However, the MSRB understands that this information sometimes is not available sooner than five days after closing and proposing a requirement that the information be provided in a shorter timeframe may not be feasible at this time. The main benefit of advance refunding disclosure is reduced information asymmetry in the secondary market, which may in turn improve the market’s fairness and efficiency. Data are readily available to the underwriter; therefore, costs above the baseline would be limited to manually entering the amount of bonds advance refunded per CUSIP number, since underwriters are already required to provide advance refunding documents, if prepared, to the EMMA Dataport and related information on Form G–32. Effect on Competition, Efficiency and Capital Formation Since the proposed amendments would apply equally to all primary offerings and associated underwriters, they should not impose a burden on competition, efficiency or capital formation. In fact, since the proposed amendments are meant to improve the fairness and efficiency through equal access for all market participants of the underwriting process and thereafter the VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 secondary market trading, the proposed amendments should improve capital formation. Specifically, the proposed amendments protect investors, dealers and other market participants who currently do not have the equal access to the CUSIP number advance refunded information disclosure, and these protections could improve the competitiveness of the primary and the secondary markets, potentially benefiting issuers and investors alike. Benefits and Costs—Repeal of Requirement for Dealers Acting as Financial Advisors To Make the Official Statement Available to the Underwriters The official statement contains information that is critical to underwriters and market participants. Rule G–32(c) is limited in scope as it only applies to delivery of the official statement when it has been prepared by a dealer acting as a financial advisor. Exchange Act Rule 15c2–12(b)(3) more broadly applies to the underwriter in contracting with the issuer or its agent for receipt of the official statement in a certain amount of time. By eliminating the requirement for a dealer acting as a financial advisor to promptly deliver the official statement to the underwriters, the proposed rule change would promote the uniform practice of regulatory responsibility between dealer financial advisors and non-dealer municipal advisors with a potentially limited negative impact on the distribution of the official statement to the underwriter. Therefore, eliminating this requirement should not result in delayed information dissemination to market participants or hamper their ability to make more informed investment decisions. It will also reduce a burden for dealers acting as financial advisors that is no longer deemed necessary. To promote regulatory consistency and uniform practice, the MSRB considered the alternative of keeping the requirement and proposing to expand the requirement to also require non-dealer municipal advisors to make the official statement available to the underwriter after the issuer approves its distribution. However, upon further review, the MSRB believes this regulatory alternative would increase the burden for non-dealer municipal advisors but would provide limited benefits to the market. Based on market participant feedback, the MSRB understands that underwriters and issuers more frequently rely upon the contractual arrangements required by Exchange Act Rule 15c2–12(b)(3) for the delivery of the official statement in a timely manner. PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 14997 While the MSRB believes the costs of sending an official statement electronically to the underwriter is negligible, this proposed rule change would nevertheless reduce costs for dealers acting as financial advisors since they are no longer required to disseminate the official statement to the underwriter unless required pursuant to Exchange Act 15c2–12(b)(3), regardless of who prepared the official statement. Effect on Competition, Efficiency and Capital Formation The proposed rule change to eliminate the requirement for dealer financial advisors that prepare the official statement to disseminate the document to the underwriter is applicable to all dealer financial advisors. The proposed rule change removes an imbalance among financial advisors since currently dealer financial advisors are required to provide the official statement, but non-dealer municipal advisors are not. Therefore, the proposed rule change should not impose a burden on competition, efficiency or capital formation. In fact, because the amendments are meant to improve the fairness and consistency of regulatory responsibility between dealer financial advisors and non-dealer municipal advisors, they should create uniform practice which should improve competition and thus benefit capital formation. Eliminating this requirement should not result in delayed information dissemination to some market participants, hampering their ability to make more informed investment decisions. Changes to Form G–32 The proposed changes to Form G–32 would require additional data fields that would be auto-populated from NIIDS on Form G–32 as well as submission of additional data fields not currently in NIIDS on Form G–32, as applicable. The economic analysis below discusses the two categories of data fields separately. Broadly speaking, the need for the two categories of proposed additional data fields on Form G–32 arises from the fact that the existing information not currently on Form G–32, but proposed to be included, would enhance the MSRB’s regulatory transparency initiatives and facilitate the MSRB’s own usage of data. The two categories of proposed additional data points on Form G–32 should also reduce the MSRB’s dependence on third-party data providers and utilities for information disclosure and provide the MSRB greater flexibility in ensuring the accuracy of the data. Additionally, as part of the MSRB’s long running E:\FR\FM\12APN1.SGM 12APN1 14998 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices jbell on DSK30RV082PROD with NOTICES transparency initiatives, the MSRB may disseminate some or all of this information, in the future. The MSRB believes that providing transparency of municipal market information is an important way to reduce information asymmetry in the market and enhance data continuity. If the MSRB chooses to disseminate some or all of the information, in the future, investors would have an additional resource providing access to the information used in their assessment of the market value of the security. Benefits and Costs—Auto Population of Additional Data Fields on Form G–32 With Information From NIIDS An underwriter of a new issue that is NIIDS-eligible provides data to NIIDS with respect to that issue, as applicable; however, only some of that information is auto-populated into Form G–32. Therefore, the MSRB may be limited in its long-term flexibility to make the information transparent to the broader market on a sustained basis, as a result of the MSRB not being in full control of the collection of those additional data fields. The proposed changes would reduce the MSRB’s dependence on third-party data providers and utilities. These additional data elements comprise pertinent information about the municipal securities and not collecting the data would impede the MSRB’s goal of creating an ongoing transparent market for municipal securities. Having these fields on Form G–32 would also ensure that the MSRB would have continued access to vital primary offering information now and in the future. While much of the information contained in the proposed additional data fields is currently available to the public in the official statement for a primary offering, it is often not easily located or explicitly stated therein. Because official statements are not consistently formatted, and the specific information sought is not necessarily prominently displayed, at least some portion of retail and other investors may be unaware of, or have difficulty locating, pertinent information. Therefore, should the MSRB disseminate some or all of this information in the future, having readily-available information, on an ongoing basis is, consistent with the MSRB’s mission of market transparency. Underwriters of non-NIIDS-eligible offerings would be exempt from the requirement to manually complete the data fields on Form G–32 that would be auto-populated from NIIDS for NIIDSeligible offerings, except for one data field that indicates the original minimum denomination of the offering. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 The MSRB considered the alternative of requiring underwriters of non-NIIDSeligible issues to manually input all the applicable information from the 57 data fields onto Form G–32. However, the MSRB believes that, at this time, this alternative would impose an unnecessary burden on regulated entities by requiring them to devote additional time and resources to providing information for issues that are not likely to be traded in the secondary market and are less likely to be traded by retail investors.49 The MSRB believes that, other than the original minimum denomination information, the additional information being sought in the proposed data fields is not critical in evaluating these offerings at this time, and the likely costs associated with inputting all of the applicable fields manually onto Form G–32 would exceed the limited benefits. The MSRB considered the alternative of collecting the additional information from a third-party data vendor other than NIIDS, to the extent one exists. However, this would require the third party to obtain the information either from NIIDS, official statements, offering circulars or from the underwriter directly, again requiring unnecessary duplication of information input. Additionally, obtaining information from a third party might limit the MSRB’s ability to make the information available, thus hindering the MSRB’s goal of increasing market transparency. The MSRB believes that expanding the number of data fields on Form G– 32 would improve the MSRB’s flexibility regarding data usage. Specifically, by collecting the NIIDS data for inclusion on Form G–32, the MSRB would have greater control and flexibility for the foreseeable future without depending on third-party data providers or utilities. The effort would also have several long-term benefits for the MSRB, including its ability to increase transparency, improve market information and reduce the likelihood of information asymmetries, should the MSRB disseminate some or all of the information, in the future. In that regard, market participants, such as retail investors, issuers and smallersized institutional investors, and municipal advisors could have access to less information than market professionals, possibly resulting in information asymmetry. Information asymmetry could cause market price distortion and/or transaction volume depression resulting in an undesirable impact on the municipal securities market. 49 See PO 00000 supra footnote 39. Frm 00088 Fmt 4703 Sfmt 4703 Because underwriters are already required to submit this information to NIIDS for NIIDS-eligible offerings, the costs associated with providing these data elements are considered part of the baseline, assuming full compliance with applicable provisions of Rule G–32 and Rule G–34. The additional cost imposed on certain market participants for data to be auto-populated from NIIDS onto Form G–32 should be limited, which may include, for example, additional time to review the pre-populated information for accuracy.50 Underwriters of non-NIIDS-eligible primary offerings are already obligated to complete Form G–32 manually pursuant to Rule G–32(b)(i)(A)(2). Because the proposed rule change only requires underwriters of non-NIIDSeligible offerings to manually complete one of the 57 data fields (e.g., original minimum denomination), the MSRB believes the proposed addition should not impose any significant additional time or burden on those underwriters. Effect on Competition, Efficiency and Capital Formation Since the data is already provided to and available through NIIDS from underwriters of primary offering municipal securities that are NIIDSeligible, the proposed changes would not impose a significant burden on regulated entities. Submitters of Form G–32 would have a continued responsibility to ensure that prepopulated information is complete and accurate. However, this responsibility would not rise to the level of a burden on competition since it would apply equally to all underwriters inputting information for new issues. Additional Data Fields on Form G–32 Not Auto-Populated With Information From NIIDS Generally, the MSRB seeks to minimize the burden of rule amendments by, for example, obtaining information from existing sources such as NIIDS. Certain data elements that the 50 Presently, one firm submits data elements to Form G–32 via a business-to-business connection (‘‘B2B’’), which is a computer-to-computer connection that does not require any human intervention and provides underwriters a direct data submission channel to Form G–32. With respect to the proposed changes, this B2B submitter would presumably continue to provide all of the proposed data elements via the same B2B connection, because auto-population from NIIDS is not possible with this format of submission. However, B2B is an automated submission itself; therefore, the burden of providing these additional data elements would be limited to the initial time and cost of coding for the process. Subsequently, there should not be additional burdens associated with providing this information to the MSRB on a periodic basis. E:\FR\FM\12APN1.SGM 12APN1 jbell on DSK30RV082PROD with NOTICES Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices MSRB believes would be useful to regulators, however, are not currently input into NIIDS or collected by the MSRB but once directly input on Form G–32 they will be available to regulators. This information could also be useful to certain market participants, such as investors, issuers and municipal advisors and thus the MSRB may disseminate this information, in the future. As discussed in detail above with regard to the additional data elements not currently captured by NIIDS (i.e., ability for minimum denomination to change, additional syndicate managers, call schedule, legal entity identifiers for credit enhancers and obligated persons, name of municipal advisor, name of obligated person, the dollar amount of CUSIP advance refunded, restrictions on the issue and retail order period by CUSIP number), the MSRB has considered the need to require each of the proposed data elements individually. The MSRB believes that this information is valuable and would immediately enhance regulatory transparency. The information could also help promote a more efficient secondary market for municipal securities, should the MSRB disseminate some or all of the information, in the future. Not collecting the additional data elements would prevent the benefits that are associated with the proposed changes, including enhanced regulatory transparency, and the option to disseminate the information in the future, from being realized. Therefore, for the proposed changes to Form G–32 that are related to additional data elements that are not currently submitted to NIIDS, the MSRB is proposing to require underwriters of NIIDS-eligible offerings to manually input this information onto Form G–32 and to require underwriters of nonNIIDS-eligible offerings to include the data field related to whether the minimum denomination has the ability to change and whether the offering is being made with restrictions, as described below. Like the alternative above for autopopulation of data from NIIDS, the MSRB has considered the alternative to collect this information from a thirdparty vendor, to the extent one exists. However, reliance on third-party vendors could limit the MSRB’s flexibility and latitude to make the data available to the market, thus hindering the goal of increased regulatory transparency. The MSRB also considered collecting all of the proposed additional data through NIIDS, including the newly proposed VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 data elements that are not currently input into NIIDS. However, those data elements are currently not available from NIIDS; thus, it is more practicable for the MSRB to collect the information directly on Form G–32. If DTC were at some point to change its data collection scope, the MSRB could revisit the approach. The MSRB believes there would be many benefits associated with collection of the proposed additional data elements not currently collected in NIIDS, as these new data elements are currently not readily available or easily extractable by the MSRB. The proposed changes would ensure the MSRB can provide this information to the market, in the future, as appropriate, which would increase transparency, reduce information asymmetry, enhance market efficiency, and may assist individual investors and other market participants with more informed decision making. Additionally, should the MSRB disseminate some or all of this information, in the future, academic studies support disclosure and have consistently demonstrated that information disclosures on municipal bond issuances have benefited investors, particularly retail investors who have higher information acquisition costs than institutional investors.51 Finally, all the additional data elements would be useful for regulators to perform regulatory oversight of the primary offering practices and the secondary market trading practices to ensure a fair and efficient market. In the context of this proposal, the relevant costs are those associated with providing information for the proposed new data elements. For the most part, this information is readily available to underwriters. However, it is useful to consider each of the below elements individually. • Ability for Minimum Denomination to Change—The proposed rule change would include a ‘‘yes/no’’ flag on Form G–32 to indicate whether the minimum denomination for the new issue could change. Since this information is contained in the official statement, which is readily available to underwriters prior to issuance, the MSRB believes the costs associated with 51 See Christine Cuny, ‘‘When Knowledge is Power: Evidence from the municipal bond market,’’ Journal of Accounting and Economics, 2017, and Komla Dzigbede, ‘‘Regulatory Disclosure Interventions in Municipal Securities Secondary Markets: Market Price Effects and the Relative Impacts on Retail and Institutional Investors,’’ Working Paper, State University of New York at Binghamton, July 2017. PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 14999 providing this information would be negligible. • Call Schedule—The proposed rule change would require additional call information on Form G–32. Like most of the proposed data elements, call information is known to underwriters prior to issuance. Therefore, the costs associated with providing this information on Form G–32 primarily take the form of additional time needed to complete Form G–32. Like other proposed data elements, the MSRB believes that the time required to provide this information (and any subsequent cost) would not be significant. • Names of Municipal Advisors, Obligated Persons, Other than the Issuer and Additional Syndicate Managers (Senior and Co-Managers)—The proposed rule change would require the names of municipal advisors, obligated persons, other than the issuer, and additional syndicate managers (if applicable) on Form G–32. This information is readily available to underwriters and the incremental cost of providing this information takes the form of additional time required to complete Form G–32. • Retail Order Period by CUSIP—The proposed rule change would require more retail order period information on Form G–32. Specifically, underwriters would be required to provide CUSIPspecific retail order period information. Like other of the proposed data elements, this information is well known to the underwriter prior to issuance. Therefore, the burden of providing this proposed additional information is limited to simply inputting it on the form. Thus, the main associated burden would be the additional time required to complete the form. Incrementally, this cost would be minor as it should not require significant time to enter the information. • Dollar Amount of Security Advance Refunded by Each CUSIP Number—The proposed rule change would require the underwriter, in a refunding, to provide the dollar amount of each CUSIP number advance refunded in an issue. The dollar amount of CUSIP numbers being advance refunded is readily available and should not be difficult for underwriters to gather and to provide to the market, as underwrites should already have the information on hand. • LEIs for Credit Enhancers and Obligated Person(s), Other than the Issuer, if Available—The proposed rule change would require the LEI for the obligated person, other than the issuer, and any credit enhancers to be provided, if readily available. In the case of the LEI for credit enhancers, this E:\FR\FM\12APN1.SGM 12APN1 15000 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices information would only be required if credit enhancements were used. LEI information is publicly available through various platforms so the cost of obtaining and providing this information would be limited. Additional costs in the form of search time may be incurred if the underwriter does not have the appropriate LEI(s) on hand. • Restrictions on the Issue—The proposed rule change would add a ‘‘yes’’ and ‘‘no’’ flag to Form G–32 for an underwriter to indicate whether the offering is being made with restrictions. Because this information should be readily available to underwriters prior to issuance, the MSRB believes the costs associated with providing this information would be negligible. As noted above, for non-NIIDSeligible offerings, the underwriter would not be required to manually complete these additional fields, except for the data field that indicates the ability for the minimum denomination of an offering to change, where the underwriter would provide a ‘‘yes/no’’ flag to indicate whether the original minimum denomination for the issue has the ability to change, and the data field that indicates whether the offering is being made with any restrictions. The MSRB believes that the immediate increase in regulatory transparency and enhanced quality control, along with the potential longterm accrued benefits of disseminating the information, in the future, would outweigh the burden imposed on underwriters.52 Effect on Competition, Efficiency and Capital Formation The MSRB believes that the proposed rule change may improve the efficiency of the municipal securities market by promoting a uniform practice and consistency and transparency of information. At present, the MSRB is unable to quantitatively evaluate the magnitude of efficiency gains or losses, or the impact on capital formation. However, the MSRB believes that the benefits would outweigh the costs over the long term. Additionally, in the MSRB’s view, the proposed changes would not result in an undue burden on competition since they would apply to all underwriters equally. jbell on DSK30RV082PROD with NOTICES 52 For B2B submissions, to provide the aboveproposed data elements, this submitter would incur development costs to code for the new submission format since their information is not auto-populated on Form G–32 from NIIDS. The MSRB realizes that this firm would most likely face greater up-front costs in the event of a rule change due to the onetime cost to revise the firm’s B2B submission code than firms submitting manually. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 Overall, the MSRB believes, in aggregate, the above proposed changes should bring additional benefits to the primary and secondary markets, with relatively limited costs to market participants. The MSRB has assessed the impact of the proposed changes and believes that the likely aggregate benefits should accrue and outweigh the likely costs over the long term. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others As previously noted, on September 14, 2017 and July 19, 2018, the MSRB published the Concept Proposal 53 and Request for Comment,54 respectively, seeking public comments on various aspects of current primary offering practices and setting forth several questions related to Rule G–11 and Rule G–32, as well as Form G–32 data fields. Following its review of the comments, the MSRB also conducted additional outreach with various market participants. The following summarizes the comments received on both the Concept Proposal and the Request for Comment and sets forth the MSRB’s responses thereto. With regard to the Concept Proposal, the MSRB only provides responses to comments regarding those items that were not subsequently addressed in the Request for Comment. With respect to the Request for Comment, the MSRB provides responses to comments for each proposed change therein as set forth below. Summary of Comments Received in Response to the Concept Proposal The MSRB received 12 comment letters in response to the Concept Proposal. BDA and SIFMA both indicated their belief that current primary offering practices are adequate, and they saw no need for sweeping changes. NABL focused its comments on questions in the Concept Proposal that it believed could result in unintended consequences on dealers in primary offerings. NAMA indicated that its main concern was ‘‘that elements of the Concept Proposal suggest MSRB rule changes that exceed the MSRB’s statutory authority.’’ Other commenters provided views on various aspects of the Concept Proposal as set forth in the summary below. 53 MSRB Regulatory Notice 2017–19 (September 14, 2017). 54 MSRB Notice 2018–15 (July 19, 2018). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 Rule G–11—Primary Offering Practices Bona Fide Public Offering In the Concept Proposal, the MSRB sought comment on whether there should be a requirement in Rule G–11 that syndicate members must make a ‘‘bona fide public offering’’ of municipal securities at the public offering price. The MSRB asked, among other things, how such a requirement would apply, what definition of ‘‘bona fide public offering’’ should apply, what documentation would be necessary to document compliance and whether issuing guidance might be a better alternative. Four commenters provided comments on this issue,55 with three commenters expressly opposing any rulemaking by the MSRB with respect to ‘‘bona fide public offerings.’’ 56 NABL and SIFMA noted that the contract between the issuer and the underwriter dictates whether there is a requirement to make a bona fide public offering at the public offering price and that the MSRB should not inject itself into those negotiations.57 SIFMA stated its concern that creating a regulatory requirement that offerings must be undertaken in a bona fide public offering would ultimately require a much more extensive set of regulatory changes and line drawing to deal with many situations where a traditional public offering may appropriately not be sought.58 According to SIFMA, this would raise considerable risk of regulations driving market decisions rather than the intentions of the party or free market forces.59 Finally, SIFMA noted that it is in the process of reviewing its Master Agreement Among Underwriters (‘‘AAU’’) and will consider what, if any, changes could be made to address some of the issues related to a syndicate member’s ‘‘bona fide public offering’’ obligations.60 NABL suggested that the MSRB update its guidance with respect to Rule G–17 to clarify that, if an underwriter is not contractually obligated to conduct a bona fide public offering, the underwriter should be required to indicate this point, as well as any material risks to the issuer of not conducting a bona fide public offering, in its disclosures under Rule G–17.61 SIFMA suggested that the MSRB could 55 BDA Letter I, NABL Letter I, TMC Bonds Letter I and SIFMA Letter I. 56 BDA Letter I, NABL Letter I and SIFMA Letter I. 57 NABL Letter I at 1; SIFMA Letter I at 4–5. 58 SIFMA Letter I at 4. 59 Id. 60 SIFMA Letter I at 5–6. 61 NABL Letter I at 1. E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices consider issuing interpretive guidance under Rule G–17 relating to material failures of a syndicate member to adhere to the contractual offering requirements that have a material adverse impact on the syndicate or the issuer.62 TMC Bonds stated that it is possible that the closed nature of the traditional syndicate structure has an unintended consequence—instead of assuring that the public has access to new issue municipal securities, only members of the syndicate or participants in a distribution agreement have such access.63 TMC Bonds suggested that the MSRB could consider that a ‘‘bona fide public offering’’ may be accomplished by posting new issues on a ‘‘market center,’’ independent of syndicate structure, allowing investors (via a dealer) with no access to the retail order period to enter orders for new issues.64 TMC Bonds noted that this would allow the ‘‘public’’ to have access to new issues in a more transparent manner than in a syndicate retail order period.65 TMC Bonds suggested that, among other requirements, dealers submitting orders would need to provide an attestation that orders are from ‘‘bona fide’’ retail investors, and anonymous orders would not be allowed.66 Finally, SIFMA noted that the Internal Revenue Service’s (IRS) issue price rules should take the lead on matters related to bona fide public offerings and initial offering prices and that the MSRB should wait on any rulemaking in this area until the market has adapted to the IRS requirements.67 In response to the comments received, the MSRB agrees with NABL and SIFMA that the contract between the issuer and the underwriter dictates whether there is a requirement to make a bona fide public offering at the public offering price. As a result, the MSRB determined to set aside discussions related to amending Rule G–11 to require syndicate members to make a bona fide public offering of municipal securities. Free-to-Trade Wire jbell on DSK30RV082PROD with NOTICES The MSRB sought comment on whether the senior syndicate manager should issue the free-to-trade wire to all syndicate members at the same time. Two commenters provided input on this issue.68 BDA believed the MSRB should require all senior syndicate managers to send a free-to-trade wire to all syndicate 62 SIFMA Letter I at 4–5. Bonds Letter I at 1. 64 TMC Bonds Letter I at 2. 65 Id. 66 Id. 67 SIFMA Letter I at 5. 68 BDA Letter I and SIFMA Letter I. 63 TMC VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 members once formal award has been assigned and that the wire should be sent on a maturity-by-maturity basis.69 Alternatively, SIFMA indicated that no regulatory requirements are needed to address the distribution of the free-totrade wire.70 SIFMA, in reviewing and revising its AAU, indicated it will consider whether to include provisions that would make more explicit the method by which free-to-trade information is communicated to syndicate members and other dealers involved in the distribution of a new issue.71 If the MSRB were to pursue a rulemaking in this area, SIFMA stated it should be limited to ensuring communications occur on a material simultaneous basis and not pursuant to specified timeframes.72 Additional Information for the Issuer The MSRB asked commenters whether the senior syndicate manager should be required to provide information to issuers on designations and allocation of securities in an offering and, if so, whether there would be a preferred method for providing the information. Additionally, the MSRB asked whether there were reasonable alternatives to this potential requirement and what benefits and burdens might be associated therewith. Four commenters responded to this inquiry.73 BDA indicated that not all issuers have access to detailed information about their securities (and in fact, according to BDA, frequently even syndicate members do not receive this information).74 BDA recommended that the MSRB require syndicate managers to send the issuers such information, as well as the underwriting spread breakdown, upon request.75 Similarly, GFOA noted that an issuer should be made aware of information distributed to the syndicate and that such information should be distributed to the entire syndicate at the same time, so no syndicate member has an advantage over another.76 The City of San Diego indicated that it actively requests and receives the relevant information from syndicate managers. However, it stated that, if the information is not currently provided to all issuers, the City of San Diego believes that Rule G–11 should be amended to require the senior syndicate manager to provide it unless the issuer opts out of receiving it.77 The City of San Diego further indicated that the senior syndicate manager in negotiated sales should be required to obtain the issuer’s approval of designations and/or allocations unless otherwise agreed to between the parties.78 GFOA indicated that it is a best practice to have discussions about the issuer’s approval of designations and/or allocations.79 SIFMA indicated that it was unaware of any circumstances where a syndicate manager refused to provide information to an issuer or where an issuer complained that such information was withheld.80 If the MSRB were to undertake rulemaking in this area, SIFMA stated that the senior syndicate manager should only be required to provide the information to the issuer upon request.81 Finally, SIFMA stated that a senior syndicate member should not be required to obtain the issuer’s approval of designations and/or allocations.82 According to SIFMA, most issuers likely have no interest in approving allocations, and those that do, normally reach agreement with the syndicate manager to do so.83 SIFMA is unaware of circumstances where a syndicate manager has agreed to allow the issuer to approve of designations/ allocations and then has failed to do so.84 Alignment of the Payment of Sales Credits for Group Net Orders With the Payment of Sales Credits for Net Designation Orders and Shortened Timeframe The MSRB asked commenters whether the timing of the payment of sales credits on group net orders should be aligned with the timing of the payment of sales credits on net designated orders. Two commenters responded.85 BDA recommended that the MSRB align the time period for the payment of sales credits on both group net and net designated to 10 business days.86 SIFMA, on the other hand, indicated that absent evidence of significant problems with the current timeframes, the MSRB should make no changes.87 77 City of San Diego Letter I at 1. 78 Id. 69 BDA 79 GFOA 70 SIFMA 80 SIFMA Letter I at 2. Letter I at 7. 71 SIFMA Letter I at 5. 72 SIFMA Letter I at 7. 73 BDA Letter I, City of San Diego Letter I, GFOA Letter I and SIFMA Letter I. 74 BDA Letter I at 2. 75 Id. 76 GFOA Letter I at 1. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 15001 Letter I at 1. Letter I at 7–8. 81 SIFMA Letter I at 8. 82 SIFMA Letter I at 9. 83 Id. 84 Id. 85 BDA Letter I and SIFMA Letter I. 86 BDA Letter I at 3. 87 SIFMA Letter I at 10. E:\FR\FM\12APN1.SGM 12APN1 15002 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices According to SIFMA, the determinations of these two payments are based on different inputs that could drive the time disparity.88 Priority of Orders and Allocation of Bonds Four commenters provided comment on whether Rule G–11 should be amended to explicitly state the process by which orders must be given priority.89 BDA and the City of San Diego believed that the rule should be amended to require senior syndicate managers, in negotiated sales, to allocate retail priority orders up to the amount of priority set by the issuer before allocating to lower priority orders, unless the issuer provides otherwise.90 SIFMA, however, stated that the current priority provisions achieve an appropriate balance of competing legitimate interests in the primary offering distribution process.91 SIFMA stated that syndicate members are obligated to follow the direction given by the issuer with regard to the priority for filling orders on that issuer’s primary offering offerings, and it is critical that MSRB rules not impede this practice.92 Further, according to SIFMA, existing MSRB guidance under Rule G–17 is adequate to address situations where the syndicate has materially departed from priority requirements.93 GFOA stated that the issuer’s priority of order designations are stated on the pricing wire and, if the issuer has indicated its preference for priority, the senior syndicate manager should abide by the issuer’s preference.94 In response to the comments received, the MSRB determined not to seek additional comment on the proposed amendment to explicitly define the process by which orders must be given priority in a primary offering. The MSRB believes that the requirements under Rule G–11 regarding priority of orders and the interpretative guidance under Rule G–17 expressly address how orders are given priority. At this time, the MSRB believes that additional rulemaking would not enhance existing priority and allocation related rules and guidance. jbell on DSK30RV082PROD with NOTICES 88 Id. 89 BDA Letter I, City of San Diego Letter I, GFOA Letter I and SIFMA Letter I. 90 BDA Letter I at 3 and City of San Diego Letter I at 1. 91 SIFMA Letter I at 10. 92 Id. 93 SIFMA Letter I at 12. 94 GFOA Letter I at 1. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 Rule G–32—Disclosures in Connection With Primary Offerings Disclosure of the CUSIPs Advance Refunded and the Percentages Thereof The MSRB requested comment on whether the MSRB should require underwriters to disclose, within a shorter timeframe than is currently required, and to all market participants at the same time, CUSIPs advance refunded and the percentages thereof. Six commenters provided their views.95 The City of San Diego, NFMA and Wells Capital agreed that underwriters should disclose the refunding CUSIPs to all market participants at the same time.96 Wells Capital noted that incomplete refunding disclosures or selective disclosures can create inequitable trading advantages for those obtaining refunding information prior to it being posted on EMMA.97 NFMA stated that the most effective and least costly solution to ensure all investors have equal access to advance refunded CUSIP information is the disclosure of information to EMMA at the same time, as soon as practicable.98 BDA agreed that the MSRB should require the senior syndicate manager or sole manager to disclose the CUSIPs advance refunded and the percentages thereof within a short period following the pricing of the refunding bonds, if available.99 SIFMA questioned the value of requiring submission of the percentages.100 NABL indicated that, while it has no view as to whether such a requirement should be adopted, it does believe it is important that any requirement not serve to indirectly regulate issuers by creating a de facto requirement that CUSIPs be identified by the issuer at pricing or any time before the issuer is otherwise obligated to provide such information.101 SIFMA believed the deadline for submitting advance refunding documents should remain at the current five business days after closing.102 SIFMA noted that, while making information about advance refunded bonds available at an earlier timeframe would be beneficial to the marketplace, it cautioned that the MSRB should thoroughly analyze the changes required to be made to Form G–32 and the 95 BDA Letter I, City of San Diego Letter I, NABL Letter I, NFMA Letter I, SIFMA Letter I and Wells Capital Letter I. 96 City of San Diego Letter I at 1, NFMA Letter I at 2 and Wells Capital Letter I at 2. 97 Wells Capital Letter I at 2. 98 NFMA Letter I at 2. 99 BDA Letter I at 3. 100 SIFMA Letter I at 14. 101 NABL Letter I at 2. 102 SIFMA Letter I at 13. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 EMMA primary market submission system.103 Further, SIFMA stated that, if a municipal advisor participates, the municipal advisor rather than the underwriter should be required to submit the advance refunding document and associated information to EMMA.104 Submission of Preliminary Official Statements to EMMA Nine commenters addressed the question about whether Rule G–32 should require the posting of the preliminary official statement (‘‘POS’’) to EMMA.105 Four commenters believed there should be a requirement that the POS be submitted to EMMA promptly.106 The City of San Diego noted that there is no valid reason for some market participants to have access to the POS before others.107 It indicated that the underwriter in a negotiated sale and the municipal advisor in a competitive sale should be required to submit the POS to EMMA concurrently with, or within one business day of, receiving confirmation from the issuer that the POS has been electronically printed/posted.108 If the information changes, the City of San Diego believed the underwriter or municipal advisor should be required to post a supplement or remove the POS if it becomes stale.109 Similarly, NFMA supported submission of the POS to EMMA prior to pricing to ensure that all market participants, including holders of parity bonds, have equal access to the latest disclosure documents of an issuer.110 Paganini and Wells Capital urged the MSRB to require underwriters (and municipal advisors, in the case of Wells Capital) to promptly submit the POS to EMMA so all potential buyers/investors have access to the information at the same time.111 Five commenters opposed requiring the mandatory posting of a POS to EMMA.112 Three commenters believed such a requirement would be outside the MSRB’s jurisdiction and would be indirect regulation of issuers by the MSRB in violation of the Exchange 103 Id. 104 SIFMA Letter I at 14. Letter I, City of San Diego Letter I, GFOA Letter I, NABL Letter I, NAMA Letter I, NFMA Letter I, Paganini Letter I, SIFMA Letter I and Wells Capital Letter I. 106 City of San Diego Letter I, NFMA Letter I, Paganini Email I and Wells Capital Letter I. 107 City of San Diego Letter I at 1–2. 108 Id. 109 City of San Diego Letter I at 2. 110 NFMA Letter I at 2. 111 Paganini Email I at 1 and Wells Capital Letter I at 2. 112 BDA Letter I, GFOA Letter I, NABL Letter I, NAMA Letter I and SIFMA Letter I. 105 BDA E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices Act.113 GFOA indicated that the POS should only be posted at the direction of the issuer.114 NAMA believed that requiring the municipal advisor to post the POS could cause them to be engaging in broker-dealer activity and could possibly force them to violate their fiduciary responsibilities to their municipal issuer clients if posting the information may be counter to the issuer’s wishes or benefit.115 According to SIFMA, the POS as a disclosure document is incomplete, subject to change and quickly replaced by the final official statement; as marketing material, it would transform EMMA from a disclosure and transparency venue to a central marketplace.116 Additionally, according to SIFMA, any pre-sale posting of the POS would require issuer consent, thus the MSRB would need to work with the issuer community to ensure they would be willing to give such consent. SIFMA also noted that the MSRB previously sought comment on this same issue in 2012 and noted that ‘‘very little has changed since then.’’ 117 If the MSRB chooses to pursue rulemaking in this area, SIFMA indicated that the MSRB should carefully consider the points raised by SIFMA and other commenters in response to the 2012 release.118 Two commenters noted the difficulty in ensuring that updated information is disseminated once a POS has been posted. For example, BDA stated that the MSRB would need to develop a mechanism to ensure that everyone who viewed a POS on EMMA would receive any supplements subsequently provided.119 Similarly, NAMA asked how updated information would be ‘‘flagged as being revised’’ and how a dealer would reach investors who had previously received a POS that was now stale.120 The MSRB agrees with the majority of commenters that there should not, at this time, be a requirement to post the preliminary POS to EMMA. Because the POS is more likely to change than the OS, the MSRB agrees that it would be difficult to ensure that the POSs posted were current and not outdated and that posting such documents could lead to confusion and misinformation about a particular issue. In addition, issuers currently are free to upload their jbell on DSK30RV082PROD with NOTICES 113 GFOA Letter I, NABL Letter I and NAMA Letter I. 114 GFOA Letter I at 2. 115 NAMA Letter I at 2–3. 116 SIFMA Letter I at 15. 117 SIFMA Letter I at 16. 118 Id. See also MSRB Notice 2012–61 (Dec. 12, 2012). 119 BDA Letter I at 4. 120 NAMA Letter I at 3–4. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 preliminary POS to EMMA if they so choose. Whether Non-Dealer Financial Advisors Should Make the Official Statement Available to the Underwriter After the Issuer Approves It for Distribution Three commenters provided comment on this question.121 BDA and SIFMA urged the MSRB to amend Rule G–32(c) to apply to all municipal advisors 122 instead of only to dealer financial advisors.123 NAMA indicated that the municipal advisor should not have the responsibility to make the official statement available to the underwriter unless tasked to do so by the issuer.124 NAMA noted that municipal advisors should be removed all together from Rule G–32(c) because Exchange Act Rule 15c2–12 sets forth a process by which an underwriter obtains the official statement.125 Whether the MSRB Should AutoPopulate Into Form G–32 Certain Information That Is Submitted to NIIDS But Is Not Currently Required To Be Provided on Form G–32 The MSRB received three comments on the question of whether Form G–32 should be amended to require certain additional data fields that would be auto-populated with information currently submitted to NIIDS.126 BDA recommended, generally, that the MSRB auto-populate information from NIIDS into Form G–32, and NAMA indicated that this is the type of review the MSRB should be undertaking to reduce the compliance burden on regulated entities.127 SIFMA suggested that autopopulating Form G–32 with initial minimum denomination information from NIIDS would assist the marketplace overall in better complying with MSRB Rule G–15(f), on minimum denominations.128 SIFMA also suggested that certain call-related fields in NIIDS might be useful if included on Form G–32, but suggested that the MSRB first should conduct a thorough review of the data to ensure that the structure of the data provided in NIIDS provides an accurate representation of the different call features used in the 121 BDA Letter I, NAMA Letter I and SIFMA Letter I. 122 In discussing the Request for Comment, commenters used the terms ‘‘financial advisor’’ and ‘‘municipal advisor’’ interchangeably for purposes of describing a dealer acting as a financial advisor. 123 BDA Letter I at 4 and SIFMA Letter I at 19. 124 NAMA Letter I at 2. 125 NAMA Letter I at 4. 126 BDA Letter I, NAMA Letter I and SIFMA Letter I. 127 BDA Letter I at 4 and NAMA Letter I at 5. 128 SIFMA Letter I at 19. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 15003 municipal securities market.129 In any event, SIFMA suggested that the MSRB should undertake a notice and comment period with respect to any additional data elements it would propose to make public through EMMA.130 Whether the MSRB Should Request Additional Information on Form G–32 That Currently Is Not Provided in NIIDS, and If So, What Data Five commenters provided comments on this issue.131 All five of the commenters thought certain items would be useful if included on Form G– 32, and disseminated, but none believed all of the identified potential items from the Concept Proposal should be included. The City of San Diego and NAMA specifically thought the municipal advisor fee should not be included, and the City of San Diego also believed the management fee should be excluded because of the vast differences in how it is determined between differing transactions.132 SIFMA indicated that EMMA is not the proper venue for disclosing fees and expenses that are incorporated into the information provided in the official statement.133 Additionally, BDA indicated that minimum denomination and call information would be useful on Form G–32.134 NAMA indicated that additional information would benefit issuers and the marketplace, especially information related to true interest cost and yield to maturity.135 SIFMA raised concerns regarding the current process for submitting information on commercial paper issues, which are not subject to the NIIDS requirement and, according to SIFMA, ‘‘consistently raise significant operational and compliance difficulties.’’ 136 SIFMA asked that the MSRB engage in discussions with SIFMA members to assess the operational issues and develop solutions to enhance efficiency and effectiveness of commercial paper submissions.137 Two commenters specifically noted their support for the inclusion of legal entity identifiers (‘‘LEIs’’) on Form G– 32.138 GLEIF indicated its belief that 129 Id. 130 Id. 131 BDA Letter I, City of San Diego Letter I, GLEIF Letter I, NAMA Letter I and SIFMA Letter I. 132 City of San Diego Letter I at 2 and NAMA Letter I at 5. 133 SIFMA Letter I at 19. 134 BDA Letter I at 4. 135 NAMA Letter I at 5. 136 SIFMA Letter I at 24. 137 Id. 138 GLEIF Letter I and SIFMA Letter I. E:\FR\FM\12APN1.SGM 12APN1 15004 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices requiring issuers to register for LEIs would help move towards global harmonization for U.S. issuers to be identified by LEIs.139 SIFMA noted that Form G–34 should have a field for the submission of LEIs, as the LEI system would be useful to the MSRB in terms of enhancing transparency in the issuance of municipal securities.140 While SIFMA recognized the potential costs to issuers to register for LEIs, it believed the MSRB should strongly promote the value of obtaining LEIs by issuers and obligors as part of the issuance process.141 Additionally, SIFMA suggested the MSRB provide written materials describing the benefits of and the process for obtaining LEIs to assist the industry in promoting the benefits to issuers and obligors during the issuance process.142 Other Questions Has the IRS’s issue price rule impacted any primary offering practices in the municipal securities market, and in what ways? If any MSRB rules are affected, what, if any, amendments should be considered? BDA, GFOA, NABL and SIFMA each provided comments on this question. BDA believed the IRS’s issue price rule has not changed the primary offering practices for municipal securities.143 NABL stated that no MSRB rule should be adopted if it would undermine, conflict with or make impractical the continued compliance with the issue price rules.144 GFOA expressly supported NABL’s position.145 Finally, SIFMA noted that the issue price rules should take the lead on matters related to bona fide public offerings and initial offering prices and that the MSRB should wait on any rulemaking in this area until the market has adapted to the IRS requirements.146 The MSRB determined that the rules being considered in the Concept Proposal did not impact or conflict with the IRS issue price rules, nor did they impact an underwriter’s ability to conform with those rules. Are there any other primary offering practices that the MSRB should consider in its review? Three commenters provided thoughts on other primary offering practices the MSRB should consider.147 Doty 139 GLEIF Letter I at 1. Letter I at 21. jbell on DSK30RV082PROD with NOTICES 140 SIFMA 141 Id. suggested that the MSRB consider amending Rule G–32(iii)(A) to require disclosure of ‘‘the amount of any compensation received by the broker, dealer or municipal securities dealer at any stage of the offering from an obligated person or any other party, in addition to the governmental issuer, in connection with completion of one or more stages of the offering or completion of the entire offering or both.’’ 148 According to Doty, without disclosure, investors would believe that the underwriter/placement agent received only the compensation paid by the governmental issuer, without knowledge of the underwriter’s/ placement agent’s full compensatory motivation to complete the transaction.149 Doty further suggested that municipal advisors should disclose all of their compensation in both negotiated and competitive offerings and whether their compensation was contingent upon the closing of the transaction or achievement of any other factor, such as the size of the transaction.150 The MSRB agrees that the issue of compensation paid to the underwriter is an issue of interest, but believes consideration of this issue should be undertaken separately from the primary offering practices rule review. NAMA suggested that the MSRB should ensure that all references in the MSRB rule book to dealer-municipal advisors, municipal advisors and financial advisors ‘‘correctly reflect the actual duties and responsibilities of [m]unicipal [a]dvisors that are stated in the Exchange Act and the Final Municipal Advisor Rule.’’ 151 Additionally, NAMA urged the MSRB to address the impact of rulemaking on small municipal advisory firms.152 The MSRB agrees that certain terminology and references in its rules could be clarified or modernized as a result of the municipal advisor regulatory regime, but that consideration of such changes should be undertaken separately from the primary offering practices rule review. Wells Capital asked that the MSRB address in Rule G–32 the current practices related to the ‘‘deemed final’’ POS required under SEC Rule 15c2–12 regarding both timing of the pricing and completeness of the deemed final POS.153 In Wells Capital’s experience, pricing of municipal deals usually is not 142 Id. 143 BDA 148 Doty 144 NABL 149 Doty Letter I at 5. Letter I at 2. 145 GFOA Letter I at 1. 146 SIFMA Letter I at 24. 147 Doty Letter I, NAMA Letter I and Wells Capital Letter I. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 Letter I at 1. Letter I at 2. 150 Id. 151 NAMA PO 00000 Summary of Comments Received in Response to the Request for Comment The Request for Comment sought further comment on proposed amendments to Rule G–11 related to (1) simultaneous issuance of the free-totrade wire; (2) providing additional information to the issuer related to designations and allocations; and (3) alignment of the timeframe for the payment of group net sales credits with the payment of net designation sales credits. Additionally, the Request for Comment sought input on proposed amendments related to Rule G–32 and Form G–32, including (1) disclosures of CUSIP numbers advance refunded and the percentages thereof; (2) whether non-dealer municipal advisors should be required to make the official statement available to the underwriter after the issuer approves it for Letter I at 6. 152 Id. 153 Wells based on a deemed final POS as is required under Rule 15c2–12.154 Additionally, Wells Capital requested that the MSRB address issues regarding the minimum time needed between the issuance of a deemed final POS and pricing. Wells Capital urged the MSRB to impose a minimum number of business days between the distribution of a deemed final POS and the pricing of that transaction. According to Wells Capital, underwriters attempt to rush final pricing without a deemed final POS in the hopes that the buy-side will not detect all the ‘‘warts’’ in the transaction or will not raise questions that have not been adequately addressed in the POS. Finally, Wells Capital urged the MSRB to address current practices by issuers and underwriters related to selective disclosure.155 For jurisdictional reasons the MSRB is unable to address the issues proposed by Wells Capital. What are the reasonable alternatives to each of the above proposals? For example, are any of the proposals that would require a rule change better addressed through other means, such as interpretive guidance, compliance resources, additional outreach/ education, new MSRB resources, or voluntary industry initiatives? Are there less burdensome or more beneficial alternatives? The MSRB received no comments related to this set of questions. After carefully considering commenters’ suggestions and concerns regarding the Concept Proposal, the MSRB determined to seek further comment, on certain of the concepts, as discussed in more detail below. 154 Id. Capital Letter I at 3. Frm 00094 Fmt 4703 Sfmt 4703 155 Id. E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices distribution; (3) whether Form G–32 should be auto-populated with additional information from NIIDS; and (4) whether Form G–32 should be amended to request additional information that would not be autopopulated from NIIDS. The MSRB received 10 comments letters in response, which are summarized below. jbell on DSK30RV082PROD with NOTICES Rule G–11—Primary Offering Practices Free-to-Trade Wire The Request for Comment again sought feedback on proposed amendments to Rule G–11, on primary offering practices, to add a requirement that the senior syndicate manager issue the free-to-trade wire to all syndicate members at the same time. BDA, GFOA and SIFMA supported this proposed change. However, BDA recommended that the rule not prescribe the manner of dissemination of a free-to-trade wire, specifically, because industry customs change and eventually dissemination of such information may be made in another manner.156 Instead, BDA suggested modifying the proposed language to require notification ‘‘in any reasonable manner accepted and customary’’ in the industry.157 GFOA suggested that the proposed change include language that addresses the Internal Revenue Service (IRS) issue price rules.158 Specifically, GFOA suggested that language be included that indicates trades may not be allowable at any price if issue price restrictions (such as hold-the-price restrictions) are in place.159 As previously noted, the MSRB believes equal access to information is important to the fair and effective functioning of the market for primary offerings of municipal securities. In addition, after consulting with stakeholders, the MSRB added selling groups to the parties that should receive the free-to-trade information as proposed. The MSRB believes requiring dissemination of this information for receipt by all syndicate and selling group members at the same time, would prevent preferential access to the freeto-trade information. In response to commenters, the MSRB is not proposing to dictate the timing of when, or the form of how, the free-to-trade communication should be sent, but that dissemination be electronic by an industry-accepted method. The MSRB does not believe it is prudent or necessary to include a reference to IRS issue price rules in proposed changes to 156 BDA Letter II at 1. 157 Id. 158 GFOA Letter II at 2. 159 Id. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 Rule G–11, as syndicate and selling group members have an existing obligation to comply with all other rules and regulations that may apply to primary offerings. Additional Information for the Issuer In the Request for Comment, the MSRB asked whether MSRB Rule G– 11(g) should be amended to require the senior syndicate manager to provide to the issuer the same information it provides to the syndicate regarding the designations and allocations of securities in an offering. Four commenters generally supported the proposed change.160 Both BDA and SIFMA indicated that the information should be required to be provided to the issuer only upon request and suggested that additional issuer education regarding the information and its availability should be undertaken.161 SIFMA also noted that, if Rule G–11 is amended as proposed, it should provide that issuers can opt out of receiving this information.162 Additionally, SIFMA suggested that the information should be provided in a consistent manner across the industry so that it is useable.163 GFOA and NAMA supported having the senior syndicate manager provide the issuer, at all times, with the same information it provides the syndicate regarding designations and allocations.164 GFOA noted that education of issuers cannot replace the actual receipt of the information,165 and NAMA indicated that it is not helpful to allow issuers to opt out of receiving the information or to direct them to a website to review the official statement.166 In response to the comments received, the MSRB has determined to propose requiring the senior syndicate manager to provide issuers the same information it provides to the syndicate regarding both the designations and allocations of securities in an offering. As previously noted, the MSRB believes that, while issuers sometimes may be involved in reviewing and approving allocations or may be able to request information regarding designations and allocations from various sources, including the senior syndicate manager and certain third-party information resources, some issuers are unaware this information is available and can be requested. By making dissemination of this 160 BDA Letter II; GFOA Letter II; NAMA Letter II; and SIFMA Letter II. 161 Id. 162 SIFMA Letter at 2. 163 Id. 164 GFOA Letter II at 1; and NAMA Letter II at 5. 165 GFOA Letter II at 1. 166 NAMA Letter II at 5. PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 15005 information to issuers a requirement, the MSRB ensures that all issuers, regardless of size, will receive the designation and allocation information relevant to their primary offerings. The MSRB also notes that because underwriters are already required to provide this information to syndicate members, no additional documents should have to be produced to comply with the proposed requirement. Alignment of the Timeframe for the Payment of Group Net Sales Credits With the Payment of Net Designation Sales Credits In the Request for Comment, the MSRB sought input on whether Rule G– 11 should be amended to align the time period for the payment of group net sales credits (currently, 30 calendar days following delivery of the securities to the syndicate) with the payment of net designation sales credits (10 calendar days following delivery of the securities to the syndicate). BDA supported this change,167 while SIFMA opposed it.168 According to SIFMA, the determination of the amounts due and owing to each syndicate member for group orders is based on different information than that needed for the determination of amounts due and owing for net designation orders.169 SIFMA stated its belief that, absent evidence of significant problems with the current timing of the payments, no changes should be made.170 After carefully considering the potential differences in the timing of these payments, the MSRB has proposed amendments to Rule G–11 that would align the payment of net designation and group net sales credits. The MSRB believes that based on current practices there is no reason for the discrepancy in the timing of the payment of these sales credits and that aligning these payments would avoid unnecessary credit risks among syndicate members. If fact, several stakeholders indicated that they are already making group net sales credit payments consistent with the 10day requirement. Rule G–32—Disclosures in Connection With Primary Offerings Equal Access to the Disclosure of the CUSIP Numbers Advance Refunded and the Percentages Thereof In the Request for Comment, the MSRB asked for comment on proposed amendments to Rule G–32, on disclosures in connection with a 167 BDA Letter II at 2. Letter II at 2. 168 SIFMA 169 Id. 170 SIFMA E:\FR\FM\12APN1.SGM Letter II at 3. 12APN1 15006 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices jbell on DSK30RV082PROD with NOTICES primary offering, to require disclosures of CUSIP numbers advance refunded and percentages thereof to be made to all market participants at the same time. GFOA and NFMA supported this proposed change, with both indicating a preference for a shorter timeframe for disclosure than the current five business days.171 BDA and SIFMA noted they support access to this information, but in light of recent tax changes that eliminate some advance refundings, they questioned the value of such a requirement.172 The MSRB believes that advanced refunding information should be provided to market participants, at the same time, because equal access to advance refunding information is important for the efficient functioning of the primary market for municipal securities. Additionally, the Request for Comment sought input on whether information on potential advance refundings would be useful to the market (i.e., a ‘‘gray list’’). The MSRB asked whether there should be a requirement, or a voluntary option, for underwriters to submit to EMMA lists of bonds, by CUSIP number, that the issuer has indicated may be advance refunded. NFMA indicated that a list of partial refunding candidates should be made available on EMMA.173 GFOA and SIFMA objected to the submission of information on potential refundings, indicating that information should be provided only once the information regarding the advance refunded maturities is final.174 At this time, given that ‘‘potential refunding’’ is not a consistently defined term in the municipal securities market, the MSRB believes that the disclosure of such information could be confusing to investors. Thus, the MSRB has determined not to pursue rulemaking regarding the disclosure of ‘‘potential’’ refundings in the market. Whether Non-Dealer Municipal Advisors Should Make the Official Statement Available to the Managing or Sole Underwriter After the Issuer Approves It for Distribution In the Request for Comment, the MSRB asked for feedback on proposed amendments to Rule G–32(c) that would extend the requirements of that rule to non-dealer municipal advisors. Acacia, Ehlers, NAMA and PRAG opposed this suggested change,175 while BDA, NFMA 171 GFOA Letter II at 2; and NFMA Letter II at 2. Letter II at 2; and SIFMA Letter II at 3. 173 NFMA Letter II at 2. 174 GFOA Letter II at 2; and SIFMA Letter II at 4. 175 Acacia Letter II at 1; Ehlers Letter II at 1; NAMA Letter II at 1; and PRAG Letter II at 1. 172 BDA VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 and SIFMA supported it.176 Acacia, Ehlers, NAMA and PRAG urged the MSRB to eliminate Rule G–32(c) entirely, noting that there is no longer a need for this requirement, even with respect to dealer financial advisors, given that Exchange Act Rule 15c2–12 addresses the delivery of the official statement.177 Acacia and NAMA indicated that, if the MSRB decides to amend the rule as proposed, further clarification would be needed to understand exactly how it would be applied (e.g., terms should be defined and clarification given to application of the rule).178 Acacia and NAMA also indicated that requiring the non-dealer municipal advisor to deliver the official statement to the underwriter blurred the lines between municipal advisor and broker-dealer roles.179 NFMA believed that including non-dealer municipal advisors in this requirement would enhance market transparency and fairness.180 SIFMA noted that there is no reason for the requirement to apply differently to dealer financial advisors and non-dealer municipal advisors.181 In response to commenters, the MSRB engaged in additional outreach on the usefulness of the requirements of Rule G–32(c). As a result of these additional discussions and the written comments received, the MSRB is proposing to eliminate Rule G–32(c) entirely. The MSRB agrees with commenters that there is no longer a need for this requirement because, as noted by commenters, SEC Rule 15c2–12 requires the delivery of the official statement to the underwriter by the issuer or its agent regardless of who prepares the document. This requirement, thus, encompasses those instances where a dealer acting as a financial advisor or non-dealer municipal advisor has prepared the official statement. Additional Data Fields on Form G–32 Auto-Populated From NIIDS In the Request for Comment, the MSRB sought public comment on the inclusion of certain additional data fields on Form G–32 that would be autopopulated with information underwriters currently are required to input into NIIDS. The Request for Comment included an appendix of 176 BDA Letter II at 2; NFMA Letter II at 2; and SIFMA Letter II at 4. 177 Acacia Letter II at 1–2; Ehlers Letter II at 1; NAMA Letter II at 2–3; and PRAG Letter II at 1. 178 Acacia Letter II at 2; and NAMA Letter II at 2–3. 179 Acacia Letter II at 2; and NAMA Letter II at 3. 180 NFMA Letter II at 2. 181 SIFMA Letter II at 4. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 those data elements on which comment was sought.182 BDA, SIFMA and the SEC Investor Advocate supported the inclusion of the proposed data fields on Form G–32.183 SIFMA indicated that while it supports the auto-populating of minimum denomination information from NIIDS onto Form G–32, it does not believe the submitting underwriter should have an obligation to update minimum denomination changes over the life of the security.184 The SEC Investor Advocate, however, encouraged the MSRB to consider requiring an ongoing disclosure obligation for minimum denomination information.185 For those instances where a primary offering is not NIIDS eligible, the MSRB noted in the Request for Comment, that these additional data fields would need to be input manually by the underwriter. SIFMA noted that the requirement to input information into such a large number of fields on a manual basis would create a significant burden on the dealer.186 SIFMA urged the MSRB to consider exempting private placements and other non-NIIDSeligible issues from the proposed rule.187 The MSRB is proposing to add 57 additional data fields on Form G–32, only one of which (i.e., minimum denomination) would be required to be input manually for primary offerings that are not NIIDS eligible. Commenters agreed that, with respect to NIIDSeligible offerings, the burden of compliance would be low given that this information is already required to be input into NIIDS. With respect to non-NIIDS-eligible offerings, however, the MSRB believes the benefits associated with requiring the manual entry of all 57 additional data points does not outweigh the burden of requiring the manual entry of this data. Particularly because non-NIIDS-eligible issues such as private placements are less likely to trade in the secondary market where this information would be useful. Therefore, with respect to nonNIIDS-eligible offerings, at this time, the MSRB is not proposing to require the underwriter manually input the remaining 56 proposed additional data fields. 182 See Appendix A to MSRB Notice 2018–15 for the complete list of these data fields as originally proposed. 183 BDA Letter II at 2; SEC Investor Advocate Letter II at 3; and SIFMA Letter II at 4. 184 SIFMA Letter II at 4. 185 SEC Investor Advocate Letter II at 5. 186 SIFMA Letter II at 4. 187 SIFMA Letter II at 5. E:\FR\FM\12APN1.SGM 12APN1 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices Additional Data Fields on Form G–32 Not Auto-Populated From NIIDS jbell on DSK30RV082PROD with NOTICES In the Request for Comment, the MSRB sought comment on the addition of certain data fields on Form G–32 that would not be auto-populated with information from NIIDS and, thus, would require manual completion. Specifically, the MSRB sought comment on the addition of eight data fields on Form G–32. Ability for minimum denomination to change—BDA, NFMA and the SEC Investor Advocate supported the inclusion of this information on Form G–32.188 The SEC Investor Advocate indicated he also wants the MSRB to require the updating of minimum denomination information over the life of the security.189 SIFMA supported adding a field for ‘‘initial minimum denomination’’ and suggested that a dealer should not be required to update minimum denomination information over the life of the security.190 The MSRB agrees with commenters that the information relating to whether the minimum denomination may change would be useful to regulators. In addition, this information would be useful to investors, should the MSRB disseminate the information in the future. However, the MSRB agrees with SIFMA that requiring an underwriter or dealer to continuously update this information for the life of the municipal security would be burdensome. Additional syndicate managers—BDA objected to inclusion of this manual data field and stated that the information would not assist market participants and could impose new burdens on underwriters.191 The SEC Investor Advocate supported including this data field, noting that it may provide additional transparency to the market.192 The MSRB believes that including this additional data field would be useful to regulators. The MSRB disagrees that providing this information is burdensome as this information is typically known at or before the pricing of an issue, and therefore, is generally readily available for disclosure by the senior syndicate manager. Call schedule—BDA and SIFMA opposed including this data field and indicated that including this information would be burdensome for 188 BDA Letter II at 2–3; NFMA Letter II at 3; and SEC Investor Advocate Letter II at 4. 189 SEC Investor Advocate Letter II at 5. 190 SIFMA Letter II at 4. 191 BDA Letter II at 3. 192 SEC Investor Advocate Letter II at 7. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 the underwriter.193 SIFMA suggested that the underwriter be required to provide a link to the official statement instead.194 NFMA and the SEC Investor Advocate supported the addition of this information and believed it would promote increased transparency and fairness to the market.195 The MSRB agrees with NFMA and the SEC Investor Advocate and is proposing to require this information on Form G– 32. The MSRB believes requiring this information would immediately increase regulatory transparency, providing regulators with intermediate premium call dates and prices. Additionally, should the MSRB make this information available in the future, access to the relevant call information could help investors make more informed decisions. LEI for credit enhancers and obligated person(s) if readily available—BDA objected to this data field, stating that this information is not easily obtainable in almost all instances and that the market would not benefit from this information.196 BDA further noted that any benefits would not outweigh the burden to underwriters.197 NFMA, the SEC Investor Advocate and SIFMA supported the inclusion of this data field on Form G–32.198 The SEC Investor Advocate encouraged the MSRB to take more initiative, as appropriate, with respect to the use of LEIs, and encouraged the MSRB to continue incorporating LEIs into its rulemakings and engaging in industry outreach and education on the importance of obtaining LEIs, as well as the process for obtaining them.199 SIFMA supported this proposed change and urged the MSRB to work with LEI issuers to ensure the most efficient and least burdensome collection methodology.200 The MSRB believes requiring this information on Form G–32, if readily available, would further promote the value of obtaining LEIs and encourage industry participants to obtain them as a matter of course. The MSRB also believes that LEI information provides for the more precise identification of parties that are financially responsible to support the payment of some or all of an issue and would further assist regulators and policymakers in 193 BDA Letter II at 3; and SIFMA Letter II at 5. Letter II at 5. 195 NFMA Letter II at 3; and SEC Investor Advocate Letter II at 6–7. 196 BDA Letter II at 3. 197 Id. 198 NFMA Letter II at 3; SEC Investor Advocate Letter II at 4–6; and SIFMA Letter II at 5. 199 SEC Investor Advocate Letter II at 5. 200 SIFMA Letter II at 5. 194 SIFMA PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 15007 identifying and monitoring risk exposure in the financial markets. In response to concerns regarding the potential burden of providing this information, the MSRB is only proposing LEI information be provided for obligated persons, other than the issuer, that is ‘‘readily available.’’ An LEI would be considered ‘‘readily available’’ if it were easily obtainable via a general search on the internet (e.g., web pages such as https://www.gleif.org/ en/lei/search). Name of obligated person(s)—BDA, NFMA and the SEC Investor Advocate supported this proposed change.201 The SEC Investor Advocate indicated that providing this information may provide additional transparency to the market.202 They further noted that the name(s) of obligated persons in a primary offering are not always readily available, thus requiring this information on Form G–32 ‘‘may help investors make more informed investment decisions and better understand who is legally committed to support the payment of all or some of an issue.’’ 203 SIFMA questioned the value of having to manually key in the name of an obligated person, noting that there is no standard naming convention.204 During its stakeholder outreach, the MSRB also received comments regarding the potential burden of manually entering this information for issues in which there are multiple obligated persons, other than the issuer. The MSRB understands that those instances in which there are multiple obligated persons may be relatively infrequent. Thus, the benefit of having the entire financial picture, including the identity of all obligated persons, outweighs the proposed burden that may exist in the rare instances in which there are multiple obligated persons responsible for support payment and continuing disclosures. The MSRB believes that the proposed data field would allow for easier access to important primary market information and enhance regulatory transparency. The MSRB also agrees with commenters, that should it make this information available in the future, it could help investors make more informed investment decisions. Percentage of CUSIP numbers advance refunded—NFMA and the SEC Investor Advocate supported this 201 BDA Letter II at 3; NFMA Letter II at 3; and SEC Investor Advocate Letter II at 7. 202 SEC Investor Advocate Letter II at 7. 203 Id. 204 SIFMA Letter II at 5. E:\FR\FM\12APN1.SGM 12APN1 15008 Federal Register / Vol. 84, No. 71 / Friday, April 12, 2019 / Notices jbell on DSK30RV082PROD with NOTICES proposed data field.205 The SEC Investor Advocate noted that providing this information to all market participants at the same time, would, in his view reduce information asymmetry, which may equate to more fairness and efficiency in the market.206 BDA objected to this proposed data field noting that it was unnecessary and not meaningful.207 BDA suggested that for holders of refunded bonds, the more useful information would be the portion of a particular CUSIP number that has been refunded.208 As previously noted, the MSRB agrees with commenters that while the proposed data field would be useful, the more useful data element would be the dollar amount of each CUSIP number advance refunded. As a result, the MSRB modified its proposed rule change accordingly. Retail order period by CUSIP number—The SEC Investor Advocate supported including a ‘‘yes’’ or ‘‘no’’ flag by CUSIP numbers to identify orders that should not be retail orders, while SIFMA believes more thought should be given to the addition of this field because there are a variety of retail order period structures and the process for defining them can change intraday.209 In response, the MSRB determined to limit its request for retail order period information to the proposed ‘‘yes’’ or ‘‘no’’ flag by CUSIP. The MSRB believes that this information will enhance regulatory transparency. The MSRB also believes that, as currently contemplated, the potential benefits of collecting additional retail order period information by CUSIP are outweighed by the burdens it could impose on the industry. Name of municipal advisor—NFMA and the SEC Investor Advocate supported this addition.210 BDA objected and noted that this information is available in the official statement and not valuable information for secondary trading.211 The MSRB believes including the name of the municipal advisor on Form G–32 would provide useful information to investors and issuers and allow them to evaluate the experience of a municipal advisor, should the MSRB disseminate the information, in the future. The MSRB 205 NFMA Letter II at 2; and SEC Investor Advocate Letter II at 6. 206 SEC Investor Advocate Letter II at 6. 207 BDA Letter II at 3. 208 Id. 209 SEC Investor Advocate Letter II at 6; and SIFMA Letter II at 5. 210 NFMA Letter II at 3; and SEC Investor Advocate Letter II at 7. 211 BDA Letter II at 3. VerDate Sep<11>2014 18:18 Apr 11, 2019 Jkt 247001 anticipates making this field autofill as the underwriter begins to input the name of the municipal advisor into the applicable text box. In addition, the MSRB asked commenters whether there were any other data fields that should be considered for inclusion on Form G–32. For example, the Request for Comment asked whether the MSRB should include a ‘‘yes’’ or ‘‘no’’ flag data field to indicate when a new issue is issued with restrictions such as being only available to qualified institutional buyers. NFMA supported this suggested additional data field, while SIFMA objected to its inclusion on Form G– 32.212 In response to commenters, the MSRB determined to add to its proposed data fields a ‘‘yes’’ or ‘‘no’’ flag to indicate whether a primary offering is being made with restrictions. The MSRB believes the additional information would assist regulators in more easily identifying transactions that may involve a restricted issue and should the MSRB disseminate the information in the future, it could enhance dealers’ ability to identify issues that may be subject to restrictions during the course of buying and selling. The MSRB considered the abovenoted comments in formulating the proposed rule change herein. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period of up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: • Send an email to rule-comments@ sec.gov. Please include File Number SR– MSRB–2019–07 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. All submissions should refer to File Number SR–MSRB–2019–07. This file number should be included on the subject line if email 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 website (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 website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the MSRB. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MSRB–2019–07 and should be submitted on or before May 3, 2019. For the Commission, pursuant to delegated authority.213 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–07244 Filed 4–11–19; 8:45 am] BILLING CODE 8011–01–P Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or 212 NFMA Letter II at 3; and SIFMA Letter II at 213 17 5. PO 00000 Frm 00098 Fmt 4703 Sfmt 9990 E:\FR\FM\12APN1.SGM CFR 200.30–3(a)(12). 12APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 71 (Friday, April 12, 2019)]
[Notices]
[Pages 14988-15008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07244]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85551; File No. SR-MSRB-2019-07]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of a Proposed Rule Change To Amend Rules G-11 
and G-32 and Form G-32 Regarding a Collection of Data Elements Provided 
in Electronic Format to the EMMA Dataport System in Connection With 
Primary Offerings

