Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Proposed Rule Change Relating to Rule G-38, on Consultants, Rule G-37, Political Contributions and Prohibitions on Municipal Securities Business, Rule G-8, on Books and Records, and Revisions to the Attachment Page to Form G-37/G-38

[Federal Register Volume 64, Number 196 (Tuesday, October 12, 1999)]
[Notices]
[Pages 55326-55334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26524]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41975; File No. SR-MSRB-98-08]


Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Proposed Rule Change Relating to Rule G-38, 
on Consultants, Rule G-37, Political Contributions and Prohibitions on 
Municipal Securities Business, Rule G-8, on Books and Records, and 
Revisions to the Attachment Page to Form G-37/G-38

October 4, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 16, 1998, the Municipal Securities Rulemaking Board (``Board'' 
or ``MSRB'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') a proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Board. On August 26, 1999, the Board filed Amendment No. 1 which 
replaces and supersedes the proposed rule change.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as contained in Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On June 16, 1998, the MSRB submitted its initial proposal 
which amended G-38 to define the meaning of ``reportable 
contributions,'' outlined what Consultant Agreements should include, 
and provided dealers with a ``reasonable efforts'' defense. The 
defense would have held that a dealer does not violate Rule G-38 if 
the dealer fails to receive all required information from its 
consultant and thus, fails to report such information to the Board, 
but can demonstrate that it used reasonable efforts in attempting to 
obtain the information, including a statement in the dealer's 
Consultant Agreement that Board rules require disclosure of 
consultant contributions and payments, and send quarterly reminders 
to its consultants of the deadline for their submissions to the 
dealer of the required information. After discussions with the 
Commission, the Board amended the proposal and published it for 
comment. See Additional Requirements for Pending Amendments on 
Disclosure of Consultants' Contributions: Rule G-38, MSRB Reports, 
Vol. 19, No. 2 (April 1999) at 3-7. Amendment No. 1, among other 
things, modifies the ``reasonable efforts'' defense established in 
the initial proposal by imposing stricter requirements on dealers in 
monitoring their consultants' activities.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The MSRB is proposing to amend Rule G-38, on consultants, Rule G-
37, on political contributions and prohibitions on municipal securities 
business, Rule G-8, on books and records, and to revise the attachment 
page to Form G-37/G-38. The proposed rule change requires brokers, 
dealers, or municipal securities dealers (``dealers'') to obtain from 
their consultants information on the consultants' political 
contributions and payments to state and local political parties and to 
report such information to the Board on Form G-37/G-38. The Board has 
requested that the Commission delay the effectiveness of the proposed 
rule change until April 1, 2000, to provide time for dealers to revise 
their contracts with their consultants and to put supervisory 
procedures in place for compliance with the proposed rule change. Below 
is the text of the proposed rule change. Additions are italicized; 
deletions are bracketed.
Rule G-38. Consultants
    (a) Definitions.
    (i)-(v) No change.
    (vi) The term ``reportable political contribution'' means:
    (A) if the consultant has had direct or indirect communication with 
an issuer on behalf of the broker, dealer or municipal securities 
dealer to obtain or retain municipal securities business for such 
broker, dealer or municipal securities dealer, a political contribution 
to an official(s) of such issuer made by any contributor referred to in 
paragraph (b)(i) during the period beginning six months prior to such 
communication and ending six months after such communication;
    (B) the term does not include those political contributions to 
official(s) of an issuer made by any individual referred to in 
subparagraph (b)(i)(A) or (B) of this rule who is entitled to vote for 
such official if the contributions made by such individual, in total, 
are not in excess of $250 to any official of such issuer, per election.
    (vii) The term ``reportable political party payment'' means:

[[Page 55327]]

