[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)]
[Notices]
[Pages 43587-43595]
[FR Doc No: 2017-19804]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81595; File No. SR-MSRB-2017-06]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change To Amend MSRB Rule G-
34, on CUSIP Numbers, New Issue, and Market Information Requirements

September 13, 2017.
    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 August 30, 2017 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-34, on CUSIP numbers, new issue, and market information
requirements, (the ``proposed rule change'') to more clearly express in
the rule language the MSRB's longstanding interpretation that brokers,
dealers and municipal securities dealers (collectively, ``dealers'')
when acting as a placement agent in a private placement of municipal
securities are subject to the CUSIP number requirements under Rule G-
34(a); to expand the application of the rule to cover not only dealer
municipal advisors but also non-dealer municipal advisors in
competitive sales of municipal securities; and to provide a limited
exception from the requirements to apply for CUSIP numbers and to apply
for depository eligibility. The MSRB requests that the proposed rule
change be effective six months from the date of Commission approval.
    The text of the proposed rule change is available on the MSRB's Web
site at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2017-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
CUSIP Number Requirements Applicable to Dealers in Private Placements
    In 1983, the SEC approved MSRB Rule G-34, on CUSIP numbers, new
issue and market information requirements.\3\ The MSRB adopted Rule G-
34 to improve efficiencies in the processing and clearance activities
of the municipal securities industry, noting that ``if all eligible
municipal securities have CUSIP numbers assigned to and printed on
them, dealers will be able to place greater reliance on the CUSIP
identification of these securities in receiving, delivering, and
safekeeping'' them.\4\ Rule G-34(a)(i) requires a dealer, whether
acting as agent or principal, that acquires an issuer's securities
``for the purpose of distributing such new issue,'' and a dealer acting
as a financial advisor in a competitive sale of a new issue, to apply
for a CUSIP number for the new issue by a particular point in time in
the transaction process. The rule requires, among other things, that
underwriters, and financial advisors in competitive sales, make
application for a CUSIP number based on eight specified items of
information about the new issue.\5\ Rule G-34(a)(i)(A)(5) addresses the
obligations to update application information that has changed, for
example, when the structure of an issuance changes after the CUSIP
number has been assigned.
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    \3\ Exchange Act Release No. 19743 (May 9, 1983), 48 FR 21690-01
(May 13, 1983) (SR-MSRB-82-11).
    \4\ Exchange Act Release No. 18959 (Aug. 13, 1982), 47 FR 36737-
03 (Aug. 23, 1982) (SR-MSRB-82-11).
    \5\ These eight items are contained in current Rule G-
34(a)(i)(A)(4)(a) through (h) and were part of CUSIP Service
Bureau's original standards for issuing CUSIP numbers. These items
are:
    (a) Complete name of issue and series designation, if any;
    (b) interest rate(s) and maturity date(s) (provided, however,
that, if the interest rate is not established at the time of
application, it may be provided at such time as it becomes
available);
    (c) dated date;
    (d) type of issue (e.g., general obligation, limited tax or
revenue);
    (e) type of revenue, if the issue is a revenue issue;
    (f) details of all redemption provisions;
    (g) the name of any company or other person in addition to the
issuer obligated, directly or indirectly, with respect to the debt
service on all or part of the issue (and, if part of the issue, an
indication of which part); and
    (h) any distinction(s) in the security or source of payment of
the debt service on the issue, and an indication of the part(s) of
the issue to which such distinction(s) relate.
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    The MSRB has become aware of confusion over the application of Rule
G-34(a)(i) among dealers in municipal securities. Some industry
participants have questioned whether the obligation to apply for a
CUSIP number pursuant to Rule G-34(a)(i) is conditioned on the
underwriter's intent to conduct a distribution of the new issue, and
therefore, applies only to public offerings and not private placements.
The MSRB has publicly stated the view, however, that private placements
of municipal securities ``generally are eligible for CUSIP numbering
and thus are subject to the requirements of [R]ule G-34.'' \6\
Similarly, the MSRB has indicated that, unless otherwise noted,
``references to `underwriter' in the context of Rule G-34 are meant to
include placement agents as well as dealers that purchase securities
from the issuer as principal,'' \7\ and that ``references to `syndicate
and selling group members' in this context are meant to include
managers of syndicates as well as sole underwriters or placement agents
in non-syndicated offerings.'' \8\
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    \6\ CUSIP Number Eligibility Standards and Requirements to
Obtain CUSIP Numbers, MSRB Reports, Vol. 12, No. 2 (Jul. 1992)
(emphasis in original). In this notice, the MSRB defined ``private
placement'' to mean ``any new issue of municipal securities that is
`placed' by a dealer, on an agency basis, with one or more
investors.''
    \7\ See Exchange Act Release No. 50773 (Dec. 1, 2004), 69 FR
70731-02 (Dec. 7, 2004) (SR-MSRB-2004-08).
    \8\ Id. See also MSRB Notice 2008-28 (Jun. 27, 2008) (``Rule G-
34 defines `underwriter' very broadly to include a dealer acting as
a placement agent . . .''). Note further that in MSRB Notice 2008-23
(May 9, 2008), the MSRB filed a proposed rule change to amend Rule
G-34 to require underwriter registration and testing with DTCC's New
Issue Information Dissemination System (NIIDS). The proposed
amendment required all dealers underwriting municipal securities
with nine months or greater effective maturity to register to
participate in NIIDS and required the dealers to successfully test
NIIDS prior to acting as underwriter on a new issue of municipal
securities. The MSRB noted that ``underwriter'' in this context was
defined ``very broadly to include a dealer acting as a placement
agent . . . .''

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    Despite the guidance, there have been questions in the industry
regarding the application of Rule G-34(a)(i) to private placements of
municipal securities, including direct purchase transactions in which a
dealer acts as a placement agent.\9\ A contributing factor in the issue
over the application of Rule G-34(a)(i) to private placements has been
the definition of the term ``underwriter'' as it is used in the rule
and the reference to ``distributing'' in that definition.\10\ Rule G-
34(a)(i) defines ``underwriter'' as
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    \9\ When a dealer or municipal advisor works with a municipal
securities issuer on a financial transaction to raise capital for
the issuer, the regulated entity should have reasonably designed
policies and procedures in place to make a determination as to
whether the transaction involves a municipal security that results
in the application of MSRB rules. If the transaction is not an
issuance of a municipal security (e.g., a commercial loan), there is
no Rule G-34 requirement to apply for a CUSIP number. The draft
amendments do not affect the necessity for this determination. The
Supreme Court set forth the relevant guidance in Reves v. Ernst &
Young, Inc., 494 U.S. 56 (1990), and the MSRB has reminded the
industry of the requirement to conduct the appropriate analysis in
an offering prior to applying for a CUSIP number. See MSRB Notice
2011-52 (Sept. 12, 2011) and MSRB Notice 2016-12 (Apr. 4, 2016)
(noting that the placement of what might be referred to as a ``bank
loan'' may, as a legal matter, involve a municipal security and
therefore trigger the application of various federal securities
laws, including MSRB rules such as Rule G-34).
    \10\ The term ``distributing'' as used in the rule is not
defined, and, based on general industry perception, market
participants might interpret it to mean that the Rule G-34(a)(i)
requirements apply only in public offerings and not to private
placements. For example, the SEC in its explanatory comment to Rule
144 of the Securities Act of 1933, on persons deemed not to be
engaged in a distribution and therefore not underwriters, noted
that:
    A person satisfying the applicable conditions of the Rule 144
safe harbor is deemed not to be engaged in a distribution of the
securities and therefore not an underwriter of the securities for
purposes of [Securities Act of 1933] section 2(a)(11). Therefore,
such a person is deemed not to be an underwriter when determining
whether a sale is eligible for the [Securities Act of 1933] Section
4(1) exemption for `transactions by any person other than an issuer,
underwriter, or dealer.'
    Preliminary note to 17 CFR 230.144.

each broker, dealer or municipal securities dealer who acquires,
whether as principal or agent, a new issue of municipal securities
from the issuer of such securities for the purpose of distributing
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such new issue.