April 8, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on April 2, 2019 the Municipal Securities 
Rulemaking Board (the ``MSRB'' or ``Board'') filed with the Securities 
and Exchange Commission (the ``SEC'' or ``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by the MSRB. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB filed with the Commission a proposed rule change to amend 
MSRB Rule G-11, on primary offering practices, MSRB Rule G-32, on 
disclosures in connection with primary offerings and Form G-32, 
regarding a collection of data elements provided in electronic format 
to the Electronic Municipal Market Access Dataport (the ``EMMA 
Dataport'') \3\ system in connection with primary offerings (the 
``proposed rule change''). The proposed rule change seeks to update and 
enhance the general practices undertaken by underwriters and others, as 
applicable, in a primary offering of municipal securities.
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    \3\ EMMA[supreg] is a registered trademark of the MSRB. The EMMA 
Dataport is the submission portal through which information is 
provided for display to the public on EMMA.
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    Following the effectiveness of the proposed rule change, assuming 
all amendments are approved, the MSRB will publish one or more 
regulatory notices within 180 days of effectiveness, and such notices 
shall specify the compliance dates for the respective rule changes, 
which in any case shall be not less than 90 days nor more than one year 
following the date of the notice establishing each such compliance 
date. The MSRB will also make both amended Form G-32 as well as the 
updated EMMA Dataport Manual for Primary Market Submissions and the 
Specifications for Primary Market Submissions Service document \4\ 
available to underwriters in advance of relevant compliance date(s) to 
aid them in completing the amended form. The MSRB will announce the 
availability of amended Form G-32 and the updated manual and 
specification document by publishing a regulatory notice at a later 
date.
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    \4\ The EMMA Dataport Manual for Primary Market Submissions 
describes the requirements of MSRB Rule G-32 for underwriters to 
submit primary offering disclosure documents and information to EMMA 
and gives instructions for making such submissions. Rule G-32 
requires that such submissions be made as set forth in the EMMA 
Dataport Manual.
    The Specifications for Primary Market Submissions Service 
document provides instructions for making continuous submissions of 
multiple offerings of securities to the EMMA Dataport and contains 
figures for making submissions to the EMMA Dataport through a 
computer-to-computer interface.
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    The text of the proposed rule change is available on the MSRB's 
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2019-Filings.aspx, at the MSRB's principal office, and at the Commission's 
Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
Rule G-11--Primary Offering Practices
    Rule G-11 establishes terms and conditions for sales by brokers, 
dealers and municipal securities dealers (together, ``dealers'') of new 
issues of municipal securities in primary offerings, including 
provisions on communications relating to the syndicate and designations 
and allocations of securities. The rule was first adopted by the MSRB 
in 1978, and was designed to