    (A) if a political party of a state or political subdivision 
operates within the geographic area of an issuer with which the 
consultant has had direct or indirect communication to obtain or retain 
municipal securities business on behalf of the broker, dealer or 
municipal securities dealer, a payment to such party made by any 
contributor referred to in paragraph (b)(i) during the period beginning 
six months prior to such communication and ending six months after such 
communication;
    (B) the term does not include those payments to political parties 
of a state or political subdivision made by any individual referred to 
in subparagraph (b)(i)(A) or (B) of this rule who is entitled to vote 
in such state or political subdivision if the payments made by such 
individual, in total, are not in excess of $250 per political party, 
per year.
    (viii)( The term ``official of such issuer'' or ``official of an 
issuer'' shall have the same meaning as in rule G-37(g)(vi).
    (b) Written Agreement
    (i) Each broker, dealer or municipal securities dealer that uses a 
consultant shall evidence the consulting arrangement by a writing 
setting forth, at a minimum, the name, company, business address, role 
and compensation arrangement of each such consultant (``Consultant 
Agreement''). In addition, the Consultant Agreement shall include a 
statement that the consultant agrees to provide the broker, dealer or 
municipal securities dealer with a list by contributor category, in 
writing, of any reportable political contributions and any reportable 
political party payments during each calendar quarter made by:
    (A) the consultant;
    (B) if the consultant is not an individual, any partner, director, 
officer or employee of the consultant who communicates with an issuer 
to obtain municipal securities business on behalf of the broker, dealer 
or municipal securities dealer; and
    (C) any political action committee controlled by the consultant or 
any partner, director, officer or employee of the consultant who 
communicates with an issuer to obtain municipal securities business on 
behalf of the broker, dealer or municipal securities dealer.
    (ii) The Consultant Agreement shall require that, if applicable the 
consultant shall provide to the broker, dealer or municipal securities 
dealer a report that no reportable political contributions or 
reportable political party payments were made during a calendar 
quarter.
    (iii) The Consultant Agreement shall require that the consultant 
provide the reportable political contributions and political party 
payments for each calendar quarter, or report that no reportable 
political contributions or political party payments were made for a 
particular calendar quarter, to the broker, dealer or municipal 
securities dealer in sufficient time for the broker, dealer or 
municipal securities dealer to meet its reporting obligations under 
paragraph (e) of this rule.
    (iv) [Such] The Consultant Agreement must be entered into before 
the consultant engages in any direct or indirect communication with an 
issuer on behalf of the broker, dealer or municipal securities dealer.
    (c) Information Concerning Political Contributions to Official(s) 
of an Issuer and Payments to State and Local Political Parties Made by 
Consultants.
    (i) A broker, dealer or municipal securities dealer is required to 
obtain information on its consultant's reportable political 
contributions and reportable political party payments beginning with a 
consultant's first direct or indirect communication with an issuer on 
behalf of the broker, dealer or municipal securities dealer to obtain 
or retain municipal securities business for such broker, dealer or 
municipal securities dealer. The broker, dealer or municipal securities 
dealer shall obtain from the consultant the information concerning each 
reportable political contribution required to be recorded pursuant to 
rule G-8(a)(xviii)(F) and each reportable political party payment 
required to be recorded pursuant to rule G-8(a)(xviii)(G) or, if 
applicable, a report indicating that the consultant made no reportable 
political contributions and no reportable political party payments 
required to be recorded pursuant to rule G-8(a)(xviii)(H).
    (ii) The requirement to obtain the information referred to in 
paragraph (c)(i) of this rule shall end upon the termination of the 
Consultant Agreement.
    (iii) A broker, dealer or municipal securities dealer will not 
violate this section if it fails to receive from its consultant all 
required information on reportable political contributions and 
reportable political party payments and thus fails to report such 
information to the Board if the broker, dealer or municipal securities 
dealer can demonstrate that it used reasonable efforts in attempting to 
obtain the necessary information. Reasonable efforts shall include:
    (A) a statement in the Consultant Agreement that Board rules 
require disclosure of consultant contributions to issuer officials and 
payments to state and local political parties;
    (B) the broker, dealer or municipal securities dealer sending 
quarterly reminders to its consultants of the deadline for their 
submissions to the broker, dealer or municipal securities dealer of the 
information concerning their reportable political contributions and 
reportable political party payments;
    (C) the broker, dealer or municipal securities dealer including in 
the Consultant Agreement provisions to the effect that:
    (1) the Consultant Agreement will be terminated by the broker, 
dealer or municipal securities dealer if, for any calendar quarter, the 
consultant fails to provide the broker, dealer or municipal securities 
dealer with information about its reportable political contributions or 
reportable political party payments, or a report noting that the 
consultant made no reportable political contributions or no reportable 
political party payments, and such failure continues up to the date to 
be determined by the dealer, but no later than the date by which the 
broker, dealer or municipal securities dealer is required to send Form 
G-37/G-38 to the Board with respect to the next succeeding calendar 
quarter, such termination to be effective upon the date the broker, 
dealer or municipal securities dealer must send its Form G-37/G-38 to 
the Board (i.e., January 31, April 30, July 31 or October 31); and
    (2) no further payments, including payments owed for services 
performed prior to the date of termination, shall be made to the 
consultant by or on behalf of the broker, dealer or municipal 
securities dealer as of the date of such termination; and
    (D) the broker, dealer or municipal securities dealer enforcing the 
Consultant Agreement provisions described in paragraph (c)(iii)(C) of 
this rule in a full and timely manner and indicating the reason for and 
date of the termination on its Form G-37/G-38 for the applicable 
quarter.
    (d) Disclosure to Issuers. Each broker, dealer or municipal 
securities dealer shall submit in writing to each issuer with which the 
broker, dealer or municipal securities dealer is engaging or is seeking 
to engage in municipal securities business, information on consulting 
arrangements relating to such issuer, which information shall include 
the name, company, business address, role and compensation arrangement 
of any consultant used, directly or indirectly, by the broker, dealer 
or municipal securities dealer to attempt to obtain or retain municipal 
securities business with each such issuer. Such

[[Page 55328]]

information shall be submitted to the issuer either:
    (i)-(ii) No change.
    [(d)] (e) Disclosure to Board. Each broker, dealer and municipal 
securities dealer shall send to the Board by certified or registered 
mail, or some other equally prompt means that provides a record of 
sending, and the Board shall make public, reports of all consultants 
used by the broker, dealer or municipal securities dealer during each 
calendar quarter. Two copies of the reports must be sent to the Board 
on Form G-37/G-38 by the last day of the month following the end of 
each calendar quarter (these dates correspond to January 31, April 30, 
July 31, and October 31). Such reports shall include, for each 
consultant, in the prescribed format, the consultant's name, company, 
business address, role, [and] compensation arrangement, any municipal 
securities business obtained or retained by the consultant with each 
such business listed separately, and, if applicable, dollar amounts 
paid to the consultant connected with particular municipal securities 
business. [In addition, s] Such reports shall indicate the total dollar 
amount of payments made to each consultant during the report period 
[and, if any such payments are related to the consultant's efforts on 
behalf of the broker, dealer or municipal securities dealer which 
resulted in particular municipal securities business, then that 
business and the related dollar amount of the payment must be 
separately identified]. In addition, such reports shall include the 
following information to the extent required to be obtained during such 
calendar quarter pursuant to paragraph (c)(i) of this rule:
    (i)(A) the name and title (including any city/county/state or 
political subdivision) of each official of an issuer and political 
party receiving reportable political contributions or reportable 
political party payments, listed by state; and
    (B) contribution or payment amounts made and the contributor 
category of the persons and entities described in paragraphs (b)(i) of 
this rule; or
    (ii) if applicable, a statement that the consultant reported that 
no reportable political contributions or reportable political party 
payments were made; or
    (iii) if applicable, a statement that the consultant failed to 
provide any report of information to the dealer concerning reportable 
political contributions or reportable political party payments.

