Self Regulatory Organizations; Municipal Securities Rulemaking Board; Order Granting Approval of Proposed Rule Change Relating to Rule G-11 on Sales of New Issue Municipal Securities During the Underwriting Period

[Federal Register Volume 64, Number 85 (Tuesday, May 4, 1999)]
[Notices]
[Pages 23886-23887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11143]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41338; File No. SR-MSRB-99-2]


Self Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Granting Approval of Proposed Rule Change Relating to Rule 
G-11 on Sales of New Issue Municipal Securities During the Underwriting 
Period

April 28, 1999.

I. Introduction and Description of the Proposal

    On March 11, 1999, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Rule G-11, on sales of 
new issue municipal securities during the underwriting period. Notice 
of the proposed rule change appeared in the Federal Register on March 
25, 1999.\3\ No comments were received on the proposal. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Rel. No. 41192 (March 19, 1999), 
64 FR 14479.
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    The proposed rule change clarifies certain ambiguities in the 
Board's present syndicate practices rules. Rule G-11(g)(iii), as 
amended in November 1988,\4\ requires a managing underwriter to 
disclose to syndicate members, in writing, all available designation 
information within 10 business days following the date of sale and all 
information with the sending of the designation checks pursuant to Rule 
G-12(k). Three general questions have been raised by dealers concerning 
this rule as currently worded.
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    \4\ See Securities Exchange Act Release No. 40717 (November 27, 
1998), 63 FR 67157 (December 4, 1998).
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    First, dealers have asked whether the rule requires the managing 
underwriter to disclose to each syndicate member its own designation 
information or whether all members are to receive information about all 
the designations. The proposed rule change clarifies that all 
designation information must be disclosed to each syndicate member.
    Second, dealers have asked whether the managing underwriter is 
required to disclose designations by total dollar amounts, bond 
amounts, or both total dollar amounts and bond amounts. The proposed 
rule change clarifies that the designation information must be 
expressed in total dollar amounts.
    Third, dealers have asked whether the rule requires the managing 
underwriter to disclose to syndicate members designations made to 
anyone other than syndicate members, e.g., selling group members. The 
proposed rule change clarifies that the manager must disclose to each 
syndicate member all designations, including both those paid to 
syndicate members and those paid to non-syndicate-members.

II. Discussion

    The Commission believes the proposed rule change is consistent with 
the Act and the rules and regulations promulgated thereunder.\5\ 
Specifically,

[[Page 23887]]

the Commission believes that approval of the proposed rule change is 
consistent with Section 15B(b)(2)(C) \6\ of the Act.
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    \5\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. The proposed rule change should make information 
dissemination more efficient because it clarifies ambiguities that 
may have impeded compliance with existing rules and because it 
requires disclosure to syndicate members to be made in a form most 
useful to them. Competition in the marketplace should also benefit 
because designation information, including information concerning 
non-syndicate members, will be available to all members of the 
syndicate. 15 U.S.C. 78c(f).
    \6\ Section 15B(b)(2)(C) requires the Commission to determine 
that the Board's rules are designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
municipal securities, to remove impediments to and perfect the 
mechanism of a free and open market in municipal securities, and, in 
general, to protect investors and the public interest. 15 U.S.C. 
78o-4(b)(2)(C).
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    The Commission set forth its reasons for approving Rule G-
11(g)(iii) in its current form, requiring increased disclosure of 
designation information, when it was amended in November 1998. It 
believes that the instant proposal, resolving questions that have 
arisen since that time, provides answers that are fully consonant with 
those reasons.
    The new language that, in response to the first question outlined 
above, expressly stipulates that designation information must be 
disclosed to all syndicate members merely clarifies the intent of last 
year's amendment as understood by the Commission. Concerning the second 
question, the Commission agrees with the Board that designation 
information is most useful to syndicate members when stated in terms of 
dollar amounts, and that there is no need to further require that the 
information also be stated in terms of bond amounts. Finally, the 
Commission agrees with the Board that requiring managers to disclose 
designations paid to non-syndicate-members as well as syndicate members 
is consistent with the purpose of last year's amendment generally to 
increase the disclosure of designation information.

III. Conclusion

    For the above reasons, the Commission believes that the proposed 
rule change is consistent with the provisions of the Act, and in 
particular with Section 15B(b)(2)(C).
    It is therefore ordered, pursuant to Section 19(b)(2) \7\ of the 
Act, that the proposed rule change (SR-MSRB-99-2) is hereby approved.

    \7\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-11143 Filed 5-3-99; 8:45 am]
BILLING CODE 8010-01-M