increase the scope of information available to syndicate managers 
and members, other municipal securities professionals and the 
investing public, in connection with the distribution of new issues 
of municipal securities without impinging upon the right of 
syndicates to establish their own procedures for the allocation of 
securities and other matters.\5\
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    \5\ MSRB Reports, Vol. 5, No. 6 (Nov. 1985).

    The MSRB noted that, in adopting Rule G-11, the Board generally 
chose to require the disclosure of practices of syndicates rather than 
dictate what those practices must be.\6\
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    \6\ See, e.g., MSRB Reports, Vol. 2, No. 5 (Jul. 1982).
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    Because of the evolving nature of the municipal securities market, 
Rule G-11 has been amended several times over the years. More recently, 
as part of a retrospective rule review, the MSRB considered how Rule G-
11 applies in the current market and whether amendments may be needed 
to address changing practices in primary offerings of municipal 
securities. In its review, the MSRB found there were opportunities to 
enhance regulatory transparency, equalize information dissemination in 
primary offerings, reinforce aspects of Rule G-11 to selling group 
members regarding their existing obligations under the rule and align 
the mandatory time frames for certain payments to syndicate members in 
order to reduce credit risk.
    More specifically, the proposed amendments to Rule G-11 would 
enhance the information dissemination requirements of Rule G-11 to 
require the senior syndicate manager to disseminate free-to-trade 
information to all syndicate and selling group members at the same 
time, thus eliminating any potential for unfair advantages in secondary 
market trading that could result from having advance notice that

[[Page 14989]]

an issue is free-to-trade. Additionally, the proposed rule change would 
require the senior syndicate manager to provide the issuer with 
information relating to the designations, group net sales credits and 
allocations of the securities in a primary offering. The MSRB believes 
this information could assist issuers in their review of the 
distribution of compensation and compliance with the terms and 
conditions of the primary offering. The proposed rule change also would 
codify a selling group member's existing obligation to comply with the 
issuer terms and conditions, priority provisions and order period 
requirements, as communicated to them, in a primary offering. Finally, 
the proposed rule change would further eliminate unnecessary credit 
risk in the market and ensure the timely payment of sales credits by 
aligning the timing of the payments of such credits to syndicate 
members in group net and net designation transactions.
Rule G-32--Disclosures in Connection With Primary Offerings
    Rule G-32 sets forth the disclosure requirements applicable to 
underwriters engaged in primary offerings of municipal securities. 
Among other things, Rule G-32 requires underwriters in primary 
offerings to submit electronically to the EMMA Dataport official 
statements and advance refunding documents, if prepared, and related 
primary market documents and new issue information, such as that 
collected on Form G-32. The rule is designed to ensure that an investor 
that purchases new issue municipal securities is provided with timely 
access to information relevant to his or her investment decision. Rule 
G-32 was originally adopted by the Board in 1977,\7\ and has been 
amended periodically since then to help ensure that, as market 
practices evolved and other regulatory developments occurred, Rule G-32 
would remain current and achieve its goal of providing timely access to 
relevant information about primary offerings.
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    \7\ See File No. SR-MSRB-77-12 (Sept. 20, 1977). The SEC 
approved Rule G-32 in Release No. 34-15247 (Oct. 19, 1978), 43 FR 
50525 (Oct. 30, 1978).
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    Again, as part of a retrospective rule review, the MSRB considered 
the disclosures required pursuant to Rule G-32 and whether revisions 
were needed to meet current market needs. The proposed changes to Rule 
G-32 would ensure that access to information regarding CUSIP numbers 
advance refunded is provided to all market participants at the same 
time. Additionally, the proposed changes would eliminate the 
requirement under Rule G-32(c) that when a dealer acting as a financial 
advisor, prepares the official statement, it must provide the official 
statement to the underwriter promptly after approval by the issuer.
Form G-32 Information Submission
    Pursuant to MSRB Rule G-34, on CUSIP numbers, primary offering, and 
market information requirements, an underwriter of certain new issues 
of municipal securities must, as applicable, make the primary offering 
depository eligible and submit information about the new issue to the 
Depository Trust Company's (DTC) New Issue Information Dissemination 
Service (NIIDS).\8\ Separately, the underwriter in primary offerings of 
municipal securities is required, pursuant to Rule G-32, to submit 
electronically to the EMMA Dataport, in a timely and accurate manner, 
certain primary offering disclosure documents and related information, 
including the data elements set forth on Form G-32.\9\
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    \8\ NIIDS is an automated, electronic system that receives 
comprehensive new issue information on a market-wide basis for the 
purposes of establishing depository eligibility and immediately re-
disseminating the information to information vendors supplying 
formatted municipal securities information for use in automated 
trade processing systems. See Rule G-34(a)(ii) regarding the 
application for depository eligibility and dissemination of new 
issue information and the exclusion of certain issues as set forth 
in that subsection.
    DTC sets forth the criteria for making a security depository 
eligible and thus NIIDS eligible. According to DTC, securities that 
can be made depository eligible include those that have been issued 
in a transaction that: (i) Has been registered with the SEC pursuant 
to the Securities Act of 1933, as amended (``Securities Act''); (ii) 
was exempt from registration pursuant to a Securities Act exemption 
that does not involve (or, at the time of the request for 
eligibility, no longer involves) transfer or ownership restrictions; 
or (iii) permits resale of the securities pursuant to Rule 144A or 
Regulation S under the Securities Act, and, in all cases, such 
securities otherwise meet DTC's eligibility criteria. See The 
Depository Trust Company, Operational Arrangements p. 2 (Oct. 2018).
    \9\ See Rule G-32(b)(i)(A), on Form G-32 information 
submissions, and Rule G-32(b)(vi), on procedures for submitting 
documents and Form G-32 information. Form G-32 submissions may be 
made by the underwriter or its designated agent through the EMMA 
Dataport accessed via MSRB Gateway. The EMMA Dataport is the utility 
through which submissions of documents and related information are 
made to the MSRB and its Market Transparency Programs.
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    In 2012, the MSRB adopted amendments to Rule G-32 and Rule G-34 to 
streamline the process by which underwriters submit data in connection 
with primary offerings. The amendments integrated the submission of 
certain matching data elements to NIIDS with the EMMA Dataport, 
obviating the need for duplicative submissions of information in NIIDS-
eligible primary offerings.\10\
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    \10\ See MSRB Notice 2012-64 (Dec. 24, 2012).
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    For a ``NIIDS-eligible primary offering,'' the underwriter must 
submit all information to NIIDS as required under Rule G-34.\11\ 
Subsequently, Form G-32 is auto-populated by the data the underwriter 
has input into NIIDS. Information required to be included on Form G-32 
and for which no corresponding data element is available through NIIDS 
must be submitted manually through the EMMA Dataport on Form G-32 
(i.e., it would not be auto-populated from NIIDS) pursuant to Rule G-
32(b)(i)(A)(1)(a). Any correction to NIIDS data (and thus Form G-32 
data) must be made promptly and, to the extent feasible, in the manner 
originally submitted. For a primary offering ineligible for NIIDS,\12\ 
the underwriter of the offering must submit information required by 
Form G-32 manually as set forth under Rule G-32(b)(i)(A)(2).
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    \11\ Non-NIIDS-eligible offerings would include, for example, 
private placements that are not registered under the Securities Act 
or issuances that are subject to restrictions on resales.
    \12\ See supra footnote 8 regarding depository eligibility 
criteria. Additionally, Rule G-34(d) exempts from all Rule G-34 
requirements any issue of a municipal security (and for purposes of 
secondary market municipal securities, any part of an outstanding 
maturity of an issue) which (i) does not meet the eligibility 
criteria for CUSIP number assignment or (ii) consists entirely of 
municipal fund securities.
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    The requirement under Rule G-34(a)(ii)(C) that an underwriter of a 
primary offering of municipal securities that is NIIDS-eligible submit 
certain information about the new issue to NIIDS was designed to 
facilitate timely and accurate trade reporting and confirmation, among 
other things. Additionally, the submission of this information was 
meant to address difficulties dealers have in obtaining descriptive 
information about new issues of municipal securities.\13\ While 
underwriters of issues that are NIIDS-eligible submit a great deal of 
information about a primary offering to NIIDS, much of this information 
is not currently auto-populated into Form G-32 because not all of the 
fields required to be submitted to NIIDS are required fields on Form G-
32.\14\
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    \13\ The requirement to provide this information and the process 
for doing so are addressed in Rule G-34 and Rule G-32, respectively. 
While NIIDS provides the system for submitting the information, its 
use does not obviate the requirement that information submitted 
pursuant to Rule G-34 be timely, comprehensive and accurate. See 
MSRB Notice 2007-36 (Nov. 27, 2007).
    \14\ The proposed rule change includes an attachment showing 
those NIIDS data fields the MSRB is proposing to include on Form G-
32. Data fields marked with an ``N'' are not currently auto-
populated into Form G-32 because Form G-32 does not have 
corresponding data fields to receive the information. While the MSRB 
is currently not aware of any reason NIIDS would become unavailable, 
the inability to auto-populate information from NIIDS would not 
negate the requirement that information be provided pursuant to MSRB 
Rule G-32.