    Once a contribution or payment has been disclosed on a report, the 
dealer should not continue to disclose that particular contribution or 
payment on subsequent reports.
Rule G-8. Books and Records To Be Made by Brokers, Dealers and 
Municipal Securities Dealers
    (a) Description of Books and Records Required to be Made. Except as 
otherwise specifically indicated in this rule, every broker, dealer and 
municipal securities dealer shall make and keep current the following 
books and records, to the extent applicable to the business of such 
broker, dealer or municipal securities dealer:
    (i)-(xvii) No change.
    (xviii) Records Concerning Consultants Pursuant to Rule G-38. Each 
broker, dealer and municipal securities dealer shall maintain:
    [(i)] (A) a listing of the name, company, business address, role 
and compensation arrangement of each consultant;
    [(ii)] (B) a copy of each Consultant Agreement referred to in rule 
G-38(b);
    [(iii)] (C) a listing of the compensation paid in connection with 
each such Consultant Agreement;
    [(iv)] (D) where applicable, a listing of the municipal securities 
business obtained or retained through the activities of each 
consultant;
    [(v)] (E) a listing of issuers and a record of disclosures made to 
such issuers, pursuant to rule G-38 [(c) (d), concerning each 
consultant used by the broker, dealer or municipal securities dealer to 
obtain or retain municipal securities business with each such issuer; 
[and]
    [(vi)] (F) records of each reportable political contribution (as 
defined in rule G-38(a)(vi)), which records shall include:
    (1) the names, city/county and state of residence of contributors;
    (2) the names and titles (including any city/county/state or other 
political subdivision) of the recipients of such contributions; and
    (3) the amounts and dates of such contributions;
    (G) records of each reportable political party payment (as defined 
in rule G-38(a)(vii)) which records shall include:
    (1) the names, city/county and state of residence of contributors;
    (2) the names and titles (including any city/county/state or other 
political subdivision) of the recipients of such payments; and
    (3) the amounts and dates of such payments;
    (H) records indicating, if applicable, that a consultant made no 
reportable political contributions (as defined in rule G-38(a)(vi)) or 
no reportable political party payments (as defined in rule G-
38(a)(vii));
    (I) a statement, if applicable, that a consultant failed to provide 
any report of information to the dealer concerning reportable political 
contributions or reportable political party payments; and
    (J) the date of termination of any consultant arrangement.
    (xix) No change.
    (b)-(f) No change.
Rule G-37. Political Contributions and Prohibitions on Municipal 
Securities Business
    (a)-(d) No change.
    (e)(i)(A)-(C) No change.
    (D) any information required to be disclosed pursuant to section 
[(d)](e) of rule G-38; and
    (E) No change.
    (ii)-(iii) No change.
    (f)-(i) No change.
* * * * *

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 Board 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 
texts of these statements may be examined at the places specified in 
item IV below. The Board 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. Background
    Rule G-37 \4\ among other things, prohibits a dealer from engaging 
in municipal securities business with an issuer within two years after 
certain contributions to an official of such issuer made by the dealer, 
any municipal finance professional associated with such dealer, or any 
political action committee (``PAC'') controlled by the dealer or any 
municipal finance professional. Rule G-37(d) prohibits a dealer and any 
municipal finance professional from doing any act indirectly which 
would result in a violation of the rule if done directly by the dealer 
or municipal finance professional. Thus, a dealer would violate Rule G-
37 by engaging in municipal securities business with an

[[Page 55329]]

