Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Municipal Securities Rulemaking Board Relating to Rule G- 11, on Sales of New Issue Municipal Securities During the Underwriting Period

[Federal Register Volume 64, Number 57 (Thursday, March 25, 1999)]
[Notices]
[Pages 14479-14480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7280]


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SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-41192; File No. SR-MSRB-99-2)


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Municipal Securities Rulemaking Board Relating to Rule G-
11, on Sales of New Issue Municipal Securities During the Underwriting 
Period

March 19, 1999.
    On March 11, 1999, the Municipal Securities Rulemaking Board 
(``Board'' or ``MSRB'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') a proposed rule change (File No. 
SR-MSRB-99-2), pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The proposed 
rule change is described in Items I, II, and III below, which Items 
have been prepared by the Board. 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 Board is filing herewith an amendment to Rule G-11, on sales of 
new issue municipal securities during the underwriting period. The 
proposed rule change clarifies a previous amendment to Rule G-
11(g)(iii) concerning the disclosure of designation information to 
syndicate members. The following is the text of the proposed rule 
change, with italics denoting new language and brackets denoting 
deletions:

I. Rule G-11. Sales of New Issue Municipal Securities During the 
Underwriting Period

    (a)-(f) No change.
    (g) Designations and Allocations of Securities. The senior 
syndicate manager shall:
    (i)-(ii) No change.
    (iii) disclose, in writing, to [the] each member[s] of the 
syndicate [, in writing,] all available information on designations 
paid to syndicate and non-syndicate members expressed in total dollar 
amounts [designation information] to members within 10 business days 
following the date of sale and all information about designations paid 
to syndicate and non-syndicate members expressed in total dollar 
amounts with the sending of the

[[Page 14480]]

designation checks pursuant to Rule G-12(k); and
    (iv) No change.
    (h) 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

    On November 27, 1998, the Commission approved amendments to the 
Board's syndicate practices rules.\3\ The amendments revised several 
areas involving syndicate practices, including: issuer syndicate 
requirements, allocation of securities, designation information, take-
down information and payment of designations.
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    \3\ See Securities Exchange Act Release No. 40717 (November 27, 
1998), 63 FR 67157 (December 4, 1998).
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    After the amendments were approved, the Board received several 
inquiries from dealers concerning the amendment to Rule G-11(g)(iii) 
that requires the managing underwriter to disclose to syndicate 
members, in writing, all available designation information to members 
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).
    Most of the inquiries concerned whether the requirement was to 
disclose to each syndicate member its own designation information or 
whether all members were to receive information about all the 
designations. On December 11, 1998, the Board published a notice on its 
Web site to clarify that the requirement is that all designation 
information be disclosed to each syndicate member.
    There also have been a number of questions raised about the kind of 
designation information that managers are required to disclose. Callers 
asked whether managers should disclose designations by total dollar 
amounts, bond amounts or both total dollar amounts and bond amounts. 
The Board believes the designation information that will be most useful 
to syndicate members is the total dollar amounts of the designations.
    Another question raised by some callers was whether the disclosure 
of designation information to syndicate members would require 
disclosure of designations made to anyone other than syndicate members, 
e.g., selling group members, since it is not uncommon for selling group 
members to receive designations. These callers were concerned that, 
without disclosure to syndicate members of the designations made to 
non-syndicate members, it is obvious when the dollar amounts designated 
are totaled that the information is not complete. Since the intent of 
the Board in adopting the amendment to Rule G-11(g)(iii) was to 
increase the disclosure of designation information, the Board believes 
the information disclosed should include all designations.
    The proposed rule change addresses the questions that have been 
raised about Rule G-11(g)(iii) by amending the rule language to make 
clear that all information about designations paid to syndicate and 
non-syndicate members is to be provided to each syndicate member and 
that the designation information must be expressed in total dollar 
amounts.
    The Board believes the proposed rule change is consistent with 
Section 15B(b)(2)(C) \4\ of the Act, which provides 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 
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.''
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    \4\ 15 U.S.C. 78o-4(b)(2)(C).
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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

    Written comments were neither solicited nor received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or 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 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 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., 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-99-2 and should be 
submitted by April 15, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-7280 Filed 3-24-99; 8:45 am]
BILLING CODE 8010-01-M