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[[Page 14990]]

    The proposed rule change would add 57 data fields to Form G-32 to 
capture data that an underwriter already is required to input into 
NIIDS, as applicable, for NIIDS-eligible offerings.\15\ These new Form 
G-32 data fields would be auto-populated, as applicable, by NIIDS 
submissions made by the underwriter, pursuant to G-34 or otherwise 
required for NIIDS eligibility.\16\ By adding these data fields to Form 
G-32, the MSRB ensures its continued access \17\ to relevant and 
accurate new issue information. For non-NIIDS-eligible offerings, the 
underwriter would be required to manually complete the data field that 
indicates the original minimum denomination of the offering. The 
underwriter in a non-NIIDS-eligible offering would not be required to 
manually complete the other 57 additional fields.
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    \15\ See Rule G-34(a)(ii) regarding the application for 
depository eligibility and dissemination of new issue information. 
See also DTC Important Notice 3349-08 (April 9, 2008); SEC Release 
No. 34-57768 (May 2, 2008), 90 FR 26181 (May 8, 2008) (File No. SR-
OTC-2007-10), regarding NIIDS trade and settlement eligibility 
requirements.
    \16\ An underwriter currently completes data fields in NIIDS 
that are applicable to the particular primary offering. Not all 
NIIDS data fields are completed in a typical primary offering and 
thus, the Form G-32 data fields will not all be auto-populated for 
every offering. Specifically, for a newly issued municipal security 
an underwriter must input the key data elements required for the 
reporting, comparison, confirmation, and settlement of trades in 
municipal securities (``NIIDS Data Elements'') into NIIDS. NIIDS 
Data Elements are defined as data needed for trade reporting, trade 
matching and to set up trade confirmations (``Trade Eligible 
Data''). Additional data elements are also needed for a municipal 
security to settle at DTC and are settlement eligible data 
(``Settlement Eligible Data''). See The Depository Trust Company 
Operational Arrangements (June 2018).
    \17\ As used herein, ``continued access'' means that MSRB would 
be able to obtain and, if it determines to do so, disseminate 
information, independent of integrated data from a third-party or 
utilities.
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    Currently, the MSRB, securities data providers, other regulators 
and industry participants that have set up a communications link with 
DTC, have access to NIIDS data in real time. Additionally, the MSRB may 
disseminate some or all of the information in the future.
    In addition to the data fields auto-populated by NIIDS submissions, 
the proposed rule change also would add nine data fields to Form G-32 
for manual completion by underwriters in NIIDS-eligible offerings. Of 
these nine data fields, underwriters in non-NIIDS-eligible primary 
offerings would be required to complete two of these nine additional 
data fields. Specifically, as discussed in more detail below, 
underwriters in non-NIIDS-eligible offerings would be required to 
manually complete the data fields that provide a ``yes/no'' flag to 
indicate whether the minimum denomination for the issue has the ability 
to change and the ``yes/no'' flag to indicate if the primary offering 
is being made with restrictions.\18\ As previously noted, the MSRB may 
disseminate some or all of this information, in the future.
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    \18\ See infra discussion on amending Form G-32 to include nine 
additional data fields not currently collected by NIIDS.
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Proposed Rule Change
    On September 14, 2017, the MSRB published a concept proposal 
(``Concept Proposal'') requesting comment on possible amendments to the 
current primary offering practices of dealers.\19\ The MSRB received 12 
comment letters in response to the Concept Proposal,\20\ which formed 
the foundation for a subsequent Request for Comment on Draft Rule 
Changes Related to Primary Offering Practices, published on July 19, 
2018 (``Request for Comment'').\21\ The MSRB received 10 comment 
letters in response to the Request for Comment.\22\ Following review of 
the comments, the MSRB conducted additional outreach with various 
market participants. The comments received and follow-up conversations 
formed the basis for the proposed rule change.
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    \19\ MSRB Regulatory Notice 2017-19 (Sept. 14, 2017).
    \20\ Letter from Mike Nicholas, Chief Executive Officer, Bond 
Dealers of America, dated Nov. 16, 2017 (``BDA Letter I''); Letter 
from City of San Diego, undated (``City of San Diego Letter I''); 
Letter from Robert W. Doty, dated Nov. 2, 2017 (``Doty Letter I''); 
Email from Stephan Wolf, Global Legal Entity Identifier Foundation, 
dated Nov. 6, 2017 (``GLEIF Letter I''); Letter from Emily Brock, 
Director, Federal Liaison Center, Government Finance Officers 
Association, dated Nov. 27, 2017 (``GFOA Letter I''); Letter from 
Alexandra M. MacLennan, National Association of Bond Lawyers, dated 
Nov. 17, 2017 (``NABL Letter I''); Letter from Susan Gaffney, 
Executive Director, National Association of Municipal Advisors, 
dated Nov. 13, 2017 (``NAMA Letter I''); Letter from Julie Egan, 
NFMA Chair 2017 and Lisa Washburn, NFMA Industry Practices & 
Procedures Chair, National Federation of Municipal Analysts, dated 
Nov. 9, 2017 (``NFMA Letter I''); Email from Michael Paganini, dated 
Sept. 15, 2017 (``Paganini Email I''); Letter from Leslie M. 
Norwood, Managing Director and Associate General Counsel, Securities 
Industry Financial Markets Association, dated Nov. 15, 2017 (``SIFMA 
Letter I''); Letter from John S. Craft, Managing Director, TMC Bonds 
LLC, dated Nov. 13, 2017 (``TMC Bonds Letter I''); and Letter from 
Gilbert L. Southwell III, Vice President, Wells Capital Management, 
Inc., dated Nov. 1, 2017 (``Wells Capital Letter I'').
    \21\ MSRB Notice 2018-15 (July 19, 2018).
    \22\ Letter from Noreen P. White, Co-President and Kim M. 
Whelan, Co-President, Acacia Financial Group, Inc., dated Sept. 17, 
2018 (``Acacia Letter II''); Letter from Mike Nicholas, Chief 
Executive Officer, Bond Dealers of America, dated Sept. 17, 2018 
(``BDA Letter II''); Email from Stephen Holstein, CFI, dated Jul. 
25, 2018 (``CFI Email II''); Letter from Steve Apfelbacher, Ehlers 
Associates, Inc., dated Sept. 17, 2018 (``Ehlers Letter II''); 
Letter from Emily S. Brock, Director, Federal Liaison Center, 
Government Finance Officers Association, dated Sept. 19, 2018 
(``GFOA Letter II''); Letter from Susan Gaffney, Executive Director, 
National Association of Municipal Advisors, dated Sept. 18, 2018 
(``NAMA Letter II''); Letter from Julie Egan, NFMA Industry 
Practices & Procedures Chair, and Lisa Washburn, NFMA Industry 
Practices & Procedures Co-Chair, National Federation of Municipal 
Analysts, dated Sept. 17, 2018 (``NFMA Letter II''); Letter from 
Marianne F. Edmonds, Public Resources Advisory Group, dated Sept. 
18, 2018 (``PRAG Letter II''); Letter from Leslie M. Norwood, 
Managing Director and Associate General Counsel, Securities Industry 
and Financial Markets Association, dated Sept. 17, 2018 (``SIFMA 
Letter II''); Letter from Rick A. Fleming, Investor Advocate, U.S. 
Securities and Exchange Commission, Office of the Investor Advocate, 
dated Sept. 17, 2018 (``SEC Investor Advocate Letter II'').
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Proposed Rule Change Under Rule G-11
Codify That Selling Group Members Have an Existing Obligation To Comply 
With Communications Relating to the Issuer Terms and Conditions, 
Priority Provisions and Order Period Requirements
    The proposed rule change would amend Rule G-11(f) to codify an 
existing obligation of selling group members to comply with the written 
communications they receive from the senior syndicate manager relating 
to, among other things, issuer requirements, priority provisions and 
order period requirements. Rule G-11(f) currently states that prior to 
the first offer of any securities by the syndicate, the senior 
syndicate manager is required to provide, in writing, to syndicate 
members and selling group members, if any, ``(i) a written statement of 
all terms and conditions required by the issuer, (ii) a written 
statement of all of the issuer's retail order period requirements, if 
any, [and] (iii) the priority provisions . . .'' The senior syndicate 
manager must also promptly furnish in writing to the syndicate members 
and the selling group members any changes in the priority provisions or 
pricing information.
    Additionally, the MSRB has stated that the activities of all 
dealers should be viewed in light of the basic fair dealing principles 
of Rule G-17, on conduct of municipal securities and municipal advisor 
activities.\23\ In 2013, the MSRB amended Rule G-11 to, among other 
things, address concerns related to retail order period practices and 
required expressly that the senior syndicate manager's written 
statement of all terms and conditions required by

[[Page 14991]]

the issuer also be delivered to selling group members.\24\ The 
amendment also added Rule G-11(k) to require that any dealer that 
submits an order designated as retail during a retail order period must 
provide certain information that would assist in determining if the 
order is a bona fide retail order. The 2013 amendments to Rule G-11 
coupled with the Rule G-17 guidance indicates selling group members are 
subject to the issuer requirements in allocating securities to their 
investors.\25\
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    \23\ See MSRB Notice 2009-42 (July 14, 2009).
    \24\ See Release No. 34-70532 (Sept. 26, 2013), 78 FR 60956 
(Oct. 2, 2013) (File No. SR-MSRB-2013-05).
    \25\ See also Rule G-11(b) which requires that every dealer that 
submits an order to a syndicate or to a member of a syndicate for 
the purchase of securities must disclose at the time of submission 
if the order is for its dealer account or a related account of the 
dealer.
---------------------------------------------------------------------------

    By codifying this existing obligation, the amendment would 
highlight that selling group members must comply with the priority 
provisions and other issuer terms and conditions when they receive 
written notification of such from the syndicate manager.
Require That the Senior Syndicate Manager Communicate to All Syndicate 
and Selling Group Members, at the Same Time, When the Issue Is Free To 
Trade
    The proposed rule change would amend Rule G-11(g) to add new 
subsection (ii) which would require the senior syndicate manager to 
notify all members of the syndicate and selling group, at the same time 
via free-to-trade wire or electronically by other industry-accepted 
method of communication, that the offering is free to trade at a price 
other than the initial offering price.\26\
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    \26\ The other provisions of Rule G-11(g) would be renumbered 
accordingly to account for this addition.
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    In a primary offering of municipal securities where a syndicate is 
formed (i.e., not a sole-managed offering), a free-to-trade wire is 
sent by the senior syndicate manager to syndicate members once all of 
the municipal securities in the issue or particular maturity (or 
maturities) are free to trade. That is, the free-to-trade wire 
communicates to members of the syndicate that they may trade the bonds 
in the secondary market at market prices which could be the same or 
different than the initial offering price.\27\
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    \27\ For purposes of reporting transactions after the free-to-
trade information has been disseminated, the MSRB has indicated that 
once a new issue has been released for trading (i.e., is free to 
trade), normal transaction reporting rules will apply to the 
syndicate managers, syndicate members and selling group members. See 
Release No. 34-49902; (Jun. 22, 2004), 69 FR 38925 (Jun. 29, 2004) 
(File No. SR-MSRB-2004-02).
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    The MSRB believes equal access to information is important to the 
fair and effective functioning of the market for primary offerings of 
municipal securities. Therefore, the MSRB believes requiring 
dissemination of this information for receipt by all syndicate and 
selling group members at the same time would prevent preferential 
access to the free-to-trade information (thus, understanding that they 
are then able to commence selling bonds at market prices) by some while 
other syndicate and selling group members, who are not aware of the 
information, are delayed in knowing that they may transact at prices 
other than the initial offering price.
    The MSRB understands that methods of communication evolve and 
change over time. As a result, the dissemination of free-to-trade 
information eventually may be made by methods other than the 
traditional ``free-to-trade wire.'' While the MSRB is not proposing to 
dictate the timing of when, or the form of how, the free-to-trade 
communication should be sent, requiring dissemination of this 
information electronically by an industry-accepted method that ensures 
all syndicate and selling group members receive the information at the 
same time would level the playing field.\28\
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    \28\ The MSRB reminds dealers that such distributed 
communication would be subject to the record retention requirements 
of Rule G-9(b)(viii)(C) which requires the dealer to maintain, among 
other things, all written and electronic communications received and 
sent relating to the conduct of the municipal securities activities 
of such dealer and Exchange Act Rule 17a-4(b)(4) which requires 
dealers to maintain copes of all communications sent by the dealer 
relating to its business as such.
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Require the Senior Syndicate Manager To Provide Information Required 
Under Rule G-11(g)(ii) and (iii) to Issuers in a Primary Offering
    Currently, the senior syndicate manager is not required to provide 
information to issuers regarding designations and allocations of 
municipal securities in a primary offering.\29\ The proposed rule 
change would amend Rule G-11(g)(ii) and (iii) \30\ to require the 
senior syndicate manager to comply with the information-dissemination 
provisions of this rule with respect to issuers in addition to just 
syndicate members. Rule G-11(g)(ii) requires, in part, the senior 
syndicate manager, within two business days following the date of sale, 
to disclose to the syndicate, in writing, a summary by priority 
category, of all allocations of securities accorded priority over 
member orders. Rule G-11(g)(iii) requires the senior syndicate manager 
to disclose, in writing and as set forth in the rule, to each member of 
the syndicate information on the designations paid to syndicate and 
non-syndicate members.
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    \29\ ``Designation'' typically refers to the percentage of the 
takedown or spread that a buyer directs the senior syndicate manager 
to credit to a particular syndicate member (or members) in a net 
designated order. ``Allocation'' generally refers to the process of 
setting securities apart for the purpose of distribution to 
syndicate and selling group members. See MSRB Glossary of Municipal 
Securities Terms.
    \30\ Currently, these provisions are Rule G-11(g)(ii) and (iii). 
However, with the proposed addition of Rule G-11(g)(ii) noted above, 
these provisions would become Rule G-11(g)(iii) and (iv).
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    The MSRB believes that providing this information to the issuer 
along with information on group net sales credits, as described more 
fully below, would better inform all issuers of the orders and 
allocations of their primary offering. The MSRB believes this 
information would be valued particularly by those issuers who are not 
aware this information is available for their review. An issuer who 
does not wish to receive or review this information need simply delete 
the communication at its discretion.
Align the Timeframe for the Payment of Group Net Sales Credits With the 
Payment of Net Designation Sales Credits
    The proposed rule change would amend Rule G-11(j) to align the 
current timeframe for the payment of group net sales credits with the 
existing timeframe for the payment of net designation sales credits as 
set forth therein. Currently, Rule G-11(i) states that the final 
settlement of a syndicate or similar account shall be made within 30 
calendar days following the date the issuer delivers the securities to 
the syndicate. Group net sales credits (i.e., those sales credits for 
orders in which all syndicate members benefit according to their 
participation in the account) are paid out of the syndicate account 
when it settles pursuant to Rule G-11(i). As a result, syndicate 
members may wait 30 calendar days following receipt of the securities 
by the syndicate before they receive their group net sales credits. By 
contrast, Rule G-11(j) states that sales credits due to a syndicate 
member as designated by an investor in connection with the purchase of 
securities (``net designation payments'') shall be distributed within 
10 calendar days following the date the issuer delivers the securities 
to the syndicate.
    The SEC approved amendments to Rule G-11(i) in 2009 to, among other 
things, shorten the timeframe for settlement of the syndicate account 
from 60 calendar days to 30 calendar days following the date the issuer 
delivers the securities to the syndicate. The

[[Page 14992]]

amendments also shortened the timeframe for the payment of net 
designation orders in Rule G-11(j) from 30 calendar days to 10 calendar 
days. The MSRB indicated that the shortened timeframes were intended to 
reduce the exposure of co-managers to the credit risk of the senior 
manager pending settlement of the accounts.\31\
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    \31\ See Release No. 34-60725 (Sept. 28, 2009), 74 FR 50855 
(Oct. 1, 2009) (File No. SR-MSRB-2009-12).
---------------------------------------------------------------------------

    The proposed amendments would not impact the timing of the 
settlement of the syndicate account, but rather would merely align the 
timeframe for the payment of group net and net designation sales 
credits. The MSRB believes aligning the time frames for the payment and 
receipt of sales credits would be a minor adjustment that would ensure 
uniform practice in making and receiving such payments in a timely 
manner. In addition, this proposed rule change would reduce credit risk 
by decreasing the exposure of syndicate trading account members to the 
potential deterioration in the credit of the syndicate or account 
manager during the pendency of account settlements. The MSRB further 
believes that the time period of 10 calendar days would provide balance 
between reducing risk of exposure of co-managers and the credit risk of 
the senior manager while still providing the senior syndicate manager 
with the time needed to process and pay the sales credits.
    As a result of the alignment of these payments, the information 
that is currently provided within 30 calendar days of delivery of 
securities to the syndicate under Rule G-11(h)(ii)(B) would now be 
provided within 10 business days following the date of sale under 
revised Rule G-11(g)(iv). Thus, the proposed rule change would delete 
Rule G-11(h)(ii)(B), and Rule G-11(h)(ii)(C) would be amended to become 
Rule G-11(h)(ii)(B).
Proposed Rule Change Under Rule G-32
Provide Equal Access To Advance Refunding Documents and Related 
Information \32\
---------------------------------------------------------------------------

    \32\ In general, advance refunding issues are those municipal 
bonds issued more than 90 days before the redemption of the refunded 
bonds. See MSRB Interpretive Guidance--Current Refundings (Aug. 8, 
1991).
---------------------------------------------------------------------------

    The proposed rule change would amend Rule G-32(b)(ii) to require 
that in an advance refunding, where advance refunding documents are 
prepared, the underwriter must provide access to the documents and 
certain related information to the entire market at the same time.\33\
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    \33\ This means underwriters would be precluded from 
disseminating advance refunding documents and information to any 
market participant, without first submitting it to the EMMA 
Dataport; provided that this restriction does not prohibit 
communication with anyone that may require such information for 
purposes of facilitating the completion of the transaction.
---------------------------------------------------------------------------

    Currently, Rule G-32(b)(ii) requires the advance refunding 
documents and applicable Form G-32 information be submitted to the EMMA 
Dataport, no later than five business days after the closing date for 
the primary offering. However, the MSRB understands that in some 
instances, some market participants may be informed of the advance 
refunding details before the information is submitted and made public 
on EMMA.
    The MSRB believes that equal access to advance refunding 
information is important for the efficient functioning of the primary 
and secondary market for municipal securities. The MSRB also believes 
requiring underwriters to provide information to the market regarding 
CUSIP numbers advance refunded in a manner that allows access to the 
information by the entire market at the same time would support this 
effort.
Repeal the Requirement That a Dealer Financial Advisor That Prepares 
the Official Statement Must Make It Available to the Managing or Sole 
Underwriter After the Issuer Approves It for Distribution
    The proposed rule change would repeal the current requirement under 
Rule G-32(c) that a dealer financial advisor that prepares an official 
statement on behalf of an issuer with respect to a primary offering of 
municipal securities make the official statement available to the 
managing underwriter or sole underwriter in a designated electronic 
format, promptly after the issuer approves its distribution.
    In the Concept Proposal and Request for Comment the MSRB sought 
comment on whether the requirement under Rule G-32(c) should be 
extended to require all financial advisors (i.e., both dealer and non-
dealer) that have prepared the official statement to provide the 
official statement to the underwriter promptly after approved by the 
issuer. Upon review of comment letters and discussions with various 
market participants, the MSRB is proposing to repeal this requirement 
under Rule G-32(c).
    Rule G-32 was adopted in 1977 to ensure that investors purchasing 
new issue municipal securities are provided with all available 
information relevant to their investment decision by settlement of the 
transaction.\34\ The Board has recognized that the MSRB cannot 
prescribe the content, timing, quantity or manner of production of the 
official statement by the issuer or its agents.\35\ Thus, the MSRB 
crafted Rule G-32(c) to ensure that once the official statement is 
completed and approved by the issuer, dealers acting as financial 
advisors would be obligated to begin the dissemination process 
promptly. The Board further urged that issuers using the services of 
non-dealer financial advisors hold those financial advisors to the same 
standards for prompt delivery.\36\ The Board noted that the requirement 
under Rule G-32(c) was not meant to diminish a dealer's obligations 
under Securities Exchange Act Rule 15c2-12(b)(3).
---------------------------------------------------------------------------

    \34\ See File No. SR-MSRB-77-12 (Sept. 20, 1977). The SEC 
approved Rule G-32 in Release No. 34-15247 (Oct. 19, 1978), 43 FR 
50525 (1978).
    \35\ See Release No. 34-40230 (July 17, 1998); 63 FR 40148 (July 
27, 1998) (File No SR-MSRB-97-14).
    \36\ Id.
---------------------------------------------------------------------------

    Exchange Act Rule 15c2-12(b)(3) requires that an underwriter 
contract with the issuer or its agent to obtain copies of the official 
statement within the time period mandated by the rule. According to the 
SEC, the purpose of this provision is to ``facilitate the prompt 
distribution of disclosure documents so that investors will have a 
reference document to guard against misrepresentations that may occur 
in the selling process.'' \37\
---------------------------------------------------------------------------

    \37\ See Release No. 34-26985 (June 28, 1989); 54 FR 28799 at 
28805 (Jul. 10, 1989).
---------------------------------------------------------------------------

    In adopting the rule, the SEC recognized the existing delivery 
requirements under Rule G-32 and noted that

    By adopting paragraph (b)(3), which serves as a foundation for 
fostering compliance with the requirements of MSRB rule G-32, the 
Commission wishes to emphasize the importance it places on the 
prompt distribution of final official statements.\38\
---------------------------------------------------------------------------

    \38\ Id.