issuer after directing any person to make a contribution to an official 
of such issuer. As indirect activities are often difficult to prove, 
the Board believes that additional information about consultant 
arrangements should be made available to issuers and the public in 
order to maintain the integrity of the market. Accordingly, the Board 
adopted Rule G-38.\5\
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    \4\ MSRB Manual, General Rules, Rule G-37 (CCH) 3681.
    \5\ MSRB Manual, General Rules, Rule G-38 (CCH) 3686.
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    Rule G-38 requires dealers who use consultants \6\ to evidence the 
consulting arrangement in writing (referred to as a ``Consultant 
Agreement'').\7\ Rule G-38(c) requires each dealer to disclose to an 
issuer with which it is engaging or seeking to engage in municipal 
securities business, in writing, information on consulting arrangements 
relating to such issuer. The written disclosure must include, at a 
minimum, the name, company, role and compensation arrangement with the 
consultant or consultants. Dealers are required to make such written 
disclosures either prior to the issuer's selection of any dealer in 
connection with the municipal securities business being sought, or at 
or prior to the consultant's first direct or indirect communication 
with the issuer for any municipal securities business. Rule G-38(d) 
requires dealers to submit to the Board, on a quarterly basis, reports 
of all consultants used by the dealer.\8\ For each consultant, dealers 
must report the consultant's name, company, role and compensation 
arrangement, as well as the dollar amount of any payment made to the 
consultant during the quarterly reporting period.\9\
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    \6\ Rule G-38(a)(i) defines the term ``consultant'' as any 
person used by a dealer to obtain or retain municipal securities 
business through direct or indirect communication by such person 
with an issuer on the dealer's behalf where the communication is 
undertaken by such person in exchange for, or with the understanding 
of receiving, payment from the dealer or any other person.
    \7\ Rule G-38 requires that the Consultant Agreement, at a 
minimum, include the name, company, role and compensation 
arrangement of each consultant used by the dealer. The Consultant 
Agreement must be entered into before a consultant engages in any 
direct or indirect communication with an issuer on the dealer's 
behalf.
    \8\ Such reports must be filed on Form G-37/G-38.
    \9\ In addition, if any payment made during the reporting period 
is related to the consultant's efforts on behalf of the dealer which 
resulted in particular municipal securities business, whether the 
municipal securities business was completed during that or a prior 
reporting period, then the dealer must separately identify that 
business and the dollar amount of the payment.
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    As mentioned above, one of the reasons the Board adopted Rule G-38 
was because of its concern that dealers might be circumventing Rule G-
37 by using consultants to make political contributions. There also was 
concern about dealers hiring consultants who had made their own 
contributions to issuer officials.\10\ The Rule G-38 reporting and 
recordkeeping requirements seek to make information public about the 
consultants that dealers have hired and the municipal securities 
business obtained through such consultants. One reason the Board sought 
this public disclosure was so that reporters and others could 
investigate further whether there was a connection between 
contributions given by consultants and the business they obtained for 
the dealers that hired them. The Board determined to adopt the proposed 
rule change to Rule G-38 because of concern that, given the increased 
enforcement of Rule G-37, more dealers may seek to circumvent Rule G-37 
by hiring consultants who make substantial contributions to issuer 
officials.
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    \10\ In October 1993, at the urging of SEC Chairman Arthur 
Levitt, 19 major dealers agreed to a Statement of Initiative 
(``Initiative'') to support the principle that political 
contributions which are intended to influence the awarding of 
municipal securities should be prohibited. Within a few months, 
another 36 dealers ``signed on'' to the Initiative. Interpretation 
No. 1 was issued on December 6, 1993, and among other things, 
provides requirements for a dealer that uses a consultant to obtain 
or retain municipal securities business. This interpretation 
requires, among other things, that a dealer have a written agreement 
with the consultant and that such agreement prohibit the consultant, 
its officers, directors, partners, and non-clerical employees from 
making any political contributions or other payments, directly or 
indirectly, for the purposes of obtaining or retaining municipal 
securities business.
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2. Summary of Proposed Rule Change
    The proposed rule change would require a dealer to receive and 
report certain contribution and payment information from: the 
consultant; any partner, director, officer or employee of the 
consultant who communicates with an issuer to obtain municipal 
securities business on behalf of the dealer; and, any PAC controlled by 
the consultant or any partner, director, officer or employee of the 
consultant who communicates with issuers to obtain municipal securities 
business on behalf of the dealer.\11\ A dealer would be required to 
include within its Consultant Agreement a statement that the consultant 
agrees to provide the dealer each calendar quarter with a listing of 
reportable political contributions to official(s) of an issuer and 
reportable payments to political parties of states and political 
subdivisions during such quarter, or a report that no reportable 
political contributions or reportable political party payments were 
made, as appropriate.\12\
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    \11\ A ``consultant'' in Rule G-38 can refer to an individual or 
a company (e.g., a bank affiliated with a bank dealer). For example, 
if an individual is a consultant, this individual would report to 
the dealer only his or her contributions and payments and the 
contributions of any PAC controlled by such individual. If the 
consultant is a company, the company would report its contributions 
and payments to the dealer, as well as those made by any partner, 
director, officer or employee of the consultant who communicates 
with issuers to obtain municipal securities business on behalf of 
the dealer, and any PAC controlled by the consultant or any partner, 
director, officer or employee of the consultant who communicates 
with issuers to obtain municipal securities business on behalf of 
the dealer.
    \12\ The de minimis exception for contributions to official(s) 
of an issuer provides that a consultant need not provide to a dealer 
information about contributions made by any partner, director, 
officer or employee of the consultant who communicates with issuers 
to obtain municipal securities business on behalf of the dealer to 
any official of an issuer for whom such individual is entitled to 
vote if such individual's contributions, in total, are not in excess 
of $250 to each official of such issuer, per election. Similarly, 
the de minimis exception for payments provides that a consultant 
need not provide to a dealer information about payments to political 
parties of a state or political subdivision made by any partner, 
director, officer or employee of the consultant who communicates 
with issuers to obtain municipal securities business on behalf of 
the dealer who is entitled to vote in such state or political 
subdivision if the payments by the individual, in total, are not in 
excess of $250 per political party, per year.
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    The proposed rule change would require a dealer to obtain 
information from its consultants about the contributions made to issuer 
officials only if the consultant has had direct or indirect 
communication with such issuer to obtain municipal securities business 
on behalf of the dealer.\13\ The political party payments required to 
be reported are limited to those made to political parties of states 
and political subdivisions that operate within the geographic area of 
the issuer with whom the consultant communicates on behalf of the 
dealer (e.g., city, county and state parties). The date that 
establishes the obligation for the collection of contribution 
information is the date of the consultant's communication with the 
issuer to obtain municipal securities business on behalf of the dealer.
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    \13\ A dealer must disclose contributions with respect to those 
issuers from which a consultant seeking municipal securities 
business on behalf of the dealer, regardless of whether 
contributions are going to and communications are occurring with the 
same or different personnel within that particular issuer.
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    With respect to the collection of contribution and payment 
information, the proposed rule change contains a six-month ``look-
back'' as well as a six-month ``look-forward'' provision from the date 
of communication with an issuer. Thus, a consultant must disclose to 
the dealer the contributions and payments made by the consultant

[[Page 55330]]