    However, other MSRB rules define underwriter by reference to Rule
15c2-12(f)(8) of the Securities Exchange Act of 1934 (``Exchange
Act''),\11\ which defines an underwriter as
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    \11\ 17 CFR 240.15c2-12(f)(8).

any person who has purchased from an issuer of municipal securities
with a view to, or offers or sells for an issuer of municipal
securities in connection with, the offering of any municipal
security, or participates or has a direct or indirect participation
in any such undertaking, or participates or has a participation in
the direct or indirect underwriting of any such undertaking; except,
that such term shall not include a person whose interest is limited
to a commission, concession, or allowance from an underwriter,
broker, dealer, or municipal securities dealer not in excess of the
usual and customary distributors' or sellers' commission,
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concession, or allowance.

    It is well-understood that this definition of ``underwriter''
includes a dealer in both a public offering and a private placement of
a municipal security and is therefore not limited to public
distributions. Indeed, when adopting Rule 15c2-12, to ensure private
placements of municipal securities were included, the SEC changed its
originally proposed definition of ``underwriter'' to refer to
``offerings'' of municipal securities, as opposed to ``distributions''
of municipal securities. The SEC explained the reason for this change
as follows:

    Some commentators suggested that since the term `underwriter' in
the Proposed Rule was defined as a broker, dealer, or municipal
securities dealer who participated in a `distribution' the
Commission had created an implicit private placement exception.
Specifically, they noted that persons selling securities in an
offering that did not involve a distribution would not be subject to
the Rule. The word `distribution,' which was used in the definition
of ``underwriter'' in the Proposed Rule, has been replaced with the
term `offering'. This change is intended to clarify that a broker,
dealer or municipal securities dealer may be acting as underwriter,
for purposes of the Rule, in connection with a private offering.\12\
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    \12\ Exchange Act Release No. 26985 (Jun. 28, 1989), 54 FR
28799-01 (Jul. 10, 1989) (Final rule adopting Exchange Act Rule
15c2-12). The MSRB believes its prior interpretations of Rule G-34
regarding the need for CUSIP numbers in private placements of
municipal securities are consistent with the SEC's position. See
e.g., CUSIP Number Eligibility Standards and Requirements to Obtain
CUSIP Numbers, MSRB Reports, Vol. 12, No. 2 (Jul. 1992), Exchange
Act Release No. 50773 (Dec. 1, 2004), 69 FR 70731-02 (Dec. 7, 2004)
(SR-MSRB-2004-08) and MSRB Notice 2008-28 (Jun. 27, 2008).

CUSIP Number Requirements Applicable to Dealer Municipal Advisors in
Competitive Sales
    In 1986, the MSRB amended Rule G-34(a) to require a dealer acting
as a financial advisor (``dealer municipal advisor'') in a competitive
sale of a new issue of municipal securities to apply for CUSIP numbers
``in sufficient time to allow for assignment of a number prior to the
date of award.'' \13\ This application of the CUSIP number requirement
only to dealer municipal advisors is largely the result of Rule G-34
pre-dating the municipal advisor regulatory regime mandated by the
Dodd-Frank Wall Street Reform and Consumer Protection Act.\14\
Financial advisory activities are now generally defined also as
municipal advisory activities, though a significant number of the now
broadly defined municipal advisors are not dealers (``non-dealer
municipal advisor''). As a result, non-dealer municipal advisors are
not subject to the CUSIP number application requirements under the
current rule, which creates the potential for regulatory inefficiencies
where a non-dealer municipal advisor is retained in a competitive sale.
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    \13\ Exchange Act Release No. 22730 (Dec. 19, 1985), 50 FR
53046-01 (Dec. 27, 1985) (SR-MSRB-85-20).
    \14\ Public Law 111-203, H.R. 4173 (2010). The MSRB amended Rule
G-34(a) in 1986 to apply the CUSIP requirements to dealers acting as
financial advisors in competitive sales of a new issue. Exchange Act
Release No. 22730 (Dec. 19, 1985), 50 FR 53046-01 (Dec. 27, 1985)
(SR-MSRB-85-20).
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Proposed Amendments to Rule G-34
    As set forth in more detail below, the proposed rule change would:
     Clarify the application of the CUSIP number requirements
to dealers in private placements.
    As noted above, the MSRB is aware that, despite guidance issued in
this area, there continues to be confusion and inconsistency in the
application of the CUSIP number requirements under Rule G-34(a)(i). To
alleviate these issues, the proposed rule change would amend paragraph
(a)(i)(A) to delete the definition of ``underwriter'' from the rule
text and would add a new definition of ``underwriter'' in new section
(e) on definitions. Subsection (e)(vii) would cross reference the term
``underwriter'' to the same term as it is defined in Exchange Act Rule
15c2-12(f)(8). This proposed rule change would codify existing
interpretations and clarify in the text of the rule that dealers acting
as placement agents in private placement transactions, including direct
purchases of municipal securities, are subject to the CUSIP-related
requirements set forth in Rule G-34(a).
     Apply the CUSIP number requirements to all municipal
advisors advising on a competitive sale of municipal securities.
    Many non-dealer municipal advisors advise issuers with respect to