    The SEC noted that in adopting Rule 15c2-12(b)(3), it was leaving 
the determination of the ``precise method and timing of delivery'' of 
the official statement to the MSRB.\39\
---------------------------------------------------------------------------

    \39\ See 54 FR 28799 at 28806.
---------------------------------------------------------------------------

    The MSRB understands that several participants in a primary 
offering may be responsible for preparing the official statement,\40\ 
and while dealers acting as

[[Page 14993]]

financial advisors and non-dealer municipal advisors may be engaged to 
review and contribute to portions of the document, they are less 
frequently engaged to ``prepare'' the official statement as they might 
have been in the past. Therefore, while the goal of Rule G-32(c) is 
consistent with the overall goal of Rule G-32 and Exchange Act Rule 
15c2-12(b)(3), that is, to facilitate the prompt distribution of the 
official statement to the market and investors, that section of the 
rule itself is limited in such a way that its usefulness in the current 
market is questionable. The MSRB understands that Rule G-32(c) 
requirements apply to a limited universe of market participants (i.e., 
dealers acting as financial advisors that prepare the official 
statement). This leaves a gap such that Rule G-32(c) does not extend to 
parties other than dealers acting as financial advisors who prepare the 
official statement.
---------------------------------------------------------------------------

    \40\ For example, the MSRB understands that bond counsel or 
underwriter's counsel frequently prepares the official statement on 
behalf of the issuer and may seek input on various components from 
the underwriter or the municipal advisor. However, Rule G-32(c) does 
not apply to bond counsel or underwriter's counsel, and the MSRB 
does not have jurisdiction over these parties in any event. 
Therefore, if these parties were engaged to prepare the official 
statement for the issuer, they would not be subject to the 
requirements of Rule G-32(c).
---------------------------------------------------------------------------

    In reviewing Rule G-32(c) and considering whether to expand the 
section of the rule to include non-dealer municipal advisors, the MSRB 
considered whether the existing rule and/or the expansion thereof would 
resolve a harm in the market. After discussions with various market 
participants and consideration of the actual scope of the impact of the 
rule, the MSRB believes any harm in the market related to the delivery 
of official statements would not be resolved by Rule G-32(c) regardless 
of whether dealers acting as financial advisors and non-dealer 
municipal advisors are required to comply. The MSRB believes the scope 
of Rule G-32(c) may be too limited to have any significant impact on 
the official statement delivery requirements.
    The MSRB understands that the obligation under Exchange Act Rule 
15c2-12(b)(3) for an underwriter to contract with the issuer or its 
agent to receive the official statement within a defined period of time 
already ensures that the underwriter would receive the official 
statement within a certain period of time regardless of the party 
preparing it.
Proposed Changes to Form G-32
Amend Form G-32 To Include 57 Additional Data Points Already Collected 
by NIIDS
    The proposed rule change would amend Form G-32 to include 57 
additional data fields that would be auto-populated with datapoints 
already required to be input into NIIDS, as applicable, for NIIDS-
eligible offerings. As previously noted, these data fields are 
currently available to regulators and certain other industry 
participants that have access to NIIDS. However, adding the data fields 
to Form G-32 would ensure the MSRB's continued access to important 
primary offering information, and enhance its ability to oversee the 
accuracy and distribution of the information provided.
    At this time, however, the MSRB believes requiring the manual 
completion of all the above data fields for non-NIIDS-eligible issues 
such as private placements and other restricted offerings that are not 
intended for secondary market trading would be burdensome on 
underwriters.\41\ Thus, for a non-NIIDS-eligible primary offering, an 
underwriter would continue to be required to manually complete the same 
data fields on Form G-32 that it currently completes with the addition 
of one of the 57 data fields discussed above. The additional data field 
would indicate the original minimum denomination of the offering, as 
applicable. As with the other data points currently required on Form G-
32, once an underwriter provides the information, it would be available 
to regulators. Regulators could use this information to determine 
whether a new issue of municipal securities is trading at the 
appropriate minimum denomination in the secondary market. Additionally, 
as with the other NIIDS data points discussed above, the MSRB may 
disseminate this information in the future.
---------------------------------------------------------------------------

    \41\ Non-NIIDS-eligible securities are less likely to trade in 
the secondary market because they typically are issued with trading 
restrictions and, therefore, less liquid. They are different from 
NIIDS-eligible securities, which by their nature are DTC eligible, 
and are freely tradable in the market. See supra footnote 8. The 
MSRB would continue to monitor the need for specific information 
with respect to non-NIIDS-eligible offerings to determine whether 
any other additional data elements may be required at a later time.
---------------------------------------------------------------------------

    The MSRB believes that, at this time, requiring this additional 
information on Form G-32, as applicable, for NIIDS-eligible offerings, 
and requiring the single additional data point for non-NIIDS-eligible 
offerings would not only assist the MSRB in ensuring its continued 
access to new issue information but would enhance MSRB regulatory 
transparency initiatives.
Amend Form G-32 To Include Nine Additional Data Fields Not Currently 
Collected by NIIDS
    The proposed rule change would amend Form G-32 to include nine 
additional data fields, set forth below, for manual completion (i.e., 
not auto-populated from NIIDS), as applicable, by underwriters in 
NIIDS-eligible primary offerings of municipal securities. Underwriters 
in non-NIIDS-eligible primary offerings would be required to manually 
complete two of these data fields: the ``yes'' or ``no'' indicator 
regarding whether the original minimum denomination for a new issue has 
the ability to change, and the ``yes'' or ``no'' indicator regarding 
whether the new issue has any restrictions. However, underwriters in 
non-NIIDS-eligible offerings would not be required to complete the 
other seven data fields.
    The MSRB believes that the information collected by these data 
fields would enhance MSRB regulatory transparency initiatives as all 
the additional data elements would be immediately available to 
regulators to perform regulatory oversight of primary offerings and 
subsequent secondary market trading practices to ensure a fair and 
efficient market. Additionally, the MSRB may disseminate some or all of 
this information in the future.
    The proposed rule change would amend Form G-32 to add the following 
data fields:
    Ability for original minimum denomination to change--The MSRB 
believes providing a ``yes'' or ``no'' indicator at the time of 
issuance as to whether the original minimum denomination for an issue 
can change, would immediately enhance regulatory transparency and 
provide useful information to investors, should the MSRB disseminate 
this information in the future. In some primary offerings, for example, 
if the official statement or other offering document indicates that a 
municipal security is non-rated or below investment grade at the time 
of issuance, but the security achieves an investment grade rating at 
some point in the future, this could result in a change to the original 
minimum denomination. Because an underwriter would not be required to 
update this information over the life of the municipal security, having 
this indicator would highlight the need to check relevant disclosure 
documents for developments that could trigger a change in the original 
minimum denominations.
    Additional syndicate managers--The MSRB believes that having a data 
field

[[Page 14994]]

that indicates all the syndicate managers (senior and co-managers) on 
an underwriting would provide useful information for regulators. For 
example, regulators would be able to more easily identify where a 
particular syndicate manager was engaged or seek more information about 
particular syndicate managers, as needed, in performing oversight. 
Additionally, should the MSRB disseminate this information in the 
future, it could be used to evaluate the experience of a syndicate 
manager for an upcoming offering.
    The MSRB believes the complete list of underwriters typically is 
known at or before the pricing of an issue and, therefore, senior and 
co-manager information is readily available to the senior underwriter 
before Form G-32 is due.
    Call schedule--Requiring call schedule information on Form G-32 
would include, for example, premium call dates and prices, and the par 
call date. For primary offerings with call prices stated as a 
percentage of the compound accreted value (CAV) the underwriter would 
enter the premium call dates and percentage of CAV the new issue can be 
called at as well as the par call date. All of which would immediately 
increase regulatory transparency, providing regulators with 
intermediate premium call dates and prices, and a means to 
differentiate between a call price represented in dollars as opposed to 
CAV. Additionally, should the MSRB disseminate this information in the 
future, access to all the relevant call information could help 
investors make more informed investment decisions.
    Identity of obligated person(s), other than the issuer--The MSRB 
believes that providing the name(s) of the obligated person(s), other 
than the issuer, for a primary offering of municipal securities is 
important because they are responsible for continuing disclosures, and 
this information is sometimes not easily identifiable for regulatory 
transparency purposes. Also, having more ways of identifying those 
legally committed to support payment of all or part of a primary 
offering would increase transparency, should the MSRB disseminate this 
information in the future. The MSRB recognizes that there may be 
confusion in identifying other obligated persons in a manner that is 
consistent. As a result, the MSRB believes the identity of the other 
obligated person(s) should be input on Form G-32 the same as it appears 
on the official statement, or if there is no official statement, in the 
manner it appears in the applicable offering documents for the issue. 
This would ensure uniform practice in the identity of the obligated 
person(s), other than the issuer, with respect to that issue.
    LEI for credit enhancers and obligated person(s), other than the 
issuer,\42\ if readily available--The LEI provides a method to uniquely 
identify legally distinct entities that engage in financial 
transactions. The goal of this global identification system is to 
precisely identify parties to a financial transaction to assist 
regulators, policymakers and financial market participants in 
identifying and better understanding risk exposure in the financial 
markets and to allow monitoring of areas of concern. The MSRB believes 
that requiring this information for credit enhancers and obligated 
persons, other than the issuer, if readily available, would promote the 
value of obtaining LEIs and encourage industry participants to obtain 
them as a matter of course. An LEI would be considered ``readily 
available'' if it were easily obtainable via a general search on the 
internet (e.g., web pages such as https://www.gleif.org/en/lei/search). 
The MSRB also believes that obtaining this information, when readily 
available, on credit enhancers and other obligated persons would help 
advance the goal of having a global identification method for these 
parties and improve the quality of municipal market financial data and 
reporting.
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    \42\ An LEI is a 20-digit alpha-numeric code that connects to 
key reference information providing unique identification of legal 
entities participating in financial transactions. Only organizations 
duly accredited by GLEIF are authorized to issue LEIs. The MSRB 
believes that, at this time, except for credit enhancers and 
obligated person(s), other than the issuer, the LEI information 
being sought is not critical in evaluating the financial risks of an 
issuer, and because issuers typically do not obtain an LEI, the 
likely time and costs associated with having to conduct a search to 
determine if LEI information is readily available for an issuer, 
would exceed any potential benefits.
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    Dollar amount of each CUSIP number advance refunded--The MSRB 
believes requiring information regarding the dollar amount of each 
CUSIP number advance refunded on Form G-32 would provide regulators 
important information regarding material changes to a bond's structure 
and value and should the MSRB disseminate this information in the 
future, may assist investors in making more informed investment 
determinations.
    In the Request for Comment, the MSRB sought comment on a data field 
that would show the percentage of each CUSIP number advance refunded. 
Upon review of comments and discussions with certain market 
participants, the MSRB believes requiring the dollar amount of each 
CUSIP number advance refunded instead of the percentage advance 
refunded would be more useful in understanding the value of the portion 
of an issue being advance refunded and would be less burdensome for 
underwriters to calculate.
    Retail order period by CUSIP number--Currently, primary offerings 
are flagged in the EMMA Dataport to indicate whether there is/was a 
retail order period. However, quite often not every maturity related to 
the offering is subject to a retail order period. The MSRB believes 
that requiring underwriters to mark a primary offering with a flag to 
indicate the existence of a retail order period for each CUSIP number 
would provide greater regulatory transparency as to the amount and 
types of bonds being offered in that retail order period. For example, 
a ``yes'' or ``no'' flag by CUSIP number would help regulators more 
easily identify orders that may not comply with a retail order period.
    Name of municipal advisor--The MSRB believes including this 
information would enhance regulatory transparency as key market 
participants would be more easily identifiable to regulators. 
Additionally, should the MSRB disseminate this information in the 
future, it could also assist certain market participants in evaluating 
the experience of the municipal advisor when reviewing primary 
offerings, especially for similar credits and structures. Finally, the 
MSRB intends to make this field autofill as the underwriter begins to 
input the name of the municipal advisor into the applicable text box.
    Restrictions on the issue--The MSRB believes adding a ``yes'' or 
``no'' flag to Form G-32 for an underwriter to indicate whether the 
primary offering is being made with restrictions would help regulators 
and, should the MSRB disseminate this information in the future, it 
could help certain other market participants more easily identify this 
information. An explanation would be provided on Form G-32 indicating 
that ``yes'' should be selected for any offerings made with a 
restriction on sales, resales or transfers of securities such as, for 
example, sales only to qualified institutional buyers as defined under 
Securities Act Rule 144A and sales only to accredited investors as 
defined under Rule 501 of Regulation D under the Securities Act.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
the provisions of Section 15B(b)(2)(C) of the

[[Page 14995]]

Act,\43\ which provides that the MSRB's rules shall:
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78o-4(b)(2)(C).

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 and 
municipal financial products, to remove impediments to and perfect 
the mechanism of a free and open market in municipal securities and 
municipal financial products, and, in general, to protect investors, 
---------------------------------------------------------------------------
municipal entities, obligated persons, and the public interest.

    The proposed rule change would promote just and equitable 
principles of trade and remove impediments to and perfect the mechanism 
of a free and open market by amending Rule G-11 to require the senior 
syndicate manager to notify all syndicate and selling group members, at 
the same time via free-to-trade wire or other industry-accepted 
electronic communication method, that the offering is free to trade in 
the secondary market. This proposed change would eliminate the 
potential for an unfair advantage in the secondary sales of municipal 
securities. Similarly, the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market by 
requiring the underwriter in an advance refunding to disclose advance 
refunding information, so all market participants have access to such 
information at the same time.
    The proposed rule change would promote just and equitable 
principles of trade by codifying in Rule G-11 the existing obligation 
of selling group members to comply with the issuer's terms and 
conditions in a primary offering of municipal securities. The proposed 
rule change also would promote just and equitable principles of trade 
by ensuring issuers in a primary offering have information regarding 
the designations and allocations of their offering. Additionally, 
providing this information to issuers removes impediments to a free and 
open market in municipal securities by giving issuers valuable 
information they otherwise may not realize or know is available.
    The proposed rule change would promote just and equitable 
principles of trade and foster cooperation and coordination with 
persons engaged in processing information with respect to transactions 
in municipal securities and municipal financial products by aligning 
the payment of sales credits in net designation and group net sales 
transactions. Additionally, aligning these payments would remove 
impediments to a free and open market in municipal securities and 
municipal financial products by reducing credit risk in the market and 
allowing group net sales credit payments to be made to syndicate 
members on a shortened timeframe.
    The inclusion on Form G-32 of additional data fields would foster 
cooperation with persons engaged in regulating and processing 
information with respect to transactions in municipal securities and 
municipal financial products, by providing more transparency with 
respect to municipal securities offerings. For example, by obtaining 
this information, the MSRB and other regulators would have access to 
more fulsome and useful market data to help inform its regulation of 
the municipal securities markets.
    Finally, the proposed rule change would remove impediments to and 
perfect the mechanism of a free and open market in municipal securities 
by removing Rule G-32(c). By eliminating a rule that no longer resolves 
a market harm, the proposed rule change seeks to more appropriately 
respond to actual market practices, reduce regulatory burdens and thus 
encourage compliance with a more appropriate and beneficial process by 
which the underwriter receives the official statement in a primary 
offering of municipal securities.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 15B(b)(2)(C) of the Exchange Act requires that MSRB rules 
not be designed to impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Exchange Act.\44\ The 
MSRB has considered the economic impact associated with the proposed 
amendments to Rule G-11, Rule G-32 and Form G-32 including a comparison 
to reasonable alternative regulatory approaches, relative to the 
baseline.\45\ The MSRB does 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 Exchange Act.
---------------------------------------------------------------------------

    \44\ Id.
    \45\ See Policy on the Use of Economic Analysis in MSRB 
Rulemaking, available at https://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. In evaluating whether there was a 
burden on competition, the Board was guided by its principles that 
required the Board to consider costs and benefits of a rule change, 
its impact on capital formation and the main reasonable alternative 
regulatory approaches.
---------------------------------------------------------------------------

    The MSRB believes the proposed rule change is needed to increase 
regulatory transparency in the primary offering process and secondary 
market trading. Additionally, the MSRB believes the proposed rule 
change is necessary to ensure its continued access to important new 
issue information, address possible information asymmetry that arises 
from certain market practices and to improve the overall efficiency of 
the market.
Rule G-11--Primary Offering Practices
    The proposed amendments to Rule G-11 would address free-to-trade 
information dissemination, require information regarding designations, 
group net sales credits and allocations be provided to the issuer in a 
primary offering, align the time period for the payment of group net 
sales credits with the payment of net designation sales credits and 
explicitly state that selling group members must comply with the 
issuer's terms and conditions in a primary offering. The need for the 
proposed amendments arises from the MSRB's oversight of underwriters in 
primary offerings of municipal bonds. The MSRB believes that by not 
amending Rule G-11 and instead leaving the rule in its current state, 
certain market issues would remain unaddressed. For example, market 
transparency would not be enhanced, and information asymmetry would not 
be reduced with respect to certain areas.
    The MSRB also considered other alternative approaches to the 
proposed changes to Rule G-11. Regarding the requirement for the senior 
syndicate manager to provide detailed information regarding 
designations, group net sales credits and allocations of the securities 
in a primary offering to the issuer, the MSRB could also require that 
the information be provided to the issuer, but only upon the issuer's 
request. However, the MSRB believes this alternative could result in 
frequent issuers having better access to information than issuers who 
are unaware that the information is available upon request. The 
proposed change to this requirement is designed to ensure that all 
issuers receive the relevant information on designations, group net 
sales credits and allocations, and the obligation can be met with the 
existing documents that are sent to syndicate members. A similar 
alternative would be to require the senior syndicate manager to provide 
designation, group net sales credit and allocation information to all 
issuers with an option to opt out of receiving the information. 
However, the MSRB is not aware of any likely rationale behind an 
issuer's decision to decline the information other than the fact that 
the issuer may decide the burden of

[[Page 14996]]

reviewing the information exceeds the benefits of the information 
itself.\46\
---------------------------------------------------------------------------

    \46\ Issuers could choose to delete the information to avoid the 
burden.
---------------------------------------------------------------------------

    The MSRB has taken into consideration the likely costs and benefits 
associated with the proposed rule change and provides the following 
analysis for each specific proposal.\47\
---------------------------------------------------------------------------

    \47\ In addition to the costs to dealers for compliance with the 
proposed amendments to Rule G-11, the MSRB believes that there also 
would be a small one-time cost associated with revising policies and 
procedures by syndicate managers as a result of these proposals.
---------------------------------------------------------------------------

Benefits and Costs--Free-to-Trade Information Dissemination
    Requiring senior syndicate managers to disseminate free-to-trade 
information to all syndicate and selling group members at the same time 
should ensure timely access to critical information. As is the case for 
all asymmetric information transactions, when a participant does not 
have the same information as others in a transaction, they are at a 
disadvantage. All syndicate and selling group members need to receive 
the information simultaneously to reduce any risk of unfair practices.
    The free-to-trade information is typically issued by the senior 
syndicate manager to all members of the syndicate. However, the MSRB 
understands that the timing of receipt of the free-to-trade information 
can vary such that information is not always received by all syndicate 
members at the same time. It is the MSRB's understanding that, 
typically, the free-to-trade information is sent electronically and 
would be simple to provide to all syndicate and selling group members 
at the same time. Therefore, above-the-baseline costs \48\ to senior 
syndicate managers associated with this requirement are expected to be 
insignificant. Syndicate and selling group members currently receiving 
the free-to-trade information after others in the syndicate have 
already received it would benefit from being notified earlier that they 
may trade in the secondary market at market prices equal to or 
different than the offering price. Thus, the MSRB believes that the 
likely benefits of this requirement significantly outweigh its likely 
costs.
---------------------------------------------------------------------------

    \48\ For economic evaluation the proposed rule changes, the 
baseline is the current state under existing MSRB rules.
---------------------------------------------------------------------------

Benefits and Costs--Additional Information for the Issuer
    The main benefit of providing information regarding designations, 
group net sales credits and allocations to the issuer is to provide 
transparency to the issuer by giving them the same information received 
by the syndicate members. This information is beneficial to the issuer 
because it provides the issuer with relevant details regarding the 
issue and assists the issuer in determining whether certain syndicate 
rules or terms have been followed. Additionally, providing this 
information, in the aggregate, may help issuers understand the 
syndicate structures, the distinct responsibility of syndicate managers 
and members and fees earned by each syndicate participant, which may 
benefit issuers when they come to market again in the future.
    Because the senior syndicate manager is already required to provide 
these disclosures to each syndicate member and could meet this 
requirement with the same information that is sent to the syndicate 
members, the incremental cost of providing this information to the 
issuers as well should be negligible. The information on net 
designations, group net sales credits and allocations is typically 
provided electronically and therefore is easy to disseminate to 
additional parties.
Benefits and Costs--Alignment of the Timeframe for the Payment of Group 
Net Sales Credits With the Payment of Net Designation Sales Credits
    Aligning the timeframe for the payment of group net sales credits 
to syndicate members with the timeframe for the payment of net 
designation sales credits would promote a uniform practice among 
payments of sales credits for syndicate members and limit the delay in 
getting paid for group net orders, while reducing syndicate members' 
exposure to the senior syndicate manager's credit risk.
    It is the MSRB's understanding that many firms acting as a senior 
syndicate manager are already operating on the ten-day deadline for the 
payment of group net sales credits. For the limited number of firms who 
are not currently operating on the ten-day deadline, in order to meet 
the new timeframe for the payment of group net sales credits, those 
firms initially may need to revise certain internal processes, and thus 
may incur some upfront costs. However, the MSRB is not proposing to 
change the timeframe related to settlement of the syndicate or similar 
account, but rather, the timeframe within which payment of the group 
net sales credits occurs. Therefore, the associated costs should not be 
significant once the new process is in place.
Benefits and Costs--Reinforce Selling Group Members' Existing 
Obligations
    Currently, syndicate managers under Rule G-11(f) are required to 
promptly furnish in writing the issuer's terms and conditions 
information described in this section to other members of the syndicate 
and selling group members. The benefit of this proposed rule change 
would be to reinforce selling group members' existing obligation to 
comply with the issuer's terms and conditions in a primary offering of 
municipal securities. Without this change, the issuer has much less 
certainty that their terms and conditions would be met.
    Selling group members presumably have a choice to become a member 
if they determine that the benefits from the ability to participant in 
a deal exceeds the compliance costs. This cost increase, however, would 
not be applicable to selling group members who are already in 
compliance with Rule G-11(f) when participating in a primary offering 
of municipal securities. The MSRB is unable to quantify the percentage 
of selling group members who are presently not in compliance and thus 
provide an estimate of the material increase of costs. However, the 
MSRB believes the overall benefits of full compliance by all selling 
group members should exceed the costs borne by non-compliant selling 
group members, as this has been the intended application of Rule G-
11(f).
Proposed Rule Change Under Rule G-11--Effect on Competition, Efficiency 
and Capital Formation
    Since all four proposed changes to Rule G-11 would apply equally to 
all primary offerings of municipal securities and associated 
underwriters, they should not impose a burden on competition, 
efficiency or capital formation. The proposed changes are meant to 
improve the fairness and efficiency of the underwriting process and 
thus should improve capital formation. Specifically, the proposed 
changes are intended to protect issuers, syndicate members and 
investors, and thus to increase confidence in the capital markets by 
enhancing transparency and promoting fairness of the competition in the 
primary offering process.
Rule G-32--Disclosures in Connection With Primary Offerings
    The proposed rule change as it relates to Rule G-32 would provide 
equal access to market participants regarding CUSIP numbers advance 
refunded and repeal the requirement for dealers acting as financial 
advisors that prepare the