during the six months prior to the date of the consultant's 
communication with the issuer.\14\ So too, if the consultant's 
communication with an issuer continues, any reportable contributions 
and payments would be required to be disclosed. Once communication 
ceases, the consultant still must disclose contribution and payment 
information for six months.\15\ The Board believes these provisions are 
important in providing information for a minimum period of one year 
about any consultant contributions to officials of an issuer with whom 
the consultant communicated on behalf of a dealer to obtain municipal 
securities business. This should help to identify any situations in 
which contributions could have influenced the awarding of municipal 
securities business. The proposed rule change would require dealers to 
keep records under Rule G-8 of all reportable political contributions 
and all reportable political party payments.
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    \14\ Such contributions and payments become reportable in the 
calendar quarter in which the consultant first communicates with the 
issuer.
    \15\ Contributions and payments made simultaneously with or 
after the consultant's first communication with the issuer are 
reportable in the calendar quarter in which they are made.
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    A dealer's requirement to collect contribution and payment 
information from its consultants ends when a Consultant Agreement has 
been terminated.\16\ Of course, dealers should not attempt to avoid the 
requirements of Rule G-38 by terminating a consultant relationship 
after directing or soliciting the consultant to make a political 
contribution to an issuer official after such termination. Rule G-37(d) 
prohibits a dealer from doing any act indirectly which would result in 
a violation of Rule G-37 if done directly by the dealer. Thus, a dealer 
may violate Rule G-37 by engaging in municipal securities business with 
an issuer after directing or soliciting any person to make a 
contribution to an official of such issuer.
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    \16\ A dealer that terminates a Consultant Agreement would of 
course be obligated to obtain information regarding contributions 
and payments made up to the date of termination.
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    The proposed rule change would require that the information 
obtained by dealers concerning their consultant's contributions and 
payments be submitted by dealers to the Board on Form G-37/G-38.\17\ 
The disclosures required by the proposed rule change are reflected in 
the draft changes to Form G-37/G-38. The draft changes require dealers 
to disclose on the attachment sheet for each consultant used by the 
dealer the contributions and payments covered by the rule or that no 
such contributions or payments were made for such quarter. Further, a 
dealer must disclose if a consultant has failed to provide it with a 
report concerning its contributions and payments. When completing the 
form, a dealer must disclose, in addition to the other required 
information, the calendar quarter and year of any reportable political 
contributions and reportable political party payments that were made 
prior to the calendar quarter of the form being completed (e.g., 
contributions and payments made in a prior quarter that are reportable 
as a result of the six-month look-back). Reportable ``look-back'' 
contributions and payments also must be disclosed on the Form G-37/G-38 
for the quarters in which the consultant has communicated with an 
issuer to obtain municipal securities business on behalf of a 
dealer.\18\ Once a contribution or payment has been disclosed on a 
report, a dealer should not continue to disclose that particular 
contribution or payment on subsequent reports. The attachment page to 
Form G-37/G-38 also has been revised to require dealers to separately 
identify all of the municipal securities business obtained or retained 
by the consultant for the dealer.\19\
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    \17\ The proposed rule change also requires dealers to report 
the consultant's business address on Form G-37/G-38.
    \18\ If the amendments to Rule G-38 become effective on April 1, 
2000, as the Board has requested, on the reports for the second 
quarter of 2000 (required to be sent to the Board by July 31, 2000) 
dealers would be required to disclose their consultants' reportable 
political contributions and reportable political party payments for 
the second quarter of 2000 and include, pursuant to the six-month 
look-back, reportable political contributions and reportable 
political party payments since October 1, 1999.
    \19\ The existing version of the form requires dealers to list 
only the municipal securities business obtained or retained by the 
consultant in which the consultant was paid a specific dollar amount 
for the particular municipal securities business.
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    The proposed rule change includes a ``reasonable efforts'' 
provision that allows dealers to rely in good faith on information 
received from their consultant regarding contributions and payments. 
The reasonable efforts provision provides that a dealer will not 
violate Rule G-38 if the dealer fails to receive from its consultant 
all required contribution and payment information and thus fails to 
report such information to the Board if the dealer can demonstrate that 
it used reasonable efforts in attempting to obtain the necessary 
information. However, to avail itself of the reasonable efforts 
provision, a dealer must:
    (1) State in its Consultant Agreement that Board rules require 
disclosure of consultant contributions and payment;
    (2) Send quarterly reminders to consultant of the deadline for 
their submissions to the dealer of contribution information;
    (3) Include language in the Consultant Agreement to the effect 
that: (a) The Consultant Agreement will be terminated if, for any 
calendar quarter, the consultant fails to provide the dealer with 
information about its reportable contributions or payments, or a report 
noting that the consultant made no reportable contributions or 
payments, and such failure continues up to the date to be determined by 
the dealer but no later than the date by which the dealer is required 
to send Form G-37/G-38 to the Board with respect to the next succeeding 
calendar quarter, such termination to be effective upon the date the 
dealer must send its Form G-37/G-38 to the Board, and (b) the dealer 
may not make any further payments to the consultant, including payments 
owed for services performed prior to the date of termination, as of the 
date of such termination; and
    (4) Enforce the Consultant Agreement provisions described above in 
a full and timely manner and indicate the reason for and date of the 
termination on its Form G-37/G-38 for the applicable quarter.
    The failure by a dealer to include the termination and non-payment 
provisions in a Consultant Agreement or to enforce any such provisions 
that may be contained in the Consultant Agreement, would not, in and of 
itself, constitute a violation of Rule G-38 but would instead preclude 
the dealer from invoking the reasonable efforts provision as a defense 
against a possible violation for failing to disclose consultant 
contribution information, which the consultant may have withheld from 
the dealer.
    Finally, the proposed rule change contains a clarifying amendment 
to Rule G-38(b)(i)(B), and a technical amendment to Rule G-37(e)(i)(D) 
to conform to the amendments to Rule G-38.
    The Board is very concerned about consultants making contributions 
to obtain municipal securities business on behalf of the dealer and, 
while the Board, at this time, is only requiring disclosure of 
consultants' political contributions and payments to state and local 
political parties, it will be paying close attention to this issue. The 
Board will take whatever further steps it feels are necessary to sever 
the connection between the giving of political

[[Page 55331]]

contributions and the awarding of municipal securities business.
    The Board believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act.\20\
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    \20\ Section 15B(b)(2)(C) states that the Board's rules shall be 
designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

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

    The Board does not believe that the proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act, because it would apply equally 
to all brokers, dealers and municipal securities dealers.

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

    In September 1997, the Board published a notice that proposed for 
comment draft amendments to Rules G-38 and G-8 and revisions to Form G-
37/G-38 that would require dealers to disclose their consultants' 
political contributions to officials of an issuer and payments to state 
and local political parties.\21\ In response to its request for 
comments, the Board received comment letters from Cox Newspapers, Piper 
Jaffray Companies, Inc. (``Piper Jaffray''), and The Bond Market 
Association (``TBMA'').
---------------------------------------------------------------------------

    \21\ ``Disclosure of Consultants' Political Contributions and 
Payments,'' MSRB Reports, Vol. 17, No. 3 (October 1997) at 3-7.
---------------------------------------------------------------------------

1. Payments to State and Local Political Parties
    TBMA and Piper Jaffray recommended that the draft amendments be 
modified to make clear that only those contributions to state and local 
political parties operating within the jurisdiction of the issuer which 
is the subject of the Consultant Agreement must be reported. TBMA 
stated that the reporting of all contributions to state and local 
political parties by consultants (except for the $250 de minimis) 
``would impose an unfair burden on all dealers employing consultants to 
monitor and report on all contributions to state and local political 
parties by independent third party market participants even though 
there was no nexus or other reasonable relationship between those 
political parties and the purpose of employing the consultant.'' Pipeer 
Jaffray stated that requiring a dealer to ``monitor and report all 
political contributions to state and local parties of a consultant and 
their corporate PAC, even when there is no relationship between the 
political party and the purpose of employing the consultant, is time 
consuming.''
    The Board determined to revise the draft amendments to limit the 
political party contributions required to be reported to those made to 
political parties of states and political subdivisions that operate 
within the geographic area of the issuer with whom the consultant 
communicates on behalf of the dealer.\22\ This is consistent with the 
requirements for reporting contributions.
---------------------------------------------------------------------------

    \22\ The proposed rule change contains a de minimis exception 
from the reporting of consultants' payments to political parties in 
which such consultant is entitled to vote if the payments are not in 
excess of $250 per political party, per year.
---------------------------------------------------------------------------