competitive sales of new issues of municipal securities. As a result,
Rule G-34(a)(i)(A), in its current form, may create inefficiencies in
the market where a non-dealer municipal advisor is retained and yet not
required to apply for a CUSIP number when advising on a competitive
sale of a new issue of municipal securities. This leaves a dealer to
make application only after the notification of award is given,
potentially delaying related market activity.
    Paragraph (a)(i)(A) would be amended to apply the CUSIP number
requirements to all municipal advisors (whether dealers or non-dealers)
advising on a competitive sale of a new issue of municipal securities.
As noted above, in 1986, the MSRB amended Rule G-34(a)(i)(A) to require
a dealer ``acting as a financial advisor'' in a competitive sale of a
new issue to apply for CUSIP numbers so as to allow assignment of the
number prior to the date of award.\15\ From a policy standpoint, the
market efficiencies served by the 1986 amendments would also be served
by these amendments because a dealer no longer would be the first party
to begin the process to obtain the CUSIP number after the award in a
competitive sale where a non-dealer municipal advisor has been engaged.
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    \15\ Exchange Act Release No. 22730 (Dec. 19, 1985), 50 FR
53046-01 (Dec. 27, 1985) (SR-MSRB-85-20).
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    Subparagraph (a)(i)(A)(3) clarifies the timeframe within which
municipal advisors advising on a competitive sale must make application
for a CUSIP number. The current provision indicates that the financial
advisor must make application by no later than one business day after
dissemination of a notice of sale. The proposed rule change would amend
that paragraph to include ``or other such request for bids.'' This
additional language would ensure the timing of the application for a
CUSIP number in those instances where a municipal advisor seeks bids in
a competitive sale of municipal securities using documentation other
than a traditional notice of sale.
     Provide an exception from the CUSIP number and depository
eligibility requirements in certain circumstances.
    The MSRB understands that banks in direct purchase transactions are
reluctant to engage in certain financing transactions if a CUSIP number
is required. While a dealer may determine from its perspective that a
transaction involves a municipal security for securities law purposes,
the bank purchaser may consider the transaction to be a loan for
certain banking or accounting purposes, thus making the bank less
likely to engage in the financing where the new issue has a CUSIP
number. As a result, dealers, on behalf of their municipal issuer
clients, may be hindered in their ability to directly place municipal
securities with banks and issuers may have fewer financing options or
providers from which to choose.
    In July 1992, the MSRB sought comment on possible exemptions from
Rule G-34, including in sales of smaller issues, short-term issues and
issues sold to a limited number of customers (i.e., private
placements).\16\ The MSRB noted that in many of these instances, CUSIP
numbers are not obtained because the dealer or financial advisor
believes the securities will not trade in the secondary market. While
the MSRB sought comment on a possible exemption, it noted that, at the
time, it ``strongly believe[d] that whenever municipal securities are
offered for sale in the market or must be processed through financial
intermediaries, CUSIP numbers should be available to identify the
securities accurately.'' \17\
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    \16\ CUSIP Number Eligibility Standards and Requirements to
Obtain CUSIP Numbers, MSRB Reports, Vol. 12, No. 2 (Jul. 1992).
    \17\ Id.
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    The MSRB continues to believe that obtaining CUSIP numbers is
generally a necessary aspect of, for example, tracking the trading,
recordkeeping, clearance and settlement, customer account transfers and
safekeeping of municipal securities, including those issued in private
placements. The MSRB also is of the view that the increase in the
number of direct purchase transactions between municipal issuers and
banks as an alternative to letters of credit and other similar types of
financings supports a limited exception from the blanket requirement to
apply for CUSIP numbers in all private placements.
    The proposed rule change would amend Rule G-34(a)(i) to add
paragraph (F). This paragraph would add an exception from the CUSIP
number requirement for situations where municipal securities are
purchased directly by a bank,\18\ any entity directly or indirectly
controlled by the bank or under common control with the bank, other
than a dealer registered under the Exchange Act (``non-dealer control
affiliate''), or a consortium of the entities described above, and the
dealer reasonably believes (based on, for example, a written
representation from the purchaser) that the purchaser is purchasing the
new issue of municipal securities with the present intent to hold the
securities to maturity. The term ``bank'' in proposed new paragraph (F)
would have the same meaning as set forth in Exchange Act Section
3(a)(6).\19\
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    \18\ The MSRB notes that a ``bank'' for purposes of the proposed
exception would not include a ``separately identifiable department
or division'' of a bank, within the meaning of Rule G-1(a).
    \19\ MSRB Rule D-1 states:
     Unless the context otherwise specifically requires, the terms
used in the rules of the Municipal Securities Rulemaking Board shall
have the respective meanings set forth in the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.) and the rules and regulations of
the Securities and Exchange Commission thereunder.
    Exchange Act Section 3(a)(6) defines ``bank'' to mean:
     (A) a banking institution organized under the laws of the
United States or a Federal savings association, as defined in
section 2(5) of the Home Owners' Loan Act, (B) a member bank of the
Federal Reserve System, (C) any other banking institution or savings
association, as defined in section 2(4) of the Home Owners' Loan
Act, whether incorporated or not, doing business under the laws of
any State or of the United States, a substantial portion of the
business of which consists of receiving deposits or exercising
fiduciary powers similar to those permitted to national banks under
the authority of the Comptroller of the Currency pursuant to the
first section of Public Law 87-722 (12 U.S.C. 92a), and which is
supervised and examined by State or Federal authority having
supervision over banks or savings associations, and which is not
operated for the purpose of evading the provisions of this title,
and (D) a receiver, conservator, or other liquidating agent of any
institution or firm included in clauses (A), (B), or (C) of this
paragraph.
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    The proposed rule change would clarify that the depository
eligibility requirements of Rule G-34(a)(ii)(A) do not apply in the
case of an exemption under Rule G-34(d), which exempts securities that
are ineligible for CUSIP number assignment and municipal fund
securities. Further, the proposed rule change would add subparagraph
(a)(ii)(A)(3), providing an exception from the depository eligibility
requirements in instances where the new issue is purchased directly by
a bank,\20\ a non-dealer control affiliate of a bank or a consortium
thereof, and the underwriter reasonably believes, based on a written
representation or otherwise, that the purchaser's present intent is to
hold the municipal securities to maturity. For consistency, the
proposed rule change would amend paragraph (a)(ii)(C), to clarify that
the requirement to input information about a new issue into NIIDS only
applies to an issue that has been made depository eligible.
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    \20\ See footnote 18, supra.
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     Make Technical and Non-Substantive Changes.
    The proposed rule change also would make technical and non-
substantive amendments as follows:
     The proposed rule change would move definitions that apply
generally throughout the rule into a new section

(e) on definitions, and, as noted above, would add a new definition of
``underwriter'' in subsection (e)(vii). The terms moved into the new
section (e) would be (i) auction agent; (ii) auction rate security;
(iii) notification period; (iv) program dealer; (v) remarketing agent;
(vi) SHORT system; (vii) underwriter; and (viii) variable rate demand
obligation.
     The proposed rule change would amend the rule to make more
specific references to the provision that describes information
necessary for CUSIP number assignments. Currently, the rule refers
throughout to paragraph (a)(i)(A). The proposed rule change would amend
these references to refer to subparagraph (a)(i)(A)(4). Similarly,
references in the rule to the enumerated items to be included in a
CUSIP number application would be changed from ``(1) through (8)'' to
``(a) through (h).''
     Finally, the proposed rule change would change capitalized
defined terms to lower case, as appropriate throughout the rule, and
would amend references to sections, subsections, paragraphs and
subparagraphs, as necessary, to be consistent with other MSRB rule
formatting.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with
the provisions of Section 15B(b)(2)(C) of the Act,\21\ which provides
that the MSRB's rules shall:
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    \21\ 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,
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municipal entities, obligated persons, and the public interest.

    The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act \22\ because the proposed rule change
would remove impediments to and perfect the mechanism for a free and
open municipal securities market by codifying existing interpretations
and clarifying in the text of the rule that dealers acting as placement
agents in private placement transactions, including direct purchases of
municipal securities, are subject to the CUSIP-related requirements set
forth in Rule G-34(a). In addition, the proposed rule change would help
prevent fraudulent and manipulative practices, promote just and
equitable principles of trade and protect investors, municipal
entities, obligated persons and the public interest by ensuring that
eligible municipal securities, including those issued in a private
placement, have an appropriate identifier assigned in order to provide
market participants with greater ability to receive, deliver, and
safekeep such securities. Through the MSRB's Electronic Municipal
Market Access (EMMA[supreg]) System,\23\ investors and other market
participants would have access to initial information on their
investments organized by the particular CUSIP number, as well as
transparency as to transaction details if the securities do later trade
in the secondary market. The availability of an exception to this
requirement would eliminate impediments to and perfect the mechanism of
a free and open market in municipal securities by allowing dealers and
municipal advisors to provide services in certain direct purchase
transactions without inhibiting their issuer clients' access to
financings that otherwise might not be available if CUSIP numbers were
required. In addition, the proposed rule change would remove
impediments to a free and open market by requiring all municipal
advisors to comply with the requirements of Rule G-34(a)(i)(A), thus
encouraging consistency and efficiency in competitive sales of
municipal securities and ensuring that CUSIP numbers are obtained by
municipal advisors earlier in a competitive deal to allow for immediate
trading upon award.
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    \22\ Id.
    \23\ EMMA is a registered trademark of the MSRB.
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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.\24\ In
accordance with the MSRB's policy on the use of economic analysis,\25\
the MSRB has considered the economic impact associated with the
proposed rule change to MSRB Rule G-34, including a comparison to
reasonable alternative regulatory approaches, relative to the
baseline.\26\ For purposes of its analysis, the MSRB considers the
baseline to be full compliance by dealers with the existing CUSIP
requirement.\27\ 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.
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    \24\ 15 U.S.C. 78o-4(b)(2)(C).
    \25\ Policy on the Use of Economic Analysis in MSRB Rulemaking,
available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx.
    \26\ As an alternative to the proposed rule change, the MSRB
considered making no amendments, while its request for comment
nevertheless served as a reminder of the MSRB's longstanding
interpretation that dealers, when acting as a placement agent in a
private placement, are required to apply for CUSIP numbers. See MSRB
Regulatory Notice 2017-05.
    \27\ The MSRB is aware, however, that there is uncertainty among
at least some market participants with regard to the application of
the existing rule.
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    The intent of the proposed rule change is to (1) clarify in rule
text the MSRB's longstanding view that dealers acting as placement
agents in private placements of municipal securities, including direct
purchases, are underwriters and thus must apply for CUSIP numbers for
new issues; and (2) apply the CUSIP number requirements to all
municipal advisors advising on a competitive sale of municipal
securities. In addition, the proposed rule change provides a
principles-based exception for dealers and municipal advisors from the
CUSIP number requirements and for dealers from the depository
eligibility requirements in certain direct purchase transactions.
    The MSRB believes the proposed rule change would reduce regulatory
uncertainty for underwriters and municipal advisors with regard to the
requirement to apply for CUSIP numbers. Pursuant to the proposed rule
change, dealers would know with greater certainty when application for
a CUSIP number is required in private placement transactions.
Similarly, while in practice some non-dealer municipal advisors may be
applying for CUSIP numbers in a competitive offering before the final
award is made,\28\ the proposed rule change would ensure that this is
the case, thus reducing the risk of delays in secondary market trading
where a competitive offering is awarded but no CUSIP number has been
assigned.
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    \28\ By comparison, in a negotiated offering, underwriters are
already established and CUSIP numbers can be assigned on a pre-trade
basis before pricing.
---------------------------------------------------------------------------