[[Page 14997]]

official statement to make the official statement available to the 
underwriter promptly after approval by the issuer.
Benefits and Costs--Equal Access to the Disclosure of the CUSIP Numbers 
Advance Refunded
    Currently, Rule G-32 requires underwriters of an advance refunding 
to provide the advance refunding document, which only includes a list 
of the advance refunded CUSIPs, to the EMMA Dataport and related 
information on Form G-32, no later than five business days after the 
closing date. The proposed change is needed to reduce information 
asymmetry that may arise in the secondary markets. In the case of 
advance refundings, information regarding the CUSIPs advance refunded 
may currently be available to certain market participants before it is 
available to others. This could result in negative consequences for the 
less informed market participants by forcing them to make investment 
decisions with less information than other market participants.
    The MSRB has considered the alternative of requiring the advance 
refunding document to be submitted to the EMMA Dataport sooner than 
five business days after closing to minimize the chance of discrepancy 
in the timing of disclosures made to different market participants. 
However, the MSRB understands that this information sometimes is not 
available sooner than five days after closing and proposing a 
requirement that the information be provided in a shorter timeframe may 
not be feasible at this time.
    The main benefit of advance refunding disclosure is reduced 
information asymmetry in the secondary market, which may in turn 
improve the market's fairness and efficiency. Data are readily 
available to the underwriter; therefore, costs above the baseline would 
be limited to manually entering the amount of bonds advance refunded 
per CUSIP number, since underwriters are already required to provide 
advance refunding documents, if prepared, to the EMMA Dataport and 
related information on Form G-32.
Effect on Competition, Efficiency and Capital Formation
    Since the proposed amendments would apply equally to all primary 
offerings and associated underwriters, they should not impose a burden 
on competition, efficiency or capital formation. In fact, since the 
proposed amendments are meant to improve the fairness and efficiency 
through equal access for all market participants of the underwriting 
process and thereafter the secondary market trading, the proposed 
amendments should improve capital formation. Specifically, the proposed 
amendments protect investors, dealers and other market participants who 
currently do not have the equal access to the CUSIP number advance 
refunded information disclosure, and these protections could improve 
the competitiveness of the primary and the secondary markets, 
potentially benefiting issuers and investors alike.
Benefits and Costs--Repeal of Requirement for Dealers Acting as 
Financial Advisors To Make the Official Statement Available to the 
Underwriters
    The official statement contains information that is critical to 
underwriters and market participants. Rule G-32(c) is limited in scope 
as it only applies to delivery of the official statement when it has 
been prepared by a dealer acting as a financial advisor. Exchange Act 
Rule 15c2-12(b)(3) more broadly applies to the underwriter in 
contracting with the issuer or its agent for receipt of the official 
statement in a certain amount of time. By eliminating the requirement 
for a dealer acting as a financial advisor to promptly deliver the 
official statement to the underwriters, the proposed rule change would 
promote the uniform practice of regulatory responsibility between 
dealer financial advisors and non-dealer municipal advisors with a 
potentially limited negative impact on the distribution of the official 
statement to the underwriter. Therefore, eliminating this requirement 
should not result in delayed information dissemination to market 
participants or hamper their ability to make more informed investment 
decisions. It will also reduce a burden for dealers acting as financial 
advisors that is no longer deemed necessary.
    To promote regulatory consistency and uniform practice, the MSRB 
considered the alternative of keeping the requirement and proposing to 
expand the requirement to also require non-dealer municipal advisors to 
make the official statement available to the underwriter after the 
issuer approves its distribution. However, upon further review, the 
MSRB believes this regulatory alternative would increase the burden for 
non-dealer municipal advisors but would provide limited benefits to the 
market. Based on market participant feedback, the MSRB understands that 
underwriters and issuers more frequently rely upon the contractual 
arrangements required by Exchange Act Rule 15c2-12(b)(3) for the 
delivery of the official statement in a timely manner.
    While the MSRB believes the costs of sending an official statement 
electronically to the underwriter is negligible, this proposed rule 
change would nevertheless reduce costs for dealers acting as financial 
advisors since they are no longer required to disseminate the official 
statement to the underwriter unless required pursuant to Exchange Act 
15c2-12(b)(3), regardless of who prepared the official statement.
Effect on Competition, Efficiency and Capital Formation
    The proposed rule change to eliminate the requirement for dealer 
financial advisors that prepare the official statement to disseminate 
the document to the underwriter is applicable to all dealer financial 
advisors. The proposed rule change removes an imbalance among financial 
advisors since currently dealer financial advisors are required to 
provide the official statement, but non-dealer municipal advisors are 
not. Therefore, the proposed rule change should not impose a burden on 
competition, efficiency or capital formation. In fact, because the 
amendments are meant to improve the fairness and consistency of 
regulatory responsibility between dealer financial advisors and non-
dealer municipal advisors, they should create uniform practice which 
should improve competition and thus benefit capital formation. 
Eliminating this requirement should not result in delayed information 
dissemination to some market participants, hampering their ability to 
make more informed investment decisions.
Changes to Form G-32
    The proposed changes to Form G-32 would require additional data 
fields that would be auto-populated from NIIDS on Form G-32 as well as 
submission of additional data fields not currently in NIIDS on Form G-
32, as applicable. The economic analysis below discusses the two 
categories of data fields separately.
    Broadly speaking, the need for the two categories of proposed 
additional data fields on Form G-32 arises from the fact that the 
existing information not currently on Form G-32, but proposed to be 
included, would enhance the MSRB's regulatory transparency initiatives 
and facilitate the MSRB's own usage of data. The two categories of 
proposed additional data points on Form G-32 should also reduce the 
MSRB's dependence on third-party data providers and utilities for 
information disclosure and provide the MSRB greater flexibility in 
ensuring the accuracy of the data. Additionally, as part of the MSRB's 
long running

[[Page 14998]]

transparency initiatives, the MSRB may disseminate some or all of this 
information, in the future. The MSRB believes that providing 
transparency of municipal market information is an important way to 
reduce information asymmetry in the market and enhance data continuity. 
If the MSRB chooses to disseminate some or all of the information, in 
the future, investors would have an additional resource providing 
access to the information used in their assessment of the market value 
of the security.
Benefits and Costs--Auto Population of Additional Data Fields on Form 
G-32 With Information From NIIDS
    An underwriter of a new issue that is NIIDS-eligible provides data 
to NIIDS with respect to that issue, as applicable; however, only some 
of that information is auto-populated into Form G-32. Therefore, the 
MSRB may be limited in its long-term flexibility to make the 
information transparent to the broader market on a sustained basis, as 
a result of the MSRB not being in full control of the collection of 
those additional data fields. The proposed changes would reduce the 
MSRB's dependence on third-party data providers and utilities. These 
additional data elements comprise pertinent information about the 
municipal securities and not collecting the data would impede the 
MSRB's goal of creating an ongoing transparent market for municipal 
securities. Having these fields on Form G-32 would also ensure that the 
MSRB would have continued access to vital primary offering information 
now and in the future. While much of the information contained in the 
proposed additional data fields is currently available to the public in 
the official statement for a primary offering, it is often not easily 
located or explicitly stated therein. Because official statements are 
not consistently formatted, and the specific information sought is not 
necessarily prominently displayed, at least some portion of retail and 
other investors may be unaware of, or have difficulty locating, 
pertinent information. Therefore, should the MSRB disseminate some or 
all of this information in the future, having readily-available 
information, on an ongoing basis is, consistent with the MSRB's mission 
of market transparency.
    Underwriters of non-NIIDS-eligible offerings would be exempt from 
the requirement to manually complete the data fields on Form G-32 that 
would be auto-populated from NIIDS for NIIDS-eligible offerings, except 
for one data field that indicates the original minimum denomination of 
the offering. The MSRB considered the alternative of requiring 
underwriters of non-NIIDS-eligible issues to manually input all the 
applicable information from the 57 data fields onto Form G-32. However, 
the MSRB believes that, at this time, this alternative would impose an 
unnecessary burden on regulated entities by requiring them to devote 
additional time and resources to providing information for issues that 
are not likely to be traded in the secondary market and are less likely 
to be traded by retail investors.\49\ The MSRB believes that, other 
than the original minimum denomination information, the additional 
information being sought in the proposed data fields is not critical in 
evaluating these offerings at this time, and the likely costs 
associated with inputting all of the applicable fields manually onto 
Form G-32 would exceed the limited benefits.
---------------------------------------------------------------------------

    \49\ See supra footnote 39.
---------------------------------------------------------------------------

    The MSRB considered the alternative of collecting the additional 
information from a third-party data vendor other than NIIDS, to the 
extent one exists. However, this would require the third party to 
obtain the information either from NIIDS, official statements, offering 
circulars or from the underwriter directly, again requiring unnecessary 
duplication of information input. Additionally, obtaining information 
from a third party might limit the MSRB's ability to make the 
information available, thus hindering the MSRB's goal of increasing 
market transparency.
    The MSRB believes that expanding the number of data fields on Form 
G-32 would improve the MSRB's flexibility regarding data usage. 
Specifically, by collecting the NIIDS data for inclusion on Form G-32, 
the MSRB would have greater control and flexibility for the foreseeable 
future without depending on third-party data providers or utilities. 
The effort would also have several long-term benefits for the MSRB, 
including its ability to increase transparency, improve market 
information and reduce the likelihood of information asymmetries, 
should the MSRB disseminate some or all of the information, in the 
future. In that regard, market participants, such as retail investors, 
issuers and smaller-sized institutional investors, and municipal 
advisors could have access to less information than market 
professionals, possibly resulting in information asymmetry. Information 
asymmetry could cause market price distortion and/or transaction volume 
depression resulting in an undesirable impact on the municipal 
securities market.
    Because underwriters are already required to submit this 
information to NIIDS for NIIDS-eligible offerings, the costs associated 
with providing these data elements are considered part of the baseline, 
assuming full compliance with applicable provisions of Rule G-32 and 
Rule G-34. The additional cost imposed on certain market participants 
for data to be auto-populated from NIIDS onto Form G-32 should be 
limited, which may include, for example, additional time to review the 
pre-populated information for accuracy.\50\
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    \50\ Presently, one firm submits data elements to Form G-32 via 
a business-to-business connection (``B2B''), which is a computer-to-
computer connection that does not require any human intervention and 
provides underwriters a direct data submission channel to Form G-32. 
With respect to the proposed changes, this B2B submitter would 
presumably continue to provide all of the proposed data elements via 
the same B2B connection, because auto-population from NIIDS is not 
possible with this format of submission. However, B2B is an 
automated submission itself; therefore, the burden of providing 
these additional data elements would be limited to the initial time 
and cost of coding for the process. Subsequently, there should not 
be additional burdens associated with providing this information to 
the MSRB on a periodic basis.
---------------------------------------------------------------------------

    Underwriters of non-NIIDS-eligible primary offerings are already 
obligated to complete Form G-32 manually pursuant to Rule G-
32(b)(i)(A)(2). Because the proposed rule change only requires 
underwriters of non-NIIDS-eligible offerings to manually complete one 
of the 57 data fields (e.g., original minimum denomination), the MSRB 
believes the proposed addition should not impose any significant 
additional time or burden on those underwriters.
Effect on Competition, Efficiency and Capital Formation
    Since the data is already provided to and available through NIIDS 
from underwriters of primary offering municipal securities that are 
NIIDS-eligible, the proposed changes would not impose a significant 
burden on regulated entities. Submitters of Form G-32 would have a 
continued responsibility to ensure that pre-populated information is 
complete and accurate. However, this responsibility would not rise to 
the level of a burden on competition since it would apply equally to 
all underwriters inputting information for new issues.
Additional Data Fields on Form G-32 Not Auto-Populated With Information 
From NIIDS
    Generally, the MSRB seeks to minimize the burden of rule amendments 
by, for example, obtaining information from existing sources such as 
NIIDS. Certain data elements that the

[[Page 14999]]

MSRB believes would be useful to regulators, however, are not currently 
input into NIIDS or collected by the MSRB but once directly input on 
Form G-32 they will be available to regulators. This information could 
also be useful to certain market participants, such as investors, 
issuers and municipal advisors and thus the MSRB may disseminate this 
information, in the future.
    As discussed in detail above with regard to the additional data 
elements not currently captured by NIIDS (i.e., ability for minimum 
denomination to change, additional syndicate managers, call schedule, 
legal entity identifiers for credit enhancers and obligated persons, 
name of municipal advisor, name of obligated person, the dollar amount 
of CUSIP advance refunded, restrictions on the issue and retail order 
period by CUSIP number), the MSRB has considered the need to require 
each of the proposed data elements individually. The MSRB believes that 
this information is valuable and would immediately enhance regulatory 
transparency. The information could also help promote a more efficient 
secondary market for municipal securities, should the MSRB disseminate 
some or all of the information, in the future. Not collecting the 
additional data elements would prevent the benefits that are associated 
with the proposed changes, including enhanced regulatory transparency, 
and the option to disseminate the information in the future, from being 
realized. Therefore, for the proposed changes to Form G-32 that are 
related to additional data elements that are not currently submitted to 
NIIDS, the MSRB is proposing to require underwriters of NIIDS-eligible 
offerings to manually input this information onto Form G-32 and to 
require underwriters of non-NIIDS-eligible offerings to include the 
data field related to whether the minimum denomination has the ability 
to change and whether the offering is being made with restrictions, as 
described below.
    Like the alternative above for auto-population of data from NIIDS, 
the MSRB has considered the alternative to collect this information 
from a third-party vendor, to the extent one exists. However, reliance 
on third-party vendors could limit the MSRB's flexibility and latitude 
to make the data available to the market, thus hindering the goal of 
increased regulatory transparency. The MSRB also considered collecting 
all of the proposed additional data through NIIDS, including the newly 
proposed data elements that are not currently input into NIIDS. 
However, those data elements are currently not available from NIIDS; 
thus, it is more practicable for the MSRB to collect the information 
directly on Form G-32. If DTC were at some point to change its data 
collection scope, the MSRB could revisit the approach.
    The MSRB believes there would be many benefits associated with 
collection of the proposed additional data elements not currently 
collected in NIIDS, as these new data elements are currently not 
readily available or easily extractable by the MSRB. The proposed 
changes would ensure the MSRB can provide this information to the 
market, in the future, as appropriate, which would increase 
transparency, reduce information asymmetry, enhance market efficiency, 
and may assist individual investors and other market participants with 
more informed decision making. Additionally, should the MSRB 
disseminate some or all of this information, in the future, academic 
studies support disclosure and have consistently demonstrated that 
information disclosures on municipal bond issuances have benefited 
investors, particularly retail investors who have higher information 
acquisition costs than institutional investors.\51\
---------------------------------------------------------------------------

    \51\ See Christine Cuny, ``When Knowledge is Power: Evidence 
from the municipal bond market,'' Journal of Accounting and 
Economics, 2017, and Komla Dzigbede, ``Regulatory Disclosure 
Interventions in Municipal Securities Secondary Markets: Market 
Price Effects and the Relative Impacts on Retail and Institutional 
Investors,'' Working Paper, State University of New York at 
Binghamton, July 2017.
---------------------------------------------------------------------------

    Finally, all the additional data elements would be useful for 
regulators to perform regulatory oversight of the primary offering 
practices and the secondary market trading practices to ensure a fair 
and efficient market.
    In the context of this proposal, the relevant costs are those 
associated with providing information for the proposed new data 
elements. For the most part, this information is readily available to 
underwriters. However, it is useful to consider each of the below 
elements individually.
     Ability for Minimum Denomination to Change--The proposed 
rule change would include a ``yes/no'' flag on Form G-32 to indicate 
whether the minimum denomination for the new issue could change. Since 
this information is contained in the official statement, which is 
readily available to underwriters prior to issuance, the MSRB believes 
the costs associated with providing this information would be 
negligible.
     Call Schedule--The proposed rule change would require 
additional call information on Form G-32. Like most of the proposed 
data elements, call information is known to underwriters prior to 
issuance. Therefore, the costs associated with providing this 
information on Form G-32 primarily take the form of additional time 
needed to complete Form G-32. Like other proposed data elements, the 
MSRB believes that the time required to provide this information (and 
any subsequent cost) would not be significant.
     Names of Municipal Advisors, Obligated Persons, Other than 
the Issuer and Additional Syndicate Managers (Senior and Co-Managers)--
The proposed rule change would require the names of municipal advisors, 
obligated persons, other than the issuer, and additional syndicate 
managers (if applicable) on Form G-32. This information is readily 
available to underwriters and the incremental cost of providing this 
information takes the form of additional time required to complete Form 
G-32.
     Retail Order Period by CUSIP--The proposed rule change 
would require more retail order period information on Form G-32. 
Specifically, underwriters would be required to provide CUSIP-specific 
retail order period information. Like other of the proposed data 
elements, this information is well known to the underwriter prior to 
issuance. Therefore, the burden of providing this proposed additional 
information is limited to simply inputting it on the form. Thus, the 
main associated burden would be the additional time required to 
complete the form. Incrementally, this cost would be minor as it should 
not require significant time to enter the information.
     Dollar Amount of Security Advance Refunded by Each CUSIP 
Number--The proposed rule change would require the underwriter, in a 
refunding, to provide the dollar amount of each CUSIP number advance 
refunded in an issue. The dollar amount of CUSIP numbers being advance 
refunded is readily available and should not be difficult for 
underwriters to gather and to provide to the market, as underwrites 
should already have the information on hand.
     LEIs for Credit Enhancers and Obligated Person(s), Other 
than the Issuer, if Available--The proposed rule change would require 
the LEI for the obligated person, other than the issuer, and any credit 
enhancers to be provided, if readily available. In the case of the LEI 
for credit enhancers, this

[[Page 15000]]

information would only be required if credit enhancements were used. 
LEI information is publicly available through various platforms so the 
cost of obtaining and providing this information would be limited. 
Additional costs in the form of search time may be incurred if the 
underwriter does not have the appropriate LEI(s) on hand.
     Restrictions on the Issue--The proposed rule change would 
add a ``yes'' and ``no'' flag to Form G-32 for an underwriter to 
indicate whether the offering is being made with restrictions. Because 
this information should be readily available to underwriters prior to 
issuance, the MSRB believes the costs associated with providing this 
information would be negligible.
    As noted above, for non-NIIDS-eligible offerings, the underwriter 
would not be required to manually complete these additional fields, 
except for the data field that indicates the ability for the minimum 
denomination of an offering to change, where the underwriter would 
provide a ``yes/no'' flag to indicate whether the original minimum 
denomination for the issue has the ability to change, and the data 
field that indicates whether the offering is being made with any 
restrictions.
    The MSRB believes that the immediate increase in regulatory 
transparency and enhanced quality control, along with the potential 
long-term accrued benefits of disseminating the information, in the 
future, would outweigh the burden imposed on underwriters.\52\
---------------------------------------------------------------------------

    \52\ For B2B submissions, to provide the above-proposed data 
elements, this submitter would incur development costs to code for 
the new submission format since their information is not auto-
populated on Form G-32 from NIIDS. The MSRB realizes that this firm 
would most likely face greater up-front costs in the event of a rule 
change due to the one-time cost to revise the firm's B2B submission 
code than firms submitting manually.
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Effect on Competition, Efficiency and Capital Formation
    The MSRB believes that the proposed rule change may improve the 
efficiency of the municipal securities market by promoting a uniform 
practice and consistency and transparency of information. At present, 
the MSRB is unable to quantitatively evaluate the magnitude of 
efficiency gains or losses, or the impact on capital formation. 
However, the MSRB believes that the benefits would outweigh the costs 
over the long term. Additionally, in the MSRB's view, the proposed 
changes would not result in an undue burden on competition since they 
would apply to all underwriters equally.
    Overall, the MSRB believes, in aggregate, the above proposed 
changes should bring additional benefits to the primary and secondary 
markets, with relatively limited costs to market participants. The MSRB 
has assessed the impact of the proposed changes and believes that the 
likely aggregate benefits should accrue and outweigh the likely costs 
over the long term.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    As previously noted, on September 14, 2017 and July 19, 2018, the 
MSRB published the Concept Proposal \53\ and Request for Comment,\54\ 
respectively, seeking public comments on various aspects of current 
primary offering practices and setting forth several questions related 
to Rule G-11 and Rule G-32, as well as Form G-32 data fields. Following 
its review of the comments, the MSRB also conducted additional outreach 
with various market participants. The following summarizes the comments 
received on both the Concept Proposal and the Request for Comment and 
sets forth the MSRB's responses thereto. With regard to the Concept 
Proposal, the MSRB only provides responses to comments regarding those 
items that were not subsequently addressed in the Request for Comment. 
With respect to the Request for Comment, the MSRB provides responses to 
comments for each proposed change therein as set forth below.
---------------------------------------------------------------------------

    \53\ MSRB Regulatory Notice 2017-19 (September 14, 2017).
    \54\ MSRB Notice 2018-15 (July 19, 2018).
---------------------------------------------------------------------------

Summary of Comments Received in Response to the Concept Proposal
    The MSRB received 12 comment letters in response to the Concept 
Proposal. BDA and SIFMA both indicated their belief that current 
primary offering practices are adequate, and they saw no need for 
sweeping changes. NABL focused its comments on questions in the Concept 
Proposal that it believed could result in unintended consequences on 
dealers in primary offerings. NAMA indicated that its main concern was 
``that elements of the Concept Proposal suggest MSRB rule changes that 
exceed the MSRB's statutory authority.'' Other commenters provided 
views on various aspects of the Concept Proposal as set forth in the 
summary below.
Rule G-11--Primary Offering Practices
Bona Fide Public Offering
    In the Concept Proposal, the MSRB sought comment on whether there 
should be a requirement in Rule G-11 that syndicate members must make a 
``bona fide public offering'' of municipal securities at the public 
offering price. The MSRB asked, among other things, how such a 
requirement would apply, what definition of ``bona fide public 
offering'' should apply, what documentation would be necessary to 
document compliance and whether issuing guidance might be a better 
alternative.
    Four commenters provided comments on this issue,\55\ with three 
commenters expressly opposing any rulemaking by the MSRB with respect 
to ``bona fide public offerings.'' \56\ NABL and SIFMA noted that the 
contract between the issuer and the underwriter dictates whether there 
is a requirement to make a bona fide public offering at the public 
offering price and that the MSRB should not inject itself into those 
negotiations.\57\ SIFMA stated its concern that creating a regulatory 
requirement that offerings must be undertaken in a bona fide public 
offering would ultimately require a much more extensive set of 
regulatory changes and line drawing to deal with many situations where 
a traditional public offering may appropriately not be sought.\58\ 
According to SIFMA, this would raise considerable risk of regulations 
driving market decisions rather than the intentions of the party or 
free market forces.\59\ Finally, SIFMA noted that it is in the process 
of reviewing its Master Agreement Among Underwriters (``AAU'') and will 
consider what, if any, changes could be made to address some of the 
issues related to a syndicate member's ``bona fide public offering'' 
obligations.\60\
---------------------------------------------------------------------------

    \55\ BDA Letter I, NABL Letter I, TMC Bonds Letter I and SIFMA 
Letter I.
    \56\ BDA Letter I, NABL Letter I and SIFMA Letter I.
    \57\ NABL Letter I at 1; SIFMA Letter I at 4-5.
    \58\ SIFMA Letter I at 4.
    \59\ Id.
    \60\ SIFMA Letter I at 5-6.
---------------------------------------------------------------------------

    NABL suggested that the MSRB update its guidance with respect to 
Rule G-17 to clarify that, if an underwriter is not contractually 
obligated to conduct a bona fide public offering, the underwriter 
should be required to indicate this point, as well as any material 
risks to the issuer of not conducting a bona fide public offering, in 
its disclosures under Rule G-17.\61\ SIFMA suggested that the MSRB 
could

[[Page 15001]]

consider issuing interpretive guidance under Rule G-17 relating to 
material failures of a syndicate member to adhere to the contractual 
offering requirements that have a material adverse impact on the 
syndicate or the issuer.\62\
---------------------------------------------------------------------------

    \61\ NABL Letter I at 1.
    \62\ SIFMA Letter I at 4-5.
---------------------------------------------------------------------------

    TMC Bonds stated that it is possible that the closed nature of the 
traditional syndicate structure has an unintended consequence--instead 
of assuring that the public has access to new issue municipal 
securities, only members of the syndicate or participants in a 
distribution agreement have such access.\63\ TMC Bonds suggested that 
the MSRB could consider that a ``bona fide public offering'' may be 
accomplished by posting new issues on a ``market center,'' independent 
of syndicate structure, allowing investors (via a dealer) with no 
access to the retail order period to enter orders for new issues.\64\ 
TMC Bonds noted that this would allow the ``public'' to have access to 
new issues in a more transparent manner than in a syndicate retail 
order period.\65\ TMC Bonds suggested that, among other requirements, 
dealers submitting orders would need to provide an attestation that 
orders are from ``bona fide'' retail investors, and anonymous orders 
would not be allowed.\66\ Finally, SIFMA noted that the Internal 
Revenue Service's (IRS) issue price rules should take the lead on 
matters related to bona fide public offerings and initial offering 
prices and that the MSRB should wait on any rulemaking in this area 
until the market has adapted to the IRS requirements.\67\
---------------------------------------------------------------------------

    \63\ TMC Bonds Letter I at 1.
    \64\ TMC Bonds Letter I at 2.
    \65\ Id.
    \66\ Id.
    \67\ SIFMA Letter I at 5.
---------------------------------------------------------------------------