2. Consultant's Business Address
    Cox Newspaper suggested that Rule G-38 require disclosure of the 
address and telephone number of the consultant or (when applicable) the 
address and telephone number of the consultant's company. It noted that 
such information would help in contacting consultants to ask questions 
about connections between contributions and business and in checking 
campaign finance reports. It also noted that this information helps to 
avoid confusion with other people who have the same name as the 
consultant. Finally, it noted that the Federal Election Commission 
(``FEC'') regulations require the address of any contributor of $200 or 
more as one of the items that must be reported by political committees.
    The Board revised the draft amendments to Rule G-38 to require that 
the consultant's business address be reported on Form G-37/G-38.\23\ 
This requirement is similar to the FEC regulations. Including the 
address would be helpful for anyone trying to contact the consultant to 
inquire about contributions or any other consultant information 
contained on Form G-37/ G-38. The Board believes that requiring dealers 
to include consultants' telephone numbers could lead to unnecessary 
calls to the consultant; however, by requiring that the disclosure of 
addresses for consultants, anyone wishing to call a consultant should 
be able to obtain the telephone number.
---------------------------------------------------------------------------

    \23\ Rule G-8(a)(xviii) was also amended to require a dealer to 
maintain a record of a consultant's business address.
---------------------------------------------------------------------------

3. Additional Time for Reporting Consultants' Contributions and 
Payments
    TBMA and Piper Jaffray recommended that the draft amendments to 
Rule G-8 be modified to allow for more time in which to report the 
information received from consultants pursuant to Rule G-38. TBMA 
stated that, ``[i]n order to meet the 30-day deadline, dealers would 
have to impose a much earlier deadline on their consultants, which 
would give consultants less time to collect the information and 
transmit it to the dealers * * *. This lack of time would make it 
extremely difficult, and perhaps impossible, for dealers to collect all 
the required information for reporting in time allowed.'' TBM and Piper 
Jaffray stated that it would be more appropriate to require consultant 
contributions to be included in the report filed for the quarter 
following the making of any political contributions. TBMA stated that 
``[t]he additional 90 days would allow dealers to ensure that all of 
the consultants have reported and that the filed G-37/T-38 forms are 
completed properly.''
    The Board understands why dealers would wish more time to report 
their consultants' contributions and payments. However, the Board is 
concerned that industry participants could view this delay of up to six 
months in reports of consultant contributions and payments as a 
weakening of the rule. Thus, the Board determined not to grant 
additional time to report consultant contributions and payments.
4. Good Faith Defense
    TBMA and Piper Jaffray stated that dealers should not be required 
to guarantee the accuracy of the information they obtain from their 
consultants, and TBMA stated that dealers should not ``be expected to 
conduct any investigation into the accuracy or completeness of the 
information provided to the.'' TBMA recommended that Rule G-38 
``include language which will afford dealers confidence that they may 
in good faith rely upon the information they receive from their 
consultants in submitting their reports.''
    The Board believes it is reasonable to allow dealers to rely in 
good faith on their consultants' reports and that it would be almost 
impossible for dealers to investigate for contributions made by their 
consultants that were not reported. The amendments originally filed 
with the Commission stated that a dealer will not violate Rule G-38 if 
it fails to

[[Page 55332]]

receive from its consultant all required contribution and payment 
information and thus, fails to report such information to the Board if 
the dealer can demonstrate that it used reasonable efforts in 
attempting to obtain the necessary information. The FEC has similar 
requirements for reporting of contribution information by various 
entities. The amendments originally filed with the Commission stated 
that ``reasonable efforts'' would include having a dealer: (1) State in 
the Consultant Agreement that Board rules require disclosure of 
consultant contributions and payments, and (2) send quarterly reminders 
to consultants of the deadline for their submissions to the dealer of 
contribution and payment information.
    In January 1999, the Commission staff recommended to Board staff 
that the reasonable efforts provisions contain two additional 
requirements: (1) The dealer must disclose in its quarterly filings any 
consultant that does not provide a report of the information required 
by the rule, and (2) the dealer must terminate the contract should the 
consultant fail to provide such report by the next calendar quarter 
after it was due, and the dealer must not make any further payments 
pursuant to the Consultant Agreement. The Commission staff stated that 
these additional requirements to the reasonable efforts provision 
should ensure that all required information on contributions is 
obtained from consultants. On April 19, 1999, the Board published a 
notice for comment concerning the additional requirements for the 
amendments pending at the Commission concerning the disclosure of 
consultants' contributions.\24\ The Board received five comment letters 
in response to its request for comments on these additional 
requirements. Comment letters were received from the American Bankers 
Association (``ABA''); First Kentucky Securities Corp. (``First 
Kentucky''); State Treasurer, State of Washington (``Washington State 
Treasurer''); TBMA; and Wells Fargo & Company (``Wells Fargo'')
---------------------------------------------------------------------------

    \24\ ``Additional Requirements for Pending Amendments on 
Disclosure of Consultants' Contributions,'' MSRB Reports, Vol. 19, 
No. 2 (April 1999) at 3-7.
---------------------------------------------------------------------------

    In general, none of the commenters offered support for the 
additional requirements. The Washington State Treasurer stated that he 
objects to the additional requirements ``as both unnecessary and 
inappropriate.'' TBMA stated that the additional requirements 
``represent excessive micromanagement of dealers' business.'' Specific 
comments are summarized and discussed below.
1. De Minimus Exemption From Reporting
    Wells Fargo asked that ``the Board enlarge the scope of the de 
minimus contribution exemption contained in [r]ules G-37 and G-38.'' It 
noted that a ``general de minimus exemption for all elections and the 
elimination of the reporting requirements for both de minimus 
contributions and no contributions would greatly ease the reporting 
burden.'' In addition, Wells Fargo stated that ``[a] more limited 
approach would be to expand the de minimus exemption to the state and/
or metropolitan area in which the person making the contribution works 
or lives.''
    The ABA also noted that ``given the contiguous state borders in 
many metropolitan areas * * * and the geographic freedom provided by 
the Internet, it is far more likely that individuals may wish to make 
contributions outside of those jurisdictions in which they can vote.'' 
The ABA ``recommends that the de minimus exception of $250 per 
candidate apply to all elections, rather just than to candidates for 
whom an individual may vote'' because ``expanding the scope of the 
exemption would go far toward eliminating the burden of the proposed 
rule.''
    Response: The de minimus exemption in the proposed amendments does 
not require disclosure of certain contributions to issuer officials for 
whom a consultant is entitled to vote. This exception is similar to 
that in Rule G-37. The Commission addressed the issue of the de minimus 
exemption and its scope in Rule G-37 in its order approving that 
rule.\25\ The Commission noted that it
---------------------------------------------------------------------------