    The MSRB believes that the principles-based exception from the
CUSIP number requirements for dealers and municipal advisors may limit
or reduce those instances where a dealer or municipal advisor may be
required to apply for a CUSIP number in a direct purchase transaction.
The MSRB believes that for dealers currently complying with the CUSIP
number requirements in private placement transactions, the proposed
rule change

may lower their costs in those instances where they could rely on the
proposed exception. Similarly, dealers may see a reduction in costs for
municipal securities that currently are subject to the depository
eligibility requirements but could now be excepted from the
requirements under the proposed rule change.\29\ As a result of the
exception, there would no longer be a need to make such securities
depository eligible and input information about the new issue into
NIIDS.
---------------------------------------------------------------------------

    \29\ These municipal securities may no longer need a CUSIP
number under the proposed CUSIP exception, and thus they may no
longer fall under the depository eligibility requirement.
---------------------------------------------------------------------------

    The MSRB believes that in instances where dealers or municipal
advisors can rely on the principles-based exception based on their
reasonable belief that, at the time of a purchase, a purchaser intends
to hold the new issue of municipal securities to maturity, there is a
risk of reduced transparency if, in the future, the purchaser decides
to resell the securities without a CUSIP number. This could result in
information asymmetry and price dislocation with respect to the
subsequent purchaser.
    While non-dealer municipal advisors would now be required to apply
for CUSIP numbers when advising in competitive sales of new issue
municipal securities, the rule change per se does not necessarily
impose on them the cost of applying for the CUSIP number. According to
staff at CUSIP Global Services (``CUSIP Services''), typically only the
winning bidder for a competitive deal is billed after the CUSIP numbers
are assigned. Even though the request for a CUSIP number may have come
from a municipal advisor, it is not mandatory for the party applying
for the CUSIP number to be billed for the fees (unless the applicant
for the CUSIP number asks to be billed).\30\
---------------------------------------------------------------------------

    \30\ According to its 2017 fee schedule, CUSIP Services charges
$173 for the first maturity, plus $22 for each additional maturity
or class per series in the same application/offering document. For
example, an offering with the first maturity and ten additional
maturities or classes would cost a total of $393 ($173 + ($22 x
10)). See https://www.cusip.com/pdf/2017FeesforCUSIPAssignment.pdf.
---------------------------------------------------------------------------

    The MSRB believes non-dealer municipal advisors, and to a much
lesser extent, dealers, are likely to incur new up-front costs
associated with the development of regulatory compliance policies and
procedures. Some industry stakeholders \31\ provided an estimate on
compliance costs in terms of the number of labor hours needed to create
and apply policies and procedures to comply with the proposed rule
change, including determining the applicability of proposed exceptions.
The cost estimates ranged from eight to 15 hours initially to set up
the policies and procedures, and up to three hours per transaction
thereafter to evaluate, for example, whether the investor intended to
hold the securities to maturity. The MSRB believes these estimates are
high, as, for example, the determination of whether a transaction
involves a municipal security should have already been made for various
other purposes and is therefore part of the baseline. Even at the upper
bound of these estimates, these costs would be justified by the likely
aggregate benefits of the proposed rule change over time, including
reduced costs for some dealers who could elect not to apply for CUSIP
numbers under the proposed exception.
---------------------------------------------------------------------------

    \31\ See, infra, National Association of Municipal Advisors:
Letter from Susan Gaffney, Executive Director, dated June 30, 2017
(``NAMA Letter II''); and Securities Industry and Financial Markets
Association: Letter from Leslie M. Norwood, Managing Director and
Associate General Counsel, dated June 30, 2017 (``SIFMA Letter
II'').
---------------------------------------------------------------------------

    Some industry stakeholders suggested that the MSRB should allow the
use of other standard identifiers in addition to CUSIP numbers, as
these commenters believed other identifiers may be easier and less
costly to obtain.\32\ The MSRB understands commenters' concerns, but
believes this issue should be considered separately from this proposed
rule change. Allowing the use of other identifiers would have
implications for many other MSRB rules that are beyond the scope of
this particular proposal.
---------------------------------------------------------------------------

    \32\ See, infra, Bloomberg, L.P.: Letter from Peter Warms,
Senior Manager of Fixed Income, Entity, Regulatory Content and
Symbology, undated (``Bloomberg Letter II'').
---------------------------------------------------------------------------

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

Summary of Comments Received in Response to the First Request for
Comment
    On March 1, 2017, the MSRB published a request for comment (``First
RFC''), proposing draft amendments to Rule G-34.\33\ The First RFC
sought to (1) amend the definition of ``underwriter'' as it is used in
Rule G-34 to clarify that dealers acting as placement agents in private
placements of municipal securities, including direct purchase
transactions, are ``underwriters'' for purposes of the rule and are
required to apply for CUSIP numbers for such transactions; (2) expand
the rule to require non-dealer municipal advisors also to be subject to
the CUSIP number requirements when acting as an advisor in a
competitive sale of a new issue; and (3) to make technical amendments
as necessary. The MSRB received 20 comment letters,\34\ most of which
opposed the blanket requirement to apply for CUSIP numbers in private
placements with many suggesting alternative approaches. Commenters were
split on the desirability of expanding the rule to include non-dealer
municipal advisors.
---------------------------------------------------------------------------