    In response to the comments received, the MSRB agrees with NABL and 
SIFMA that the contract between the issuer and the underwriter dictates 
whether there is a requirement to make a bona fide public offering at 
the public offering price. As a result, the MSRB determined to set 
aside discussions related to amending Rule G-11 to require syndicate 
members to make a bona fide public offering of municipal securities.
Free-to-Trade Wire
    The MSRB sought comment on whether the senior syndicate manager 
should issue the free-to-trade wire to all syndicate members at the 
same time. Two commenters provided input on this issue.\68\ BDA 
believed the MSRB should require all senior syndicate managers to send 
a free-to-trade wire to all syndicate members once formal award has 
been assigned and that the wire should be sent on a maturity-by-
maturity basis.\69\
---------------------------------------------------------------------------

    \68\ BDA Letter I and SIFMA Letter I.
    \69\ BDA Letter I at 2.
---------------------------------------------------------------------------

    Alternatively, SIFMA indicated that no regulatory requirements are 
needed to address the distribution of the free-to-trade wire.\70\ 
SIFMA, in reviewing and revising its AAU, indicated it will consider 
whether to include provisions that would make more explicit the method 
by which free-to-trade information is communicated to syndicate members 
and other dealers involved in the distribution of a new issue.\71\ If 
the MSRB were to pursue a rulemaking in this area, SIFMA stated it 
should be limited to ensuring communications occur on a material 
simultaneous basis and not pursuant to specified timeframes.\72\
---------------------------------------------------------------------------

    \70\ SIFMA Letter I at 7.
    \71\ SIFMA Letter I at 5.
    \72\ SIFMA Letter I at 7.
---------------------------------------------------------------------------

Additional Information for the Issuer
    The MSRB asked commenters whether the senior syndicate manager 
should be required to provide information to issuers on designations 
and allocation of securities in an offering and, if so, whether there 
would be a preferred method for providing the information. 
Additionally, the MSRB asked whether there were reasonable alternatives 
to this potential requirement and what benefits and burdens might be 
associated therewith.
    Four commenters responded to this inquiry.\73\ BDA indicated that 
not all issuers have access to detailed information about their 
securities (and in fact, according to BDA, frequently even syndicate 
members do not receive this information).\74\ BDA recommended that the 
MSRB require syndicate managers to send the issuers such information, 
as well as the underwriting spread breakdown, upon request.\75\ 
Similarly, GFOA noted that an issuer should be made aware of 
information distributed to the syndicate and that such information 
should be distributed to the entire syndicate at the same time, so no 
syndicate member has an advantage over another.\76\ The City of San 
Diego indicated that it actively requests and receives the relevant 
information from syndicate managers. However, it stated that, if the 
information is not currently provided to all issuers, the City of San 
Diego believes that Rule G-11 should be amended to require the senior 
syndicate manager to provide it unless the issuer opts out of receiving 
it.\77\
---------------------------------------------------------------------------

    \73\ BDA Letter I, City of San Diego Letter I, GFOA Letter I and 
SIFMA Letter I.
    \74\ BDA Letter I at 2.
    \75\ Id.
    \76\ GFOA Letter I at 1.
    \77\ City of San Diego Letter I at 1.
---------------------------------------------------------------------------

    The City of San Diego further indicated that the senior syndicate 
manager in negotiated sales should be required to obtain the issuer's 
approval of designations and/or allocations unless otherwise agreed to 
between the parties.\78\ GFOA indicated that it is a best practice to 
have discussions about the issuer's approval of designations and/or 
allocations.\79\
---------------------------------------------------------------------------

    \78\ Id.
    \79\ GFOA Letter I at 1.
---------------------------------------------------------------------------

    SIFMA indicated that it was unaware of any circumstances where a 
syndicate manager refused to provide information to an issuer or where 
an issuer complained that such information was withheld.\80\ If the 
MSRB were to undertake rulemaking in this area, SIFMA stated that the 
senior syndicate manager should only be required to provide the 
information to the issuer upon request.\81\ Finally, SIFMA stated that 
a senior syndicate member should not be required to obtain the issuer's 
approval of designations and/or allocations.\82\ According to SIFMA, 
most issuers likely have no interest in approving allocations, and 
those that do, normally reach agreement with the syndicate manager to 
do so.\83\ SIFMA is unaware of circumstances where a syndicate manager 
has agreed to allow the issuer to approve of designations/allocations 
and then has failed to do so.\84\
---------------------------------------------------------------------------

    \80\ SIFMA Letter I at 7-8.
    \81\ SIFMA Letter I at 8.
    \82\ SIFMA Letter I at 9.
    \83\ Id.
    \84\ Id.
---------------------------------------------------------------------------

Alignment of the Payment of Sales Credits for Group Net Orders With the 
Payment of Sales Credits for Net Designation Orders and Shortened 
Timeframe
    The MSRB asked commenters whether the timing of the payment of 
sales credits on group net orders should be aligned with the timing of 
the payment of sales credits on net designated orders. Two commenters 
responded.\85\
---------------------------------------------------------------------------

    \85\ BDA Letter I and SIFMA Letter I.
---------------------------------------------------------------------------

    BDA recommended that the MSRB align the time period for the payment 
of sales credits on both group net and net designated to 10 business 
days.\86\ SIFMA, on the other hand, indicated that absent evidence of 
significant problems with the current timeframes, the MSRB should make 
no changes.\87\

[[Page 15002]]

According to SIFMA, the determinations of these two payments are based 
on different inputs that could drive the time disparity.\88\
---------------------------------------------------------------------------

    \86\ BDA Letter I at 3.
    \87\ SIFMA Letter I at 10.
    \88\ Id.
---------------------------------------------------------------------------

Priority of Orders and Allocation of Bonds
    Four commenters provided comment on whether Rule G-11 should be 
amended to explicitly state the process by which orders must be given 
priority.\89\
---------------------------------------------------------------------------

    \89\ BDA Letter I, City of San Diego Letter I, GFOA Letter I and 
SIFMA Letter I.
---------------------------------------------------------------------------

    BDA and the City of San Diego believed that the rule should be 
amended to require senior syndicate managers, in negotiated sales, to 
allocate retail priority orders up to the amount of priority set by the 
issuer before allocating to lower priority orders, unless the issuer 
provides otherwise.\90\ SIFMA, however, stated that the current 
priority provisions achieve an appropriate balance of competing 
legitimate interests in the primary offering distribution process.\91\ 
SIFMA stated that syndicate members are obligated to follow the 
direction given by the issuer with regard to the priority for filling 
orders on that issuer's primary offering offerings, and it is critical 
that MSRB rules not impede this practice.\92\ Further, according to 
SIFMA, existing MSRB guidance under Rule G-17 is adequate to address 
situations where the syndicate has materially departed from priority 
requirements.\93\ GFOA stated that the issuer's priority of order 
designations are stated on the pricing wire and, if the issuer has 
indicated its preference for priority, the senior syndicate manager 
should abide by the issuer's preference.\94\
---------------------------------------------------------------------------

    \90\ BDA Letter I at 3 and City of San Diego Letter I at 1.
    \91\ SIFMA Letter I at 10.
    \92\ Id.
    \93\ SIFMA Letter I at 12.
    \94\ GFOA Letter I at 1.
---------------------------------------------------------------------------

    In response to the comments received, the MSRB determined not to 
seek additional comment on the proposed amendment to explicitly define 
the process by which orders must be given priority in a primary 
offering. The MSRB believes that the requirements under Rule G-11 
regarding priority of orders and the interpretative guidance under Rule 
G-17 expressly address how orders are given priority. At this time, the 
MSRB believes that additional rulemaking would not enhance existing 
priority and allocation related rules and guidance.
Rule G-32--Disclosures in Connection With Primary Offerings
Disclosure of the CUSIPs Advance Refunded and the Percentages Thereof
    The MSRB requested comment on whether the MSRB should require 
underwriters to disclose, within a shorter timeframe than is currently 
required, and to all market participants at the same time, CUSIPs 
advance refunded and the percentages thereof. Six commenters provided 
their views.\95\
---------------------------------------------------------------------------

    \95\ BDA Letter I, City of San Diego Letter I, NABL Letter I, 
NFMA Letter I, SIFMA Letter I and Wells Capital Letter I.
---------------------------------------------------------------------------

    The City of San Diego, NFMA and Wells Capital agreed that 
underwriters should disclose the refunding CUSIPs to all market 
participants at the same time.\96\ Wells Capital noted that incomplete 
refunding disclosures or selective disclosures can create inequitable 
trading advantages for those obtaining refunding information prior to 
it being posted on EMMA.\97\ NFMA stated that the most effective and 
least costly solution to ensure all investors have equal access to 
advance refunded CUSIP information is the disclosure of information to 
EMMA at the same time, as soon as practicable.\98\ BDA agreed that the 
MSRB should require the senior syndicate manager or sole manager to 
disclose the CUSIPs advance refunded and the percentages thereof within 
a short period following the pricing of the refunding bonds, if 
available.\99\ SIFMA questioned the value of requiring submission of 
the percentages.\100\
---------------------------------------------------------------------------

    \96\ City of San Diego Letter I at 1, NFMA Letter I at 2 and 
Wells Capital Letter I at 2.
    \97\ Wells Capital Letter I at 2.
    \98\ NFMA Letter I at 2.
    \99\ BDA Letter I at 3.
    \100\ SIFMA Letter I at 14.
---------------------------------------------------------------------------

    NABL indicated that, while it has no view as to whether such a 
requirement should be adopted, it does believe it is important that any 
requirement not serve to indirectly regulate issuers by creating a de 
facto requirement that CUSIPs be identified by the issuer at pricing or 
any time before the issuer is otherwise obligated to provide such 
information.\101\
---------------------------------------------------------------------------

    \101\ NABL Letter I at 2.
---------------------------------------------------------------------------

    SIFMA believed the deadline for submitting advance refunding 
documents should remain at the current five business days after 
closing.\102\ SIFMA noted that, while making information about advance 
refunded bonds available at an earlier timeframe would be beneficial to 
the marketplace, it cautioned that the MSRB should thoroughly analyze 
the changes required to be made to Form G-32 and the EMMA primary 
market submission system.\103\ Further, SIFMA stated that, if a 
municipal advisor participates, the municipal advisor rather than the 
underwriter should be required to submit the advance refunding document 
and associated information to EMMA.\104\
---------------------------------------------------------------------------

    \102\ SIFMA Letter I at 13.
    \103\ Id.
    \104\ SIFMA Letter I at 14.
---------------------------------------------------------------------------

Submission of Preliminary Official Statements to EMMA
    Nine commenters addressed the question about whether Rule G-32 
should require the posting of the preliminary official statement 
(``POS'') to EMMA.\105\ Four commenters believed there should be a 
requirement that the POS be submitted to EMMA promptly.\106\ The City 
of San Diego noted that there is no valid reason for some market 
participants to have access to the POS before others.\107\ It indicated 
that the underwriter in a negotiated sale and the municipal advisor in 
a competitive sale should be required to submit the POS to EMMA 
concurrently with, or within one business day of, receiving 
confirmation from the issuer that the POS has been electronically 
printed/posted.\108\ If the information changes, the City of San Diego 
believed the underwriter or municipal advisor should be required to 
post a supplement or remove the POS if it becomes stale.\109\ 
Similarly, NFMA supported submission of the POS to EMMA prior to 
pricing to ensure that all market participants, including holders of 
parity bonds, have equal access to the latest disclosure documents of 
an issuer.\110\ Paganini and Wells Capital urged the MSRB to require 
underwriters (and municipal advisors, in the case of Wells Capital) to 
promptly submit the POS to EMMA so all potential buyers/investors have 
access to the information at the same time.\111\
---------------------------------------------------------------------------

    \105\ BDA Letter I, City of San Diego Letter I, GFOA Letter I, 
NABL Letter I, NAMA Letter I, NFMA Letter I, Paganini Letter I, 
SIFMA Letter I and Wells Capital Letter I.
    \106\ City of San Diego Letter I, NFMA Letter I, Paganini Email 
I and Wells Capital Letter I.
    \107\ City of San Diego Letter I at 1-2.
    \108\ Id.
    \109\ City of San Diego Letter I at 2.
    \110\ NFMA Letter I at 2.
    \111\ Paganini Email I at 1 and Wells Capital Letter I at 2.
---------------------------------------------------------------------------

    Five commenters opposed requiring the mandatory posting of a POS to 
EMMA.\112\ Three commenters believed such a requirement would be 
outside the MSRB's jurisdiction and would be indirect regulation of 
issuers by the MSRB in violation of the Exchange

[[Page 15003]]

Act.\113\ GFOA indicated that the POS should only be posted at the 
direction of the issuer.\114\ NAMA believed that requiring the 
municipal advisor to post the POS could cause them to be engaging in 
broker-dealer activity and could possibly force them to violate their 
fiduciary responsibilities to their municipal issuer clients if posting 
the information may be counter to the issuer's wishes or benefit.\115\ 
According to SIFMA, the POS as a disclosure document is incomplete, 
subject to change and quickly replaced by the final official statement; 
as marketing material, it would transform EMMA from a disclosure and 
transparency venue to a central marketplace.\116\ Additionally, 
according to SIFMA, any pre-sale posting of the POS would require 
issuer consent, thus the MSRB would need to work with the issuer 
community to ensure they would be willing to give such consent. SIFMA 
also noted that the MSRB previously sought comment on this same issue 
in 2012 and noted that ``very little has changed since then.'' \117\ If 
the MSRB chooses to pursue rulemaking in this area, SIFMA indicated 
that the MSRB should carefully consider the points raised by SIFMA and 
other commenters in response to the 2012 release.\118\ Two commenters 
noted the difficulty in ensuring that updated information is 
disseminated once a POS has been posted. For example, BDA stated that 
the MSRB would need to develop a mechanism to ensure that everyone who 
viewed a POS on EMMA would receive any supplements subsequently 
provided.\119\ Similarly, NAMA asked how updated information would be 
``flagged as being revised'' and how a dealer would reach investors who 
had previously received a POS that was now stale.\120\
---------------------------------------------------------------------------

    \112\ BDA Letter I, GFOA Letter I, NABL Letter I, NAMA Letter I 
and SIFMA Letter I.
    \113\ GFOA Letter I, NABL Letter I and NAMA Letter I.
    \114\ GFOA Letter I at 2.
    \115\ NAMA Letter I at 2-3.
    \116\ SIFMA Letter I at 15.
    \117\ SIFMA Letter I at 16.
    \118\ Id. See also MSRB Notice 2012-61 (Dec. 12, 2012).
    \119\ BDA Letter I at 4.
    \120\ NAMA Letter I at 3-4.
---------------------------------------------------------------------------

    The MSRB agrees with the majority of commenters that there should 
not, at this time, be a requirement to post the preliminary POS to 
EMMA. Because the POS is more likely to change than the OS, the MSRB 
agrees that it would be difficult to ensure that the POSs posted were 
current and not outdated and that posting such documents could lead to 
confusion and misinformation about a particular issue. In addition, 
issuers currently are free to upload their preliminary POS to EMMA if 
they so choose.
Whether Non-Dealer Financial Advisors Should Make the Official 
Statement Available to the Underwriter After the Issuer Approves It for 
Distribution
    Three commenters provided comment on this question.\121\ BDA and 
SIFMA urged the MSRB to amend Rule G-32(c) to apply to all municipal 
advisors \122\ instead of only to dealer financial advisors.\123\ NAMA 
indicated that the municipal advisor should not have the responsibility 
to make the official statement available to the underwriter unless 
tasked to do so by the issuer.\124\ NAMA noted that municipal advisors 
should be removed all together from Rule G-32(c) because Exchange Act 
Rule 15c2-12 sets forth a process by which an underwriter obtains the 
official statement.\125\
---------------------------------------------------------------------------

    \121\ BDA Letter I, NAMA Letter I and SIFMA Letter I.
    \122\ In discussing the Request for Comment, commenters used the 
terms ``financial advisor'' and ``municipal advisor'' 
interchangeably for purposes of describing a dealer acting as a 
financial advisor.
    \123\ BDA Letter I at 4 and SIFMA Letter I at 19.
    \124\ NAMA Letter I at 2.
    \125\ NAMA Letter I at 4.
---------------------------------------------------------------------------

Whether the MSRB Should Auto-Populate Into Form G-32 Certain 
Information That Is Submitted to NIIDS But Is Not Currently Required To 
Be Provided on Form G-32
    The MSRB received three comments on the question of whether Form G-
32 should be amended to require certain additional data fields that 
would be auto-populated with information currently submitted to 
NIIDS.\126\ BDA recommended, generally, that the MSRB auto-populate 
information from NIIDS into Form G-32, and NAMA indicated that this is 
the type of review the MSRB should be undertaking to reduce the 
compliance burden on regulated entities.\127\ SIFMA suggested that 
auto-populating Form G-32 with initial minimum denomination information 
from NIIDS would assist the marketplace overall in better complying 
with MSRB Rule G-15(f), on minimum denominations.\128\ SIFMA also 
suggested that certain call-related fields in NIIDS might be useful if 
included on Form G-32, but suggested that the MSRB first should conduct 
a thorough review of the data to ensure that the structure of the data 
provided in NIIDS provides an accurate representation of the different 
call features used in the municipal securities market.\129\ In any 
event, SIFMA suggested that the MSRB should undertake a notice and 
comment period with respect to any additional data elements it would 
propose to make public through EMMA.\130\
---------------------------------------------------------------------------

    \126\ BDA Letter I, NAMA Letter I and SIFMA Letter I.
    \127\ BDA Letter I at 4 and NAMA Letter I at 5.
    \128\ SIFMA Letter I at 19.
    \129\ Id.
    \130\ Id.
---------------------------------------------------------------------------

Whether the MSRB Should Request Additional Information on Form G-32 
That Currently Is Not Provided in NIIDS, and If So, What Data
    Five commenters provided comments on this issue.\131\ All five of 
the commenters thought certain items would be useful if included on 
Form G-32, and disseminated, but none believed all of the identified 
potential items from the Concept Proposal should be included. The City 
of San Diego and NAMA specifically thought the municipal advisor fee 
should not be included, and the City of San Diego also believed the 
management fee should be excluded because of the vast differences in 
how it is determined between differing transactions.\132\ SIFMA 
indicated that EMMA is not the proper venue for disclosing fees and 
expenses that are incorporated into the information provided in the 
official statement.\133\ Additionally, BDA indicated that minimum 
denomination and call information would be useful on Form G-32.\134\
---------------------------------------------------------------------------

    \131\ BDA Letter I, City of San Diego Letter I, GLEIF Letter I, 
NAMA Letter I and SIFMA Letter I.
    \132\ City of San Diego Letter I at 2 and NAMA Letter I at 5.
    \133\ SIFMA Letter I at 19.
    \134\ BDA Letter I at 4.
---------------------------------------------------------------------------

    NAMA indicated that additional information would benefit issuers 
and the marketplace, especially information related to true interest 
cost and yield to maturity.\135\ SIFMA raised concerns regarding the 
current process for submitting information on commercial paper issues, 
which are not subject to the NIIDS requirement and, according to SIFMA, 
``consistently raise significant operational and compliance 
difficulties.'' \136\ SIFMA asked that the MSRB engage in discussions 
with SIFMA members to assess the operational issues and develop 
solutions to enhance efficiency and effectiveness of commercial paper 
submissions.\137\
---------------------------------------------------------------------------

    \135\ NAMA Letter I at 5.
    \136\ SIFMA Letter I at 24.
    \137\ Id.
---------------------------------------------------------------------------

    Two commenters specifically noted their support for the inclusion 
of legal entity identifiers (``LEIs'') on Form G-32.\138\ GLEIF 
indicated its belief that

[[Page 15004]]

requiring issuers to register for LEIs would help move towards global 
harmonization for U.S. issuers to be identified by LEIs.\139\ SIFMA 
noted that Form G-34 should have a field for the submission of LEIs, as 
the LEI system would be useful to the MSRB in terms of enhancing 
transparency in the issuance of municipal securities.\140\ While SIFMA 
recognized the potential costs to issuers to register for LEIs, it 
believed the MSRB should strongly promote the value of obtaining LEIs 
by issuers and obligors as part of the issuance process.\141\ 
Additionally, SIFMA suggested the MSRB provide written materials 
describing the benefits of and the process for obtaining LEIs to assist 
the industry in promoting the benefits to issuers and obligors during 
the issuance process.\142\
---------------------------------------------------------------------------

    \138\ GLEIF Letter I and SIFMA Letter I.
    \139\ GLEIF Letter I at 1.
    \140\ SIFMA Letter I at 21.
    \141\ Id.
    \142\ Id.
---------------------------------------------------------------------------

Other Questions
    Has the IRS's issue price rule impacted any primary offering 
practices in the municipal securities market, and in what ways? If any 
MSRB rules are affected, what, if any, amendments should be considered?
    BDA, GFOA, NABL and SIFMA each provided comments on this question. 
BDA believed the IRS's issue price rule has not changed the primary 
offering practices for municipal securities.\143\ NABL stated that no 
MSRB rule should be adopted if it would undermine, conflict with or 
make impractical the continued compliance with the issue price 
rules.\144\ GFOA expressly supported NABL's position.\145\ Finally, 
SIFMA noted that the issue price rules should take the lead on matters 
related to bona fide public offerings and initial offering prices and 
that the MSRB should wait on any rulemaking in this area until the 
market has adapted to the IRS requirements.\146\ The MSRB determined 
that the rules being considered in the Concept Proposal did not impact 
or conflict with the IRS issue price rules, nor did they impact an 
underwriter's ability to conform with those rules.
---------------------------------------------------------------------------

    \143\ BDA Letter I at 5.
    \144\ NABL Letter I at 2.
    \145\ GFOA Letter I at 1.
    \146\ SIFMA Letter I at 24.
---------------------------------------------------------------------------

    Are there any other primary offering practices that the MSRB should 
consider in its review?
    Three commenters provided thoughts on other primary offering 
practices the MSRB should consider.\147\ Doty suggested that the MSRB 
consider amending Rule G-32(iii)(A) to require disclosure of ``the 
amount of any compensation received by the broker, dealer or municipal 
securities dealer at any stage of the offering from an obligated person 
or any other party, in addition to the governmental issuer, in 
connection with completion of one or more stages of the offering or 
completion of the entire offering or both.'' \148\ According to Doty, 
without disclosure, investors would believe that the underwriter/
placement agent received only the compensation paid by the governmental 
issuer, without knowledge of the underwriter's/placement agent's full 
compensatory motivation to complete the transaction.\149\ Doty further 
suggested that municipal advisors should disclose all of their 
compensation in both negotiated and competitive offerings and whether 
their compensation was contingent upon the closing of the transaction 
or achievement of any other factor, such as the size of the 
transaction.\150\ The MSRB agrees that the issue of compensation paid 
to the underwriter is an issue of interest, but believes consideration 
of this issue should be undertaken separately from the primary offering 
practices rule review.
---------------------------------------------------------------------------

    \147\ Doty Letter I, NAMA Letter I and Wells Capital Letter I.
    \148\ Doty Letter I at 1.
    \149\ Doty Letter I at 2.
    \150\ Id.
---------------------------------------------------------------------------

    NAMA suggested that the MSRB should ensure that all references in 
the MSRB rule book to dealer-municipal advisors, municipal advisors and 
financial advisors ``correctly reflect the actual duties and 
responsibilities of [m]unicipal [a]dvisors that are stated in the 
Exchange Act and the Final Municipal Advisor Rule.'' \151\ 
Additionally, NAMA urged the MSRB to address the impact of rulemaking 
on small municipal advisory firms.\152\ The MSRB agrees that certain 
terminology and references in its rules could be clarified or 
modernized as a result of the municipal advisor regulatory regime, but 
that consideration of such changes should be undertaken separately from 
the primary offering practices rule review.
---------------------------------------------------------------------------

    \151\ NAMA Letter I at 6.
    \152\ Id.
---------------------------------------------------------------------------

    Wells Capital asked that the MSRB address in Rule G-32 the current 
practices related to the ``deemed final'' POS required under SEC Rule 
15c2-12 regarding both timing of the pricing and completeness of the 
deemed final POS.\153\ In Wells Capital's experience, pricing of 
municipal deals usually is not based on a deemed final POS as is 
required under Rule 15c2-12.\154\ Additionally, Wells Capital requested 
that the MSRB address issues regarding the minimum time needed between 
the issuance of a deemed final POS and pricing. Wells Capital urged the 
MSRB to impose a minimum number of business days between the 
distribution of a deemed final POS and the pricing of that transaction. 
According to Wells Capital, underwriters attempt to rush final pricing 
without a deemed final POS in the hopes that the buy-side will not 
detect all the ``warts'' in the transaction or will not raise questions 
that have not been adequately addressed in the POS. Finally, Wells 
Capital urged the MSRB to address current practices by issuers and 
underwriters related to selective disclosure.\155\ For jurisdictional 
reasons the MSRB is unable to address the issues proposed by Wells 
Capital.
---------------------------------------------------------------------------

    \153\ Wells Capital Letter I at 3.
    \154\ Id.
    \155\ Id.
---------------------------------------------------------------------------