    \25\ Securities Exchange Act Release No. 33868 (April 7, 1994), 
59 FR 17621 (April 13, 1994).

believes that the MSRB's determinations as to the amount of the de 
minimus exemption and limiting its application to contributions to 
officials for whom the municipal finance professional is entitled to 
vote are appropriate and reasonable. As discussed, the proposal 
provides specific guidelines to prevent ``pay to play'' 
contributions. The proposal provides an appropriate balance between 
limiting ``pay to play'' practices and the ability of dealers and 
their employees to demonstrate support for state and local 
candidates. The proposal recognizes that certain contributions made 
for legitimate political purposes present less risk of a conflict of 
interest or the appearance of a conflict of interest. Although an 
individual may have a legitimate interest in making contributions to 
candidates for whom she is ineligible to vote, there is a greater 
risk in such circumstances that the contribution is motivated by an 
improper attempt to influence municipal officials. Thus, the 
proposal enables municipal finance professionals to contribute $250 
per election to candidates for whom they are entitled to vote 
without triggering the proposal's business limitation. As discussed, 
the proposal does not prevent dealers or their employees from 
demonstrating support for local and state officials in other ways 
including volunteer political campaign activity.\26\
---------------------------------------------------------------------------

    \26\ Id.

    Also, the proposed rule change does not require a dealer to obtain 
information about all political contributions made by its consultants. 
A dealer must obtain information from its consultants about the 
contributions made to issuer officials only if the consultant has had 
direct or indirect communication with such issuer to obtain municipal 
securities business on behalf of the dealer. The political party 
payments required to be reported are limited to those made to political 
parties of states and political subdivisions that operate within the 
geographic area of the issuer with whom the consultant communicates on 
behalf of the dealer (e.g., city, county and state parties). The date 
that establishes the obligation for the collection of contribution 
information is the date of the consultant's communication with the 
issuer to obtain municipal securities business on behalf of the dealer.
2. Requirement To Terminate Consultant Agreement
    The Washington State Treasurer stated that requiring dealers to 
terminate their Consultant Agreements with consultants who fail to 
provide information about their reportable political contributions ``is 
not in the public's best interest, for it deprives municipal securities 
dealers of any opportunity to exercise independent judgment.''
    The ABA stated that ``it is unclear from the proposed language * * 
* whether or not a dealer would be prohibited from paying a consultant 
whose contract the dealer was required to terminate pursuant to [r]ule 
G-38, for work that had already been performed under the contract.'' 
The ABA ``believes that the rule should make clear that even at 
termination, a dealer may still avail itself of the `reasonable 
efforts' defense if it pays a consultant for work that was completed 
prior to the date of termination.'' The ABA further stated that 
``[a]bsent such a clarification, the dealer could find itself liable 
for breach of the Consultant Agreement with respect to work already 
performed.''

[[Page 55333]]