    \33\ MSRB Notice 2017-05.
    \34\ Acacia Financial Group, Inc.: Letter from Noreen P. White,
Co-President; Kim M. Whelan, Co-President, dated March 31, 2017
(``Acacia Letter I''); American Bankers Association: Letter from
Cristeena G. Naser, Vice President and Senior Counsel, Center for
Securities, Trust & Investment, dated March 24, 2017 (``ABA Letter
I''); Bloomberg, L.P.: Letter from Peter Warms, Senior Manager of
Fixed Income, Entity, Regulatory Content and Symbology, undated
(``Bloomberg Letter I''); Bond Dealers of America: Letter from Mike
Nicholas, Chief Executive Officer, dated March 31, 2017 (``BDA
Letter I''); CUSIP Services: Letter from Scott J. Preiss, Managing
Director, Global Head, dated March 30, 2017 (``CUSIP Services'');
Dixworks LLC: Email from Dennis Dix, Jr., Principal, dated March 29,
2017 (``Dixworks''); First River Advisory L.L.C.: Email from Shelley
Aronson, dated March 22, 2017 (``First River Advisory''); George K.
Baum & Company: Letter from Guy E. Yandel, EVP & Co-Manager Public
Finance; Dana L. Bjornson, EVP, CFO & Chief Compliance Officer;
Andrew F. Sears, EVP & General Counsel, dated March 31, 2017
(``George K. Baum''); Government Finance Officers Association:
Letter from Emily Brock, Director, Federal Liaison Center, dated
March 31, 2017 (``GFOA Letter I''); National Association of Health
and Educational Facilities Finance Authorities: Letter from Donna
Murr, President; Martin Walke, Advocacy Committee Chair, dated March
31, 2017 (``NAHEFFA''); National Association of Municipal Advisors:
Letter from Susan Gaffney, Executive Director, dated March 31, 2017
(``NAMA Letter I''); National Federation of Municipal Analysts:
Letter from Julie Egan, NFMA Chair 2017; Lisa Washburn, NFMA
Industry Practices and Procedures Chair, dated March 31, 2017
(``NFMA''); Opus Bank: Email from Dmitry Semenov, Senior Managing
Director, Public Finance, dated March 15, 2017 (``Opus''); Phoenix
Advisors, LLC: Letter from David B. Thompson, CEO, dated March 21,
2017 (``Phoenix Advisors''); Piper Jaffray & Co.: Letter from Frank
Fairman, Managing Director, Head of Public Finance Services; Rebecca
Lawrence, Managing Director, Associate General Counsel, Public
Finance & Fixed Income, dated March 31, 2017 (``Piper Jaffray Letter
I''); Public Financial Management, Inc. and PFM Financial Advisors:
Letter from Cheryl Maddox, General Counsel; Leo Karwejna, Chief
Compliance Officer, dated March 31, 2017 (``PFM Letter I''); Email
from Rudy Salo, dated March 31, 2017; Securities Industry and
Financial Markets Association: Letter from Leslie M. Norwood,
Managing Director and Associate General Counsel, dated March 31,
2017 (``SIFMA Letter I''); SMA: Email from Michael Cawley, dated
March 21, 2017 (``SMA Letter I''); State of Florida, Division of
Bond Finance: Letter from J. Ben Watkins III, Director, Division of
Bond Finance, dated April 7, 2017 (``State of Florida'').
---------------------------------------------------------------------------

Clarification of the ``Underwriter'' Definition To Include Placement
Agents
    The majority of commenters to the First RFC opposed the MSRB's
draft amendment to Rule G-34(a)(i) that would clarify the requirement
for

dealers to apply for CUSIP numbers in private placements,\35\ while one
commenter explicitly supported the draft amendment.\36\ Three
commenters noted that, if the amendment to the definition of
``underwriter'' were adopted as proposed in the First RFC, other
aspects of Rule G-34 would be implicated.\37\ In particular, Rule G-
34(a)(ii) regarding application for depository eligibility and
dissemination of new issue information requires the underwriter to
apply to a securities depository to make a new issue depository
eligible and to communicate information about the new issue pursuant to
the rule. These commenters noted that application of this part of the
rule to private placements may not be appropriate. Specifically, the
requirement that the underwriter apply to the Depository Trust and
Clearing Corporation (``DTCC'') to make a new issue depository eligible
and then input certain information into the NIIDS may not be
appropriate or possible with respect to private placements. One
commenter suggested that, if the MSRB adopts the revised definition of
``underwriter,'' it should clarify that any issuance that does not meet
DTCC eligibility criteria or for which CUSIP numbers cannot or are not
required to be obtained should be exempt from Rule G-34(a)(ii)
requirements.\38\
---------------------------------------------------------------------------

    \35\ Acacia Letter I, ABA Letter I, BDA Letter I, First River
Advisory, George K. Baum, GFOA Letter I, NAHEFFA, NAMA Letter I,
Piper Jaffray Letter I, PFM Letter I, SIFMA Letter I, SMA Letter I,
State of Florida.
    \36\ CUSIP Services.
    \37\ BDA Letter I, GFOA Letter I and SIFMA Letter I.
    \38\ SIFMA Letter I.
---------------------------------------------------------------------------

    Nine commenters supported an exception from the CUSIP number
requirement for private placements sold to a single purchaser or a
limited number of purchasers.\39\ One commenter noted that typical
purchasers in a private placement are sophisticated financial
institutions with knowledge and experience in financial matters,\40\
while others noted that the draft amendment could put a damper on the
bank loan and direct purchase markets and, as a result, increase costs
to issuers.\41\
---------------------------------------------------------------------------

    \39\ ABA Letter I, First River Advisory, George K. Baum, GFOA
Letter I, NAHEFFA, NAMA Letter I, Piper Jaffray Letter I, Rudy Salo
and SIFMA Letter I.
    \40\ George K. Baum.
    \41\ ABA Letter I, George K. Baum, GFOA Letter I, NAHEFFA, NAMA
Letter I, Piper Jaffray Letter I, Rudy Salo, SIFMA Letter I and
State of Florida.
---------------------------------------------------------------------------

    Two commenters objected to the proposed parenthetical in the draft
amendment to Rule G-34(a), ``. . . each broker, dealer or municipal
securities dealer acting as an underwriter (which includes a placement
agent) . . .'' (emphasis added) and suggested it should be deleted,\42\
and four other commenters objected to the application of the CUSIP
number requirement to placement agents, generally.\43\
---------------------------------------------------------------------------

    \42\ BDA Letter I and George K. Baum.
    \43\ BDA Letter I, GFOA Letter I, NAMA Letter I and NAHEFFA.
---------------------------------------------------------------------------

    Some commenters stated that private placements, by their nature,
should not have CUSIP numbers because they are private transactions,
and others stated that not obtaining a CUSIP number ensures the
municipal securities will not be resold.\44\ Several commenters stated
that requiring placement agents to obtain CUSIP numbers in private
placements may discourage issuers from using placement agents at
all.\45\
---------------------------------------------------------------------------

    \44\ BDA Letter I, First River Advisory and SIFMA Letter I.
    \45\ BDA Letter I, GFOA Letter I, NAMA Letter I and Piper
Jaffray Letter I.
---------------------------------------------------------------------------

    One commenter indicated that while it does not take a position on
when CUSIP numbers should or should not be obtained, it would be
concerned about the potential disclosure consequences in the EMMA
system if the proposed amendments and clarifications would result in
more bank loans, direct purchases and private placements requiring
CUSIP numbers.\46\ This commenter indicated that, if new CUSIP numbers
are obtained for each private debt transaction of an issuer, it could
result in fewer disclosure notices being posted or linked to the CUSIP
numbers for affected publicly outstanding debt, thus reducing the
information flow to investors. Similarly, another commenter believed
private placement information should be posted on EMMA under the CUSIP
numbers for an issuer's outstanding publicly-offered bonds, and not
under a separate, distinct CUSIP number.\47\ Other commenters noted
that they would rather see enhancements to EMMA than additional
requirements placed on market participants.\48\
---------------------------------------------------------------------------

    \46\ NFMA.
    \47\ First River Advisory.
    \48\ GFOA Letter I, NAHEFFA and State of Florida.
---------------------------------------------------------------------------

    One commenter suggested that the MSRB use this opportunity to
consider allowing the use of open standard identifiers for financial
transactions and products in place of CUSIP numbers as a regulatory
alternative to mandating that only CUSIP numbers be used.\49\
---------------------------------------------------------------------------

    \49\ Bloomberg Letter I.
---------------------------------------------------------------------------

    Finally, two commenters urged the MSRB to make any amendment
prospective, regardless of whether it is deemed a clarification to an
existing rule.\50\
---------------------------------------------------------------------------

    \50\ BDA Letter I and SIFMA Letter I.
---------------------------------------------------------------------------

Requirement That Non-Dealer Municipal Advisors Apply for CUSIP Numbers
    Five commenters believed non-dealer municipal advisors should not
be required to apply for CUSIP numbers in competitive new issues of
municipal securities.\51\ Two commenters believed doing so would serve
no useful purpose and would pose an undue burden on small municipal
advisors.\52\ One commenter suggested that the better approach would be
to eliminate the requirement that dealers acting as financial advisors
obtain CUSIP numbers in competitive new issues and to instead require
the underwriter who wins the bid to obtain the CUSIP numbers.\53\
---------------------------------------------------------------------------