    What are the reasonable alternatives to each of the above 
proposals? For example, are any of the proposals that would require a 
rule change better addressed through other means, such as interpretive 
guidance, compliance resources, additional outreach/education, new MSRB 
resources, or voluntary industry initiatives? Are there less burdensome 
or more beneficial alternatives?
    The MSRB received no comments related to this set of questions.
    After carefully considering commenters' suggestions and concerns 
regarding the Concept Proposal, the MSRB determined to seek further 
comment, on certain of the concepts, as discussed in more detail below.
Summary of Comments Received in Response to the Request for Comment
    The Request for Comment sought further comment on proposed 
amendments to Rule G-11 related to (1) simultaneous issuance of the 
free-to-trade wire; (2) providing additional information to the issuer 
related to designations and allocations; and (3) alignment of the 
timeframe for the payment of group net sales credits with the payment 
of net designation sales credits. Additionally, the Request for Comment 
sought input on proposed amendments related to Rule G-32 and Form G-32, 
including (1) disclosures of CUSIP numbers advance refunded and the 
percentages thereof; (2) whether non-dealer municipal advisors should 
be required to make the official statement available to the underwriter 
after the issuer approves it for

[[Page 15005]]

distribution; (3) whether Form G-32 should be auto-populated with 
additional information from NIIDS; and (4) whether Form G-32 should be 
amended to request additional information that would not be auto-
populated from NIIDS. The MSRB received 10 comments letters in 
response, which are summarized below.
Rule G-11--Primary Offering Practices
Free-to-Trade Wire
    The Request for Comment again sought feedback on proposed 
amendments to Rule G-11, on primary offering practices, to add a 
requirement that the senior syndicate manager issue the free-to-trade 
wire to all syndicate members at the same time. BDA, GFOA and SIFMA 
supported this proposed change. However, BDA recommended that the rule 
not prescribe the manner of dissemination of a free-to-trade wire, 
specifically, because industry customs change and eventually 
dissemination of such information may be made in another manner.\156\ 
Instead, BDA suggested modifying the proposed language to require 
notification ``in any reasonable manner accepted and customary'' in the 
industry.\157\ GFOA suggested that the proposed change include language 
that addresses the Internal Revenue Service (IRS) issue price 
rules.\158\ Specifically, GFOA suggested that language be included that 
indicates trades may not be allowable at any price if issue price 
restrictions (such as hold-the-price restrictions) are in place.\159\
---------------------------------------------------------------------------

    \156\ BDA Letter II at 1.
    \157\ Id.
    \158\ GFOA Letter II at 2.
    \159\ Id.
---------------------------------------------------------------------------

    As previously noted, the MSRB believes equal access to information 
is important to the fair and effective functioning of the market for 
primary offerings of municipal securities. In addition, after 
consulting with stakeholders, the MSRB added selling groups to the 
parties that should receive the free-to-trade information as proposed. 
The MSRB believes requiring dissemination of this information for 
receipt by all syndicate and selling group members at the same time, 
would prevent preferential access to the free-to-trade information. In 
response to commenters, the MSRB is not proposing to dictate the timing 
of when, or the form of how, the free-to-trade communication should be 
sent, but that dissemination be electronic by an industry-accepted 
method. The MSRB does not believe it is prudent or necessary to include 
a reference to IRS issue price rules in proposed changes to Rule G-11, 
as syndicate and selling group members have an existing obligation to 
comply with all other rules and regulations that may apply to primary 
offerings.
Additional Information for the Issuer
    In the Request for Comment, the MSRB asked whether MSRB Rule G-
11(g) should be amended to require the senior syndicate manager to 
provide to the issuer the same information it provides to the syndicate 
regarding the designations and allocations of securities in an 
offering. Four commenters generally supported the proposed change.\160\ 
Both BDA and SIFMA indicated that the information should be required to 
be provided to the issuer only upon request and suggested that 
additional issuer education regarding the information and its 
availability should be undertaken.\161\ SIFMA also noted that, if Rule 
G-11 is amended as proposed, it should provide that issuers can opt out 
of receiving this information.\162\ Additionally, SIFMA suggested that 
the information should be provided in a consistent manner across the 
industry so that it is useable.\163\ GFOA and NAMA supported having the 
senior syndicate manager provide the issuer, at all times, with the 
same information it provides the syndicate regarding designations and 
allocations.\164\ GFOA noted that education of issuers cannot replace 
the actual receipt of the information,\165\ and NAMA indicated that it 
is not helpful to allow issuers to opt out of receiving the information 
or to direct them to a website to review the official statement.\166\
---------------------------------------------------------------------------

    \160\ BDA Letter II; GFOA Letter II; NAMA Letter II; and SIFMA 
Letter II.
    \161\ Id.
    \162\ SIFMA Letter at 2.
    \163\ Id.
    \164\ GFOA Letter II at 1; and NAMA Letter II at 5.
    \165\ GFOA Letter II at 1.
    \166\ NAMA Letter II at 5.
---------------------------------------------------------------------------

    In response to the comments received, the MSRB has determined to 
propose requiring the senior syndicate manager to provide issuers the 
same information it provides to the syndicate regarding both the 
designations and allocations of securities in an offering. As 
previously noted, the MSRB believes that, while issuers sometimes may 
be involved in reviewing and approving allocations or may be able to 
request information regarding designations and allocations from various 
sources, including the senior syndicate manager and certain third-party 
information resources, some issuers are unaware this information is 
available and can be requested. By making dissemination of this 
information to issuers a requirement, the MSRB ensures that all 
issuers, regardless of size, will receive the designation and 
allocation information relevant to their primary offerings. The MSRB 
also notes that because underwriters are already required to provide 
this information to syndicate members, no additional documents should 
have to be produced to comply with the proposed requirement.
Alignment of the Timeframe for the Payment of Group Net Sales Credits 
With the Payment of Net Designation Sales Credits
    In the Request for Comment, the MSRB sought input on whether Rule 
G-11 should be amended to align the time period for the payment of 
group net sales credits (currently, 30 calendar days following delivery 
of the securities to the syndicate) with the payment of net designation 
sales credits (10 calendar days following delivery of the securities to 
the syndicate). BDA supported this change,\167\ while SIFMA opposed 
it.\168\ According to SIFMA, the determination of the amounts due and 
owing to each syndicate member for group orders is based on different 
information than that needed for the determination of amounts due and 
owing for net designation orders.\169\ SIFMA stated its belief that, 
absent evidence of significant problems with the current timing of the 
payments, no changes should be made.\170\
---------------------------------------------------------------------------

    \167\ BDA Letter II at 2.
    \168\ SIFMA Letter II at 2.
    \169\ Id.
    \170\ SIFMA Letter II at 3.
---------------------------------------------------------------------------

    After carefully considering the potential differences in the timing 
of these payments, the MSRB has proposed amendments to Rule G-11 that 
would align the payment of net designation and group net sales credits. 
The MSRB believes that based on current practices there is no reason 
for the discrepancy in the timing of the payment of these sales credits 
and that aligning these payments would avoid unnecessary credit risks 
among syndicate members. If fact, several stakeholders indicated that 
they are already making group net sales credit payments consistent with 
the 10-day requirement.
Rule G-32--Disclosures in Connection With Primary Offerings
Equal Access to the Disclosure of the CUSIP Numbers Advance Refunded 
and the Percentages Thereof
    In the Request for Comment, the MSRB asked for comment on proposed 
amendments to Rule G-32, on disclosures in connection with a

[[Page 15006]]

primary offering, to require disclosures of CUSIP numbers advance 
refunded and percentages thereof to be made to all market participants 
at the same time. GFOA and NFMA supported this proposed change, with 
both indicating a preference for a shorter timeframe for disclosure 
than the current five business days.\171\ BDA and SIFMA noted they 
support access to this information, but in light of recent tax changes 
that eliminate some advance refundings, they questioned the value of 
such a requirement.\172\
---------------------------------------------------------------------------

    \171\ GFOA Letter II at 2; and NFMA Letter II at 2.
    \172\ BDA Letter II at 2; and SIFMA Letter II at 3.
---------------------------------------------------------------------------

    The MSRB believes that advanced refunding information should be 
provided to market participants, at the same time, because equal access 
to advance refunding information is important for the efficient 
functioning of the primary market for municipal securities.
    Additionally, the Request for Comment sought input on whether 
information on potential advance refundings would be useful to the 
market (i.e., a ``gray list''). The MSRB asked whether there should be 
a requirement, or a voluntary option, for underwriters to submit to 
EMMA lists of bonds, by CUSIP number, that the issuer has indicated may 
be advance refunded. NFMA indicated that a list of partial refunding 
candidates should be made available on EMMA.\173\ GFOA and SIFMA 
objected to the submission of information on potential refundings, 
indicating that information should be provided only once the 
information regarding the advance refunded maturities is final.\174\
---------------------------------------------------------------------------

    \173\ NFMA Letter II at 2.
    \174\ GFOA Letter II at 2; and SIFMA Letter II at 4.
---------------------------------------------------------------------------

    At this time, given that ``potential refunding'' is not a 
consistently defined term in the municipal securities market, the MSRB 
believes that the disclosure of such information could be confusing to 
investors. Thus, the MSRB has determined not to pursue rulemaking 
regarding the disclosure of ``potential'' refundings in the market.
Whether Non-Dealer Municipal Advisors Should Make the Official 
Statement Available to the Managing or Sole Underwriter After the 
Issuer Approves It for Distribution
    In the Request for Comment, the MSRB asked for feedback on proposed 
amendments to Rule G-32(c) that would extend the requirements of that 
rule to non-dealer municipal advisors. Acacia, Ehlers, NAMA and PRAG 
opposed this suggested change,\175\ while BDA, NFMA and SIFMA supported 
it.\176\ Acacia, Ehlers, NAMA and PRAG urged the MSRB to eliminate Rule 
G-32(c) entirely, noting that there is no longer a need for this 
requirement, even with respect to dealer financial advisors, given that 
Exchange Act Rule 15c2-12 addresses the delivery of the official 
statement.\177\ Acacia and NAMA indicated that, if the MSRB decides to 
amend the rule as proposed, further clarification would be needed to 
understand exactly how it would be applied (e.g., terms should be 
defined and clarification given to application of the rule).\178\ 
Acacia and NAMA also indicated that requiring the non-dealer municipal 
advisor to deliver the official statement to the underwriter blurred 
the lines between municipal advisor and broker-dealer roles.\179\ NFMA 
believed that including non-dealer municipal advisors in this 
requirement would enhance market transparency and fairness.\180\ SIFMA 
noted that there is no reason for the requirement to apply differently 
to dealer financial advisors and non-dealer municipal advisors.\181\
---------------------------------------------------------------------------

    \175\ Acacia Letter II at 1; Ehlers Letter II at 1; NAMA Letter 
II at 1; and PRAG Letter II at 1.
    \176\ BDA Letter II at 2; NFMA Letter II at 2; and SIFMA Letter 
II at 4.
    \177\ Acacia Letter II at 1-2; Ehlers Letter II at 1; NAMA 
Letter II at 2-3; and PRAG Letter II at 1.
    \178\ Acacia Letter II at 2; and NAMA Letter II at 2-3.
    \179\ Acacia Letter II at 2; and NAMA Letter II at 3.
    \180\ NFMA Letter II at 2.
    \181\ SIFMA Letter II at 4.
---------------------------------------------------------------------------

    In response to commenters, the MSRB engaged in additional outreach 
on the usefulness of the requirements of Rule G-32(c). As a result of 
these additional discussions and the written comments received, the 
MSRB is proposing to eliminate Rule G-32(c) entirely. The MSRB agrees 
with commenters that there is no longer a need for this requirement 
because, as noted by commenters, SEC Rule 15c2-12 requires the delivery 
of the official statement to the underwriter by the issuer or its agent 
regardless of who prepares the document. This requirement, thus, 
encompasses those instances where a dealer acting as a financial 
advisor or non-dealer municipal advisor has prepared the official 
statement.
Additional Data Fields on Form G-32 Auto-Populated From NIIDS
    In the Request for Comment, the MSRB sought public comment on the 
inclusion of certain additional data fields on Form G-32 that would be 
auto-populated with information underwriters currently are required to 
input into NIIDS. The Request for Comment included an appendix of those 
data elements on which comment was sought.\182\
---------------------------------------------------------------------------

    \182\ See Appendix A to MSRB Notice 2018-15 for the complete 
list of these data fields as originally proposed.
---------------------------------------------------------------------------

    BDA, SIFMA and the SEC Investor Advocate supported the inclusion of 
the proposed data fields on Form G-32.\183\ SIFMA indicated that while 
it supports the auto-populating of minimum denomination information 
from NIIDS onto Form G-32, it does not believe the submitting 
underwriter should have an obligation to update minimum denomination 
changes over the life of the security.\184\ The SEC Investor Advocate, 
however, encouraged the MSRB to consider requiring an ongoing 
disclosure obligation for minimum denomination information.\185\
---------------------------------------------------------------------------

    \183\ BDA Letter II at 2; SEC Investor Advocate Letter II at 3; 
and SIFMA Letter II at 4.
    \184\ SIFMA Letter II at 4.
    \185\ SEC Investor Advocate Letter II at 5.
---------------------------------------------------------------------------

    For those instances where a primary offering is not NIIDS eligible, 
the MSRB noted in the Request for Comment, that these additional data 
fields would need to be input manually by the underwriter. SIFMA noted 
that the requirement to input information into such a large number of 
fields on a manual basis would create a significant burden on the 
dealer.\186\ SIFMA urged the MSRB to consider exempting private 
placements and other non-NIIDS-eligible issues from the proposed 
rule.\187\
---------------------------------------------------------------------------

    \186\ SIFMA Letter II at 4.
    \187\ SIFMA Letter II at 5.
---------------------------------------------------------------------------

    The MSRB is proposing to add 57 additional data fields on Form G-
32, only one of which (i.e., minimum denomination) would be required to 
be input manually for primary offerings that are not NIIDS eligible. 
Commenters agreed that, with respect to NIIDS-eligible offerings, the 
burden of compliance would be low given that this information is 
already required to be input into NIIDS. With respect to non-NIIDS-
eligible offerings, however, the MSRB believes the benefits associated 
with requiring the manual entry of all 57 additional data points does 
not outweigh the burden of requiring the manual entry of this data. 
Particularly because non-NIIDS-eligible issues such as private 
placements are less likely to trade in the secondary market where this 
information would be useful. Therefore, with respect to non-NIIDS-
eligible offerings, at this time, the MSRB is not proposing to require 
the underwriter manually input the remaining 56 proposed additional 
data fields.

[[Page 15007]]

Additional Data Fields on Form G-32 Not Auto-Populated From NIIDS
    In the Request for Comment, the MSRB sought comment on the addition 
of certain data fields on Form G-32 that would not be auto-populated 
with information from NIIDS and, thus, would require manual completion. 
Specifically, the MSRB sought comment on the addition of eight data 
fields on Form G-32.
    Ability for minimum denomination to change--BDA, NFMA and the SEC 
Investor Advocate supported the inclusion of this information on Form 
G-32.\188\ The SEC Investor Advocate indicated he also wants the MSRB 
to require the updating of minimum denomination information over the 
life of the security.\189\ SIFMA supported adding a field for ``initial 
minimum denomination'' and suggested that a dealer should not be 
required to update minimum denomination information over the life of 
the security.\190\
---------------------------------------------------------------------------

    \188\ BDA Letter II at 2-3; NFMA Letter II at 3; and SEC 
Investor Advocate Letter II at 4.
    \189\ SEC Investor Advocate Letter II at 5.
    \190\ SIFMA Letter II at 4.
---------------------------------------------------------------------------

    The MSRB agrees with commenters that the information relating to 
whether the minimum denomination may change would be useful to 
regulators. In addition, this information would be useful to investors, 
should the MSRB disseminate the information in the future. However, the 
MSRB agrees with SIFMA that requiring an underwriter or dealer to 
continuously update this information for the life of the municipal 
security would be burdensome.
    Additional syndicate managers--BDA objected to inclusion of this 
manual data field and stated that the information would not assist 
market participants and could impose new burdens on underwriters.\191\ 
The SEC Investor Advocate supported including this data field, noting 
that it may provide additional transparency to the market.\192\
---------------------------------------------------------------------------

    \191\ BDA Letter II at 3.
    \192\ SEC Investor Advocate Letter II at 7.
---------------------------------------------------------------------------

    The MSRB believes that including this additional data field would 
be useful to regulators. The MSRB disagrees that providing this 
information is burdensome as this information is typically known at or 
before the pricing of an issue, and therefore, is generally readily 
available for disclosure by the senior syndicate manager.
    Call schedule--BDA and SIFMA opposed including this data field and 
indicated that including this information would be burdensome for the 
underwriter.\193\ SIFMA suggested that the underwriter be required to 
provide a link to the official statement instead.\194\ NFMA and the SEC 
Investor Advocate supported the addition of this information and 
believed it would promote increased transparency and fairness to the 
market.\195\
---------------------------------------------------------------------------

    \193\ BDA Letter II at 3; and SIFMA Letter II at 5.
    \194\ SIFMA Letter II at 5.
    \195\ NFMA Letter II at 3; and SEC Investor Advocate Letter II 
at 6-7.
---------------------------------------------------------------------------

    The MSRB agrees with NFMA and the SEC Investor Advocate and is 
proposing to require this information on Form G-32. The MSRB believes 
requiring this information would immediately increase regulatory 
transparency, providing regulators with intermediate premium call dates 
and prices. Additionally, should the MSRB make this information 
available in the future, access to the relevant call information could 
help investors make more informed decisions.
    LEI for credit enhancers and obligated person(s) if readily 
available--BDA objected to this data field, stating that this 
information is not easily obtainable in almost all instances and that 
the market would not benefit from this information.\196\ BDA further 
noted that any benefits would not outweigh the burden to 
underwriters.\197\ NFMA, the SEC Investor Advocate and SIFMA supported 
the inclusion of this data field on Form G-32.\198\ The SEC Investor 
Advocate encouraged the MSRB to take more initiative, as appropriate, 
with respect to the use of LEIs, and encouraged the MSRB to continue 
incorporating LEIs into its rulemakings and engaging in industry 
outreach and education on the importance of obtaining LEIs, as well as 
the process for obtaining them.\199\ SIFMA supported this proposed 
change and urged the MSRB to work with LEI issuers to ensure the most 
efficient and least burdensome collection methodology.\200\
---------------------------------------------------------------------------

    \196\ BDA Letter II at 3.
    \197\ Id.
    \198\ NFMA Letter II at 3; SEC Investor Advocate Letter II at 4-
6; and SIFMA Letter II at 5.
    \199\ SEC Investor Advocate Letter II at 5.
    \200\ SIFMA Letter II at 5.
---------------------------------------------------------------------------

    The MSRB believes requiring this information on Form G-32, if 
readily available, would further promote the value of obtaining LEIs 
and encourage industry participants to obtain them as a matter of 
course. The MSRB also believes that LEI information provides for the 
more precise identification of parties that are financially responsible 
to support the payment of some or all of an issue and would further 
assist regulators and policymakers in identifying and monitoring risk 
exposure in the financial markets. In response to concerns regarding 
the potential burden of providing this information, the MSRB is only 
proposing LEI information be provided for obligated persons, other than 
the issuer, that is ``readily available.'' An LEI would be considered 
``readily available'' if it were easily obtainable via a general search 
on the internet (e.g., web pages such as https://www.gleif.org/en/lei/search).
    Name of obligated person(s)--BDA, NFMA and the SEC Investor 
Advocate supported this proposed change.\201\ The SEC Investor Advocate 
indicated that providing this information may provide additional 
transparency to the market.\202\ They further noted that the name(s) of 
obligated persons in a primary offering are not always readily 
available, thus requiring this information on Form G-32 ``may help 
investors make more informed investment decisions and better understand 
who is legally committed to support the payment of all or some of an 
issue.'' \203\ SIFMA questioned the value of having to manually key in 
the name of an obligated person, noting that there is no standard 
naming convention.\204\
---------------------------------------------------------------------------

    \201\ BDA Letter II at 3; NFMA Letter II at 3; and SEC Investor 
Advocate Letter II at 7.
    \202\ SEC Investor Advocate Letter II at 7.
    \203\ Id.
    \204\ SIFMA Letter II at 5.
---------------------------------------------------------------------------

    During its stakeholder outreach, the MSRB also received comments 
regarding the potential burden of manually entering this information 
for issues in which there are multiple obligated persons, other than 
the issuer. The MSRB understands that those instances in which there 
are multiple obligated persons may be relatively infrequent. Thus, the 
benefit of having the entire financial picture, including the identity 
of all obligated persons, outweighs the proposed burden that may exist 
in the rare instances in which there are multiple obligated persons 
responsible for support payment and continuing disclosures.
    The MSRB believes that the proposed data field would allow for 
easier access to important primary market information and enhance 
regulatory transparency. The MSRB also agrees with commenters, that 
should it make this information available in the future, it could help 
investors make more informed investment decisions.
    Percentage of CUSIP numbers advance refunded--NFMA and the SEC 
Investor Advocate supported this

[[Page 15008]]

proposed data field.\205\ The SEC Investor Advocate noted that 
providing this information to all market participants at the same time, 
would, in his view reduce information asymmetry, which may equate to 
more fairness and efficiency in the market.\206\ BDA objected to this 
proposed data field noting that it was unnecessary and not 
meaningful.\207\ BDA suggested that for holders of refunded bonds, the 
more useful information would be the portion of a particular CUSIP 
number that has been refunded.\208\
---------------------------------------------------------------------------

    \205\ NFMA Letter II at 2; and SEC Investor Advocate Letter II 
at 6.
    \206\ SEC Investor Advocate Letter II at 6.
    \207\ BDA Letter II at 3.
    \208\ Id.
---------------------------------------------------------------------------

    As previously noted, the MSRB agrees with commenters that while the 
proposed data field would be useful, the more useful data element would 
be the dollar amount of each CUSIP number advance refunded. As a 
result, the MSRB modified its proposed rule change accordingly.
    Retail order period by CUSIP number--The SEC Investor Advocate 
supported including a ``yes'' or ``no'' flag by CUSIP numbers to 
identify orders that should not be retail orders, while SIFMA believes 
more thought should be given to the addition of this field because 
there are a variety of retail order period structures and the process 
for defining them can change intra-day.\209\ In response, the MSRB 
determined to limit its request for retail order period information to 
the proposed ``yes'' or ``no'' flag by CUSIP. The MSRB believes that 
this information will enhance regulatory transparency. The MSRB also 
believes that, as currently contemplated, the potential benefits of 
collecting additional retail order period information by CUSIP are 
outweighed by the burdens it could impose on the industry.
---------------------------------------------------------------------------

    \209\ SEC Investor Advocate Letter II at 6; and SIFMA Letter II 
at 5.
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    Name of municipal advisor--NFMA and the SEC Investor Advocate 
supported this addition.\210\ BDA objected and noted that this 
information is available in the official statement and not valuable 
information for secondary trading.\211\ The MSRB believes including the 
name of the municipal advisor on Form G-32 would provide useful 
information to investors and issuers and allow them to evaluate the 
experience of a municipal advisor, should the MSRB disseminate the 
information, in the future. The MSRB anticipates making this field 
autofill as the underwriter begins to input the name of the municipal 
advisor into the applicable text box.
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    \210\ NFMA Letter II at 3; and SEC Investor Advocate Letter II 
at 7.
    \211\ BDA Letter II at 3.
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    In addition, the MSRB asked commenters whether there were any other 
data fields that should be considered for inclusion on Form G-32. For 
example, the Request for Comment asked whether the MSRB should include 
a ``yes'' or ``no'' flag data field to indicate when a new issue is 
issued with restrictions such as being only available to qualified 
institutional buyers. NFMA supported this suggested additional data 
field, while SIFMA objected to its inclusion on Form G-32.\212\ In 
response to commenters, the MSRB determined to add to its proposed data 
fields a ``yes'' or ``no'' flag to indicate whether a primary offering 
is being made with restrictions. The MSRB believes the additional 
information would assist regulators in more easily identifying 
transactions that may involve a restricted issue and should the MSRB 
disseminate the information in the future, it could enhance dealers' 
ability to identify issues that may be subject to restrictions during 
the course of buying and selling.
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    \212\ NFMA Letter II at 3; and SIFMA Letter II at 5.
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    The MSRB considered the above-noted comments in formulating the 
proposed rule change herein.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period of up to 90 days (i) as 
the Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-MSRB-2019-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-MSRB-2019-07. This file 
number should be included on the subject line if email 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the MSRB. All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-MSRB-2019-07 and should be submitted on 
or before May 3, 2019.
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    \213\ 17 CFR 200.30-3(a)(12).

    For the Commission, pursuant to delegated authority.\213\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07244 Filed 4-11-19; 8:45 am]
 BILLING CODE 8011-01-P

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