    TBMA states that ``it may be impossible to suspend all payments of 
compensation to the consultant at the time of termination of the 
contract--if, for example, the consultant has not billed for services 
previously rendered, or there is a billing dispute that has not been 
resolved.'' TBMA believes the ``prohibition should more appropriately 
be limited to payment for services rendered after the date of 
termination.''
    Response: The Board feels strongly that Rule G-38 should require 
the disclosure of consultants' contributions and dealers should be able 
to avail themselves of a reasonable efforts defense if they wish to do 
so. The provision relating to termination of the Consultant Agreement 
with a consultant that does not provide the required information is a 
pre-condition to invoking the reasonable efforts defense. A dealer that 
does not terminate the Consultant Agreement in these instances does not 
violate Rule G-38, but it does lose its ability to invoke the 
reasonable efforts defense.
    The Board believes that the issue of a prohibition on further 
payments to a consultant at the time of termination of the Consultant 
Agreement can be addressed by dealers including a specific provision in 
their Consultant Agreements. This provision can indicate that, on the 
date of termination of the Consultant Agreement by the dealer because 
of the consultant's failure to report the required information, no 
further payments will be provided by the dealer to the consultant, 
including payments for services performed by the consultant prior to 
the date of termination. In addition, to address any uncertainty in the 
rule language about payments for prior services, the proposed rule 
change would amend Rule G-38 to note specifically that the prohibition 
on further payments at the time of termination of the Consultant 
Agreement includes payments for services performed prior to the date of 
termination. It is not clear what TBMA means by limiting payment for 
services rendered after the date of termination because, presumably, a 
consultant would not be performing services for which it would expect 
to be paid after the Consultant Agreement has been terminated.
3. Consultant Activities Other Than Seeking Municipal Securities 
Business
    The ABA stated that ``it is likely that agreements with consultants 
may cover activities in addition to municipal securities consulting'' 
and that ``[i]n such instances, the requirement to terminate should 
apply only to that portion of the contract subject to [r]ule G-38.''
    Response: Rule G-38(b) requires a dealer that uses a consultant to 
have a written Consultant Agreement. The Consultant Agreement, pursuant 
to Board rules, addresses a consultant's activities on behalf of a 
dealer in which the consultant is used to obtain or retain municipal 
securities business. If a Consultant Agreement includes other 
activities unrelated to municipal securities activities pursuant to 
Rule G-38, the requirement to terminate the Consultant Agreement would 
apply only to the activities covered by Rule G-38. If a dealer has only 
one contract with a consultant, presumably the dealer could demonstrate 
to an enforcement agency that, depending upon the facts and 
circumstances, terminating the consultant's Rule G-38 activities and 
ceasing payments with respect to such Rule G-38 activities, while the 
consultant continues other consulting activities and receives payments 
from the dealer for such activities, would meet the pre-conditions for 
invoking the reasonable efforts defense. A dealer may wish to consider 
having a separate contract or contracts with a consultant for these 
additional activities in addition to the Consultant Agreement that 
conforms to the requirements of Rule G-38.
4. Participation in the Political Process
    Wells Fargo stated that it is ``very concerned about the chilling 
effect that the adoption of the proposed rule will have on 
participation in the political process.''
    Response: The proposed rule change requires dealers to record and 
report information about certain political contributions and payments 
to state and local political parties received from their consultants. 
The proposed rule change does not prohibit political contributions or 
payments to political parties; therefore, there should be no chilling 
effect on participation in the political process.
5. Reporting
    Wells Fargo stated that it ``is concerned about the burden that the 
proposed reporting requirements will impose.'' It noted that the 
``broad definition of `consultant' in the [r]ule may subject bankers 
who provide referrals for municipal securities underwriting business to 
the reporting and disclosure rules.'' The ABA found that ``the proposed 
requirements to monitor the political contributions of consultants 
through quarterly reports to the Board and quarterly reminders to non-
complaint consultants will impose significant regulatory burdens on 
financial institutions operating nationwide that rely on cross-selling 
of affiliates' products as a significant part of their marketing 
strategy.''
    Response: Rule G-38 has always required that dealers record and 
report certain information about their consultants every quarter, the 
amendments add additional items of information that must be recorded 
and reported. While the additional information may be an added burden 
on dealers, the Board believes it is important that dealers obtain and 
report the information so that consultants' political contributions can 
be reviewed in order to determine whether there are issues that should 
be addressed, possibly through future Board rulemaking.
    The ABA mentioned the ``regulatory burden'' of dealers sending 
``quarterly reminders to non-compliant consultants.'' [emphasis added] 
One of the requirements of the reasonable efforts provision for dealers 
that wish to avail themselves of such a defense is that dealers send 
quarterly reminders to their consultants of the deadline for their 
submissions to the dealer of their reportable contribution information; 
there is no reference to non-compliant consultants in this regard.
6. Recordkeeping
    First Kentucky stated that the amendment to Rule G-8(a)(xviii)(H), 
which requires dealers to maintain records indicating, if applicable, 
that a consultant made no reportable political contributions or 
political party payments, is unnecessary and is another opportunity for 
the enforcement agencies to cite dealers for improper record retention. 
Wells Fargo stated that the requirement for dealers to report when no 
contributions have been made by consultants will be burdensome.
    Response: The amendments in the original filing required dealers to 
receive from their consultants reports on any reportable contributions, 
but the amendments did not contain a requirement for dealers to receive 
reports if no such contributions were made. To establish a complete 
record of the information being reported by consultants, Amendment No. 
1 revises the amendments in the original filing to require dealers to 
receive reports every quarter from their consultants listing all 
reportable contributions or stating that the consultants made no 
reportable contributions, as appropriate. A dealer would then indicate 
the contributions reported or that a consultant had no contributions to 
report, as appropriate, on its Form G-37/G-38 for the

[[Page 55334]]

applicable quarter. The proposed rule change requires dealers to 
disclose if they did not receive a report from a consultant during a 
particular quarter. Thus, if a consultant does not submit a report to 
the dealer for a particular quarter, the dealer must report this fact 
on its Form G-37/G-38.
    For recordkeeping purposes, the proposed amendments to Rule G-8 
establish a complete record of the reports submitted by consultants. 
These amendments require a dealer to maintain: (1) Records of each 
reportable political contribution; (2) records of each reportable 
political party payment; (3) records indicating, if applicable, that a 
consultant made no reportable political contributions or no reportable 
political party payments; and (4) a statement, if applicable, that a 
consultant failed to provide any report of information to the dealer 
concerning reportable political contributions or reportable political 
party payments.
    Although some dealers may believe the requirements to report and 
maintain records indicating that a consultant made no reportable 
political contributions would be burdensome, such reports and records 
provide a complete record of a consultant's contributions. If it should 
be determined later that a consultant did in fact make a reportable 
contribution after reporting that no reportable contributions were 
made, the dealer will have a record to demonstrate that the consultant 
hid the contribution information from the dealer.
7. List of Consultants That Have Been Subject to Termination
    TBMA stated that ``a dealer will have no way to knowing whether the 
consultant it uses has complied with similar obligations to other 
dealers in the past'' and it suggested that the Board ``could remedy 
this situation by posting on its website a list of consultants that 
have been subject to termination as a result of their failure to comply 
with these disclosure provisions.'' TMBA noted that ``[t]his would also 
serve to create a strong disincentive to the consultant to disregard 
its contractual obligations in this manner.''
    Response: The Board posts on its web site the Forms G-37/G-38 it 
receives. The porposed amendment to Rule G-38 include a requirement for 
a dealer wishing to rely on the reasonable efforts provision to 
indicate on its Form G-37/G-38 the reason for the date of termination 
of the Consultant Agreement in thos instances in which a Consultant 
Agreement has been terminated because the consultant did not provide 
the required informaiton concerning reportable political contributions 
and political party payments. Thus, information about Consultant 
Agreements terminated for failure to provide the required information 
will be available for review on the Board's web site. In addition, if a 
dealer is concerned about whether a potential consultant has provided 
the required informaiton in the past to other dealers, the dealer can 
ask the consultant to address the issue and/or the issue can be 
addressed in the Consultant Agreement.

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

    The Board has requested that the Commission delay the effectiveness 
of the proposed rule change until April 1, 2000. Within 35 days of the 
date of publication of this notice in the Federal Register of within 
such longer period (i) as the Commission may designate up to 90 days of 
such date if it finds such longer period to be appropriated and 
publishes its reasons for so finding, or (ii) as to which the self-
regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested people are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. People making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. Copies 
of the submission, all subsequent amendments, all written statements 
with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of the filing will also be 
available for inspection and copying at the Board's principal offices. 
All submissions should refer to File No. SR-MSRB-98-08 and should be 
submitted by November 2, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Johathan G. Katz,
Secretary.
[FR Doc. 99-26524 Filed 10-8-99; 8:45 am]
BILLING CODE 8010-01-M