    \51\ Acacia Letter I, Dixworks, NAMA Letter I, PFM Letter I and
SMA Letter I.
    \52\ Dixworks and NAMA Letter I.
    \53\ Acacia Letter I.
---------------------------------------------------------------------------

    Four commenters supported the draft amendment to require non-dealer
municipal advisors to be subject to the requirements of Rule G-34(a)
with respect to competitive transactions.\54\
---------------------------------------------------------------------------

    \54\ George K. Baum, GFOA Letter I, Piper Jaffray Letter I and
SIFMA Letter I.
---------------------------------------------------------------------------

Summary of Comments Received in Response to the Second Request for
Comment
    After carefully considering commenters' suggestions and concerns,
on June 1, 2017, the MSRB published a second request for comment
(``Second RFC'').\55\ The Second RFC sought further comment on the same
three issues from the First RFC. However, the Second RFC also sought
comment on draft amendments that would except from the CUSIP number
requirements dealers and municipal advisors engaged in direct purchase
transactions with a bank, its bank affiliates or a consortium of banks
formed for the purpose of participating in the new issue, where the
dealer or municipal advisor had a reasonable belief that the
purchaser(s) of the new issue intended to hold the securities to
maturity and would limit resales of the municipal securities to other
banks, bank affiliates or a consortium thereof. The draft amendments in
the Second RFC also sought comment on the application of this exception
to the requirement for underwriters to make an application for
depository eligibility under Rule G-34(a)(ii). The MSRB proposed to
define ``bank'' as it is defined in the Exchange Act.\56\ The MSRB
received 16 comment letters in response to the Second RFC.\57\
---------------------------------------------------------------------------

    \55\ MSRB Notice 2017-11 (June 1, 2017).
    \56\ See footnote 19, supra.
    \57\ Acacia Financial Group, Inc.: Letter from Noreen P. White,
Co-President; Kim M. Whelan, Co-President, dated June 29, 2017
(``Acacia Letter II''); American Bankers Association: Letter from
Cristeena G. Naser, Vice President and Senior Counsel, Center for
Securities, Trust & Investment, dated June 30, 2017 (``ABA Letter
II''); Bloomberg Letter II; Bond Dealers of America: Letter from
Mike Nicholas, Chief Executive Officer, dated June 29, 2017 (``BDA
Letter II''); Center for Municipal Finance: Letter from Marc D.
Joffe, President, dated June 28, 2017 (``CMF''); Eastern Bank:
Letter, undated (``Eastern Bank''); Fieldman Rolapp & Associates:
Letter from Adam S. Bauer, Chief Executive Officer and President,
dated June 30, 2017 (``Fieldman''); Government Capital Securities
Corp: Email from Ted Christensen, dated June 1, 2017 (``GCSC'');
Government Finance Officers Association: Letter from Emily Brock,
Director, Federal Liaison Center, dated June 30, 2017 (``GFOA Letter
II''); NAMA Letter II; New Jersey State League of Municipalities:
Letter from Michael F. Cerra, Assistant Executive Director, dated
June 27, 2017 (``NJLM''); Piper Jaffray & Co.: Letter from Frank
Fairman, Managing Director, Head of Public Finance Services; Rebecca
Lawrence, Managing Director, Associate General Counsel, Public
Finance & Fixed Income, dated June 29, 2017 (``Piper Jaffray Letter
II''); Public Financial Management, Inc. and PFM Financial Advisors
LLC: Letter from Leo Karwejna, Chief Compliance Officer; Cheryl
Maddox, General Counsel; Catherine Humphrey-Bennett, Municipal
Advisory Compliance Officer, dated July 3, 2017 (``PFM Letter II'');
SIFMA Letter II; Southern Municipal Advisors, Inc.: Letter from
Michael C. Cawley, Senior Consultant, dated June 29, 2017 (``SMA
Letter II''); Township of East Brunswick: Email from L. Mason Neely,
dated June 2, 2017 (``East Brunswick'').

---------------------------------------------------------------------------

Limited Exception From the CUSIP Number Requirements
    In response to commenters who opposed the clarification of the term
``underwriter'' that would result in a blanket requirement for dealers
to apply for CUSIP numbers in all private placements, the MSRB proposed
a limited exception from this requirement as noted above. Six of the 16
commenters generally supported the MSRB's proposed exception.\58\ GCSC
specifically noted its belief that the exception would help keep
issuance costs low for small issuers. GFOA noted that the exception is
``a helpful step forward'' but stated that without clear guidance, the
draft rule will dampen the demand for bank loans and direct purchase
financings and raise borrowing costs. Acacia, while supportive of the
proposed exception, indicated its continued concern over the need for
dealers and municipal advisors to establish policies and procedures to
arrive at the ``reasonable belief'' conclusion.
---------------------------------------------------------------------------

    \58\ Acacia Letter II, ABA Letter II, BDA Letter II, GCSC; Piper
Jaffray Letter II and SIFMA Letter II.
---------------------------------------------------------------------------

    Some commenters supported the exception but suggested an expansion
of the types of purchasers that could fit within its parameters. In
particular, four commenters suggested that in addition to banks, as
defined in the Second RFC, the MSRB should expand the exception also to
apply to local governments privately purchasing municipal
securities.\59\ Other commenters suggested that the exception be
expanded to include non-dealer subsidiaries of banks or bank holding
companies \60\ or any entity directly or indirectly controlled by the
purchasing bank or under common control with the bank, or a consortium
of such entities, other than a broker-dealer registered with the SEC
pursuant to the Exchange Act.\61\ In addition, the ABA suggested that
the draft rule should require the purchasers of the municipal
securities to represent that the securities are being purchased for
their own account without an intention to resell them, while SIFMA
proposed that the dealer or municipal advisor have a reasonable belief
that this is the case. Both the ABA and SIFMA proposed that any resales
would be limited to qualified institutional buyers as defined in Rule
144A of the Securities Act of 1933 (``Securities Act'') or an
``accredited investor'' as defined in Rule 501 of Regulation D under
the Securities Act.
---------------------------------------------------------------------------

    \59\ GFOA Letter II, NAMA Letter II, NJLM and East Brunswick.
    \60\ Piper Jaffray Letter II.
    \61\ ABA Letter II and SIFMA Letter II.
---------------------------------------------------------------------------

    The ABA emphasized that many banks use bank holding company
affiliates to provide municipal funding and the majority of these
funding subsidiaries are non-bank entities. BDA similarly asked that
further clarification be given to confirm that the exception would
apply where a bank negotiates the purchase but the actual purchaser is
a non-bank affiliate, and where there is more than one bank purchasing
in a transaction.
    Several commenters suggested that the principles-based exception
needs further clarification. Specifically, three commenters believed
additional language should be added to require the investor to
represent its intention to hold the securities to maturity and limit
resales.\62\ Similarly, SIFMA requested clarification of the type of
documentation underwriters or municipal advisors would need to produce
in an exam with FINRA or the SEC in order to show compliance with the
rule.
---------------------------------------------------------------------------

    \62\ ABA Letter II, GFOA Letter II and NAMA Letter II.
---------------------------------------------------------------------------

    Two commenters opposed the exception.\63\ CMF noted that by
requiring alternative debt instruments to have security identifiers,
the MSRB is promoting public awareness that issuers are taking on
additional obligations. However, according to CMF, allowing such an
exception for instruments not expected to trade in the secondary market
is inconsistent with this transparency objective. PFM opposed the draft
rule change entirely, and noted that the proposed exception cannot be
supported without much needed regulatory guidance. In particular, PFM
believed regulatory guidance must be provided with respect to the
``indicia of the required `reasonable belief''' to include much more
prescriptive detail. In addition, PFM believed the MSRB should withdraw
any efforts to amend Rule G-34 until the SEC's proposed amendments to
Exchange Act Rule 15c2-12 are completed. PFM noted that changes to the
disclosure requirements under Rule 15c2-12 would provide a foundation
for any action the MSRB might take with respect to Rule G-34. Finally,
GFOA indicated that, if certain clarifications cannot be made regarding
compliance with the draft rule changes, the MSRB should continue
investing in enhancing the EMMA system.
---------------------------------------------------------------------------

    \63\ CMF and PFM Letter II.
---------------------------------------------------------------------------

    Upon consideration of the comments received in response to the
Second RFC, the MSRB is proposing an expanded exception to include
purchasers that are non-dealer control affiliates of a bank. Based on
comments received, the MSRB understands that in many direct purchase
transactions there may be business reasons to hold a new issue
municipal security in an affiliated entity that is not a bank. The MSRB
further agrees that the exception should not be available if the entity
purchasing or holding the municipal security is a dealer affiliate.
With respect to expanding the exception to include local governments
purchasing municipal securities, the MSRB understands that in these
scenarios the transactions are negotiated directly between the two
parties, without the involvement of an underwriter. As a result, the
CUSIP number requirements of Rule G-34(a)(i) would not apply and the
need to expand the exception to include these scenarios is unnecessary.
    In addition, the proposed exception would require the dealer to
have a reasonable belief that the purchaser is purchasing with a
present intent to hold the securities to maturity. Commenters asked for
a more prescriptive requirement as to how one would show a reasonable
belief. However, the MSRB believes dealers should determine the best
way to make such a determination based on their particular business and
practices. The determination could be made based upon, for example, a
representation from the purchaser, though obtaining a representation is
not required. Indeed, as a general matter, the proposed rule would not
dictate the way in which a dealer must arrive at the ``reasonable
belief.'' In addition, the proposed rule would not include

language in the exception that would require a dealer or municipal
advisor to draw conclusions regarding the circumstances of the
purchaser's possible resales in the future, if the purchaser's present
intent were to change. The MSRB believes that the dealer's reasonable
belief as to the present intent of the purchaser is adequate and that
the circumstances of any subsequent resales would be outside the scope
of the dealer's analysis surrounding the initial sale of the new issue
securities.
Requirement That Non-Dealer Municipal Advisors Apply for CUSIP Numbers
    In the Second RFC, the MSRB proposed draft amendments that
generally would require all municipal advisors in competitive new
issues to apply for CUSIP numbers. Reference to ``competitive
offering'' was meant to refer to competitive offerings in a typical
public distribution of municipal securities. However, the MSRB noted
its understanding that there are direct purchase scenarios in which the
municipal advisor arranges competitive bids from, for example, three
banks competing for a direct purchase. In circumstances like those, the
MSRB indicated that the security purchased by the winning direct
purchaser may not require a CUSIP number if the municipal advisor, like
the dealer placement agent described above in a direct purchase by a
bank, could make a principled determination that trading is unlikely
and, thus, CUSIP numbers are not necessary. The Second RFC proposed
draft amendments that would allow a municipal advisor to rely on the
exception from the CUSIP number requirement if the conditions were met.
    Five commenters believed Rule G-34 should not apply to any
municipal advisors and that the obligation to obtain a CUSIP number
should rest solely with the underwriter.\64\ Acacia and NAMA stated
that while not every competitive sale has a municipal advisor, they
each do have an underwriter and thus, for consistency, it makes sense
that the underwriter would obtain the CUSIP number. In addition, NAMA
stated that a municipal advisor does not have an interface with the
investor prior to the completion of the competitive sale process and by
making a determination regarding the investor's intentions to hold or
sell a security, in addition to considering whether an instrument is in
fact a security, the municipal advisor might be engaging in broker-
dealer activity. According to NAMA, there is no benefit to municipal
advisory clients or municipal advisors by requiring municipal advisors
to obtain CUSIP numbers. Similarly, SMA stated that obtaining a CUSIP
number is an underwriter's responsibility and the imbalance between
dealer municipal advisors and non-dealer municipal advisors is
justified by the differing roles they play in the market. PFM stated
that applying for a CUSIP number is activity outside of the municipal
advisor's responsibility and ``epitomizes traditional broker-dealer
type activity.''
---------------------------------------------------------------------------

    \64\ Acacia Letter II, Fieldman, NAMA Letter II, PFM Letter II
and SMA Letter II.
---------------------------------------------------------------------------

    Two commenters indicated that the costs on non-dealer municipal
advisors of complying with the proposed obligations, including creating
and implementing policies and procedures, would be problematic and
create a new regulatory burden.\65\ Finally, one commenter noted
concern that for a municipal advisor to obtain a CUSIP number in a
competitive sale, it must make certain assumptions about the final bond
structure or know the preferred structure of the eventual
purchaser.\66\
---------------------------------------------------------------------------

    \65\ Acacia Letter II and NAMA Letter II.
    \66\ Fieldman.
---------------------------------------------------------------------------

    Three commenters supported the MSRB's efforts to address any
potential regulatory inefficiencies between dealer and non-dealer
municipal advisors.\67\ SIFMA noted that, if there is a non-dealer
municipal advisor assisting an issuer who is currently not required to
obtain a CUSIP number, then each bidding dealer in a competitive sale
must obtain a set of CUSIP numbers for the transaction, in case they
are the winning bidder. Obtaining the CUSIP number before a dealer is
selected is necessary, according to SIFMA, because of the subsequent
timing requirements related to inputting information into NIIDS. SIFMA
believed it is more efficient for a single municipal advisor to an
issuer to obtain CUSIP numbers than for several dealers competing for a
sale to obtain CUSIP numbers knowing that all but one dealer will need
to cancel the request.
---------------------------------------------------------------------------

    \67\ BDA Letter II; Piper Jaffray Letter II and SIFMA Letter II.
---------------------------------------------------------------------------

    The MSRB believes the policy reasons to require dealer municipal
advisors to apply for CUSIP numbers in competitive sales of new issue
securities are just as applicable to non-dealer municipal advisors.
Further, removing the municipal advisor (whether dealer or non-dealer)
altogether from the requirement could result in trading delays where
the winning dealer in a competitive transaction applies for the CUSIP
number after the award is made. In the alternative, removal of dealer
municipal advisors from the requirement could result in inefficiencies
where multiple dealers apply for CUSIP numbers for the same transaction
before the award is made and subsequently cancel them if they are not
selected as the winning dealer. The proposed rule change therefore
would require municipal advisors, both dealer and non-dealer alike, to
apply for CUSIP numbers for new issue securities when advising on a
competitive sale of such new issue securities. This ensures
efficiencies in the market by requiring CUSIP numbers to be assigned
prior to the award of the issue in a competitive sale where a municipal
advisor is retained. Where the competitive sale might result in a
direct purchase by a bank, its non-dealer control affiliates or a
consortium thereof, the municipal advisor may determine not to obtain a
CUSIP number if it reasonably believes the purchaser's present intent
is to hold the municipal securities to maturity. If the structure of
the transaction changes after a municipal advisor has applied for the
CUSIP number, Rule G-34(a)(i)(A)(5) requires that the information
provided in the CUSIP number application be updated as soon as it is
known, but in any event, no later than a time sufficient to ensure
CUSIP number assignment occurs prior to dissemination of the time of
first execution. The MSRB would expect the regulated entity that
originally applied for the CUSIP number to comply with Rule G-
34(a)(i)(A)(5) to correct any CUSIP number information
inconsistencies.\68\
---------------------------------------------------------------------------

    \68\ See Exchange Act Release No. 57131 (January 11, 2008), 73
FR 3295 (January 17, 2008) (SR-MSRB-2007-08) and MSRB Notice 2007-
10.
---------------------------------------------------------------------------

Other Comments
    Three commenters expressed their view that the MSRB should not
require the use of a proprietary, for-profit identifier such as
CUSIP.\69\ These commenters believed that the rule should include the
ability of an underwriter or municipal advisor to use any
identification number widely accepted in the municipal securities
market. BDA stated that by specifically referring to CUSIP numbers, the
MSRB is stifling competition in the area. Bloomberg suggested that the
MSRB add ``or other standard identifier'' to the CUSIP number
references in the rule.
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    \69\ Bloomberg Letter II; BDA Letter II and CMF.
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    The MSRB understands commenters' concerns with respect to this
issue, but, because this issue arises in numerous other contexts,
believes it should be considered separately from this

initiative, which is focused on only one MSRB rule. The MSRB notes that
it is currently monitoring or involved in various industry initiatives
to modernize identifiers.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-MSRB-2017-06 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-2017-06. 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 Web site (http://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 Web site 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-MSRB-2017-06 and should be
submitted on or before October 10, 2017.
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    \70\ 17 CFR 200.30-3(a)(12).

    For the Commission, pursuant to delegated authority.\70\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19804 Filed 9-15-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 17 (Friday, January 25, 2013)]
[Notices]
[Pages 5476-5477]
[FR Doc No: 2013-01547]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Internal Agency Docket No. FEMA-4098-DR; Docket ID FEMA-2013-0001]

Ohio; Major Disaster and Related Determinations

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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SUMMARY: This is a notice of the Presidential declaration of a major
disaster for the State of Ohio (FEMA-4098-DR), dated January 3, 2013,
and related determinations.

DATES: Effective Date: January 3, 2013.

FOR FURTHER INFORMATION CONTACT: Dean Webster, Office of Response and
Recovery, Federal Emergency Management Agency, 500 C Street SW.,
Washington, DC 20472,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION: Notice is hereby given that, in a letter
dated January 3, 2013, the President issued a major disaster
declaration under the authority of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq. (the
``Stafford Act''), as follows:

    I have determined that the damage in certain areas of the State
of Ohio resulting from severe storms and flooding due to the
remnants of Hurricane Sandy during the period October 29-30, 2012,
is of sufficient severity and magnitude to warrant a major disaster
declaration under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5121 et seq. (the ``Stafford
Act''). Therefore, I declare that such a major disaster exists in
the State of Ohio.
    In order to provide Federal assistance, you are hereby
authorized to allocate from funds available for these purposes such
amounts as you find necessary for Federal disaster assistance and
administrative expenses.
    You are authorized to provide Public Assistance in the
designated areas and Hazard Mitigation throughout the State.
Consistent with the requirement that Federal assistance is
supplemental, any Federal funds provided under the Stafford Act for
Public Assistance and Hazard Mitigation will be limited to 75
percent of the total eligible costs.
    Further, you are authorized to make changes to this declaration
for the approved assistance to the extent allowable under the
Stafford Act.

    The Federal Emergency Management Agency (FEMA) hereby gives notice
that pursuant to the authority vested in the Administrator, under
Executive Order 12148, as amended, Warren J. Riley, of FEMA is
appointed to act as the Federal Coordinating Officer for this major
disaster.
    The following areas of the State of Ohio have been designated as
adversely affected by this major disaster:

    Cuyahoga County for Public Assistance.
    All counties within the State of Ohio are eligible to apply for
assistance under the Hazard Mitigation Grant Program.

    The following Catalog of Federal Domestic Assistance Numbers
(CFDA) are to be used for reporting and drawing funds: 97.030,
Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis
Counseling; 97.033, Disaster Legal Services; 97.034, Disaster
Unemployment Assistance (DUA); 97.046, Fire Management Assistance
Grant; 97.048, Disaster Housing Assistance to Individuals and
Households in Presidentially Declared Disaster Areas; 97.049,

Presidentially Declared Disaster Assistance--Disaster Housing
Operations for Individuals and Households; 97.050, Presidentially
Declared Disaster Assistance to Individuals and Households--Other
Needs; 97.036, Disaster Grants--Public Assistance (Presidentially
Declared Disasters); 97.039, Hazard Mitigation Grant.

W. Craig Fugate,
Administrator, Federal Emergency Management Agency.
[FR Doc. 2013-01547 Filed 1-24-13; 8:45 am]
BILLING CODE 9111-23-P


North Atlantic Total Non Use Values:

Totals, SAV & Wetlands Lower Bound Upper Bound Lower Bound Upper Bound Bordering Counties Nonuse value 75,641,944 $ 139,917,060 $ 14,171,720 $ 26,871,437 $ per hh values ( 3,649,201 hh) 20.73 $ 33.97 $ 3.44 $ 6.52 $

Bordering Counties + 97.7% of additional pop in 32 mile radius Non Users 260,531,584 $ 481,912,693 $ 48,811,287 $ 92,552,594 $ per hh values ( 4,239,041 hh) 61.46 $ 113.68 $ 11.51 $ 21.83 $

Bordering Counties + 27% of additional pop in 32 mile radius Non Users 126,842,152 $ 234,623,543 $ 23,764,215 $ 45,060,065 $ per hh values ( 4,239,041 hh) 29.92 $ 55.35 $ 5.61 $ 10.63 $ Baseline Losses Preferred Technology Affected Populations Total Value * % reduction with Preferred Tech. SAV Lower Bound ( 151 acres)

Fish Habitat Only Shellfish Habitat Only Fish Habitat Only Shellfish Habitat Only Fish and Shellfish Hab.

Bordering Counties * 18.73% ( Winter flounder) * 18.97% ( northern pipefish)

All Residents 14,458,473 $ 15,665,225 $ 24,755,523 $ 26,821,701 $ 382,141 $

Use value 14,682,200 $ 15,907,625 $ 25,138,584 $ 27,236,734 $ 405,435 $

Nonuse value 13,856,831 $ 15,013,369 $ 23,725,404 $ 25,705,605 $ 314,889 $

Bordering Counties + 97.7% of additional pop in 32 mile radius All Residents 49,798,942 $ 53,955,328 $ 85,264,804 $ 92,381,289 $ 1,316,199 $

Users 50,569,519 $ 54,790,220 $ 86,584,171 $ 93,810,775 $ 1,396,430 $

Non Users 47,726,724 $ 51,710,156 $ 81,716,791 $ 88,537,147 $ 1,084,563 $

Bordering Counties + 27% of additional pop in 32 mile radius All Residents 24,245,064 $ 26,268,638 $ 41,511,939 $ 44,976,664 $ 640,803 $

Users 24,620,227 $ 26,675,113 $ 42,154,285 $ 45,672,622 $ 679,864 $

Non Users 23,236,186 $ 25,175,556 $ 39,784,557 $ 43,105,109 $ 528,029 $

Totals, SAV & Wetlands Lower Bound Upper Bound Lower Bound Upper Bound Bordering Counties All Residents 79,208,645 $ 148,246,011 $ 14,840,614 $ 28,573,472 $

Use value 80,525,924 $ 151,271,096 $ 15,087,635 $ 29,189,262 $

Nonuse value 75,641,944 $ 139,917,060 $ 14,171,720 $ 26,871,437 $

Bordering Counties + 97.7% of additional pop in 32 mile radius All Residents 272,816,279 $ 510,599,883 $ 51,115,141 $ 98,414,866 $

Users 277,353,347 $ 521,019,106 $ 51,965,949 $ 100,535,816 $

Non Users 260,531,584 $ 481,912,693 $ 48,811,287 $ 92,552,594 $

Bordering Counties + 27% of additional pop in 32 mile radius All Residents 132,823,067 $ 248,590,160 $ 24,885,868 $ 47,914,165 $

Users 135,031,979 $ 253,662,853 $ 25,300,091 $ 48,946,769 $

Non Users 126,842,152 $ 234,623,543 $ 23,764,215 $ 45,060,065 $

Baseline Losses Preferred Technology Wetlands, Lower Bound ( 25,589 acres) Wetlands, Upper Bound ( 43,813 acres) SAV Upper Bound ( 1,205 acres)

Fish and Shellfish Hab.

* 23.75% ( scup) 3,817,949 $ 4,050,678 $ 3,146,034 $ 13,150,062 $ 13,951,645 $ 10,835,803 $ 6,402,226 $ 6,792,484 $ 5,275,508 $