Testimony

of

Barrett Cupp, Environmental Manager

The Sherwin-Williams Company

on

National Emission Standards for Hazardous Air Pollutants: Areas Source
Standards for Paints and Allied Products Manufacturing

Public Hearing

Environmental Protection Agency – Research Triangle Park

June 16, 2009

Rule Applicability

My name is Barry Cupp and I am an Environmental Project Manager for The
Sherwin-Williams Company in Cleveland, Ohio. While Sherwin-Williams
looks forward to submitting comments on many aspects of this rulemaking,
I will reserve my comments today to a few issues of critical importance
– that is, the need for the rule, the proposed costs and overall
applicability of the proposed rule.

The coatings manufacturing industry questions the need for this Paint
and Allied Products Area Source rule at all. The HAPs of concern have
been reduced by 90 % since 1990 through efforts by our industry to
formulate away from these chemicals, the implementation of the
Miscellaneous Coatings Manufacturing (MCM) MACT standards and as a
result of other emission controls efforts both regulatory and voluntary.
 This dramatic reduction is demonstrated by comparing the 1990 reporting
year to 2002 in the EPA NEI data or SARA 313 release reporting.  It has
also been documented by the EPA sector strategy reports for the paint
and coatings industry. By EPA’s own estimates, this rule will only
reduce the total metal HAPs by 4.2 tons per year and those listed metals
 of concern, cadmium, chromium, nickel and lead by 0.13 tons per year.
The estimated reduction of organic HAP is 169 tons per year and those
listed chemicals of concern, benzene and methylene chloride by 5.1 tons
per year. This is an extremely small emission reduction for a rule that
is estimated to impact 2,100 facilities, over 50% of which are very
small business (less than 10 employees).    As such, it is unclear if
the proposed rule is required at all due to prior reductions being
unquantified and ignored by this rulemaking.

EPA estimates of the cost to control these emissions is flawed.  One
example that highlights these flaws is the assumption that a sheet of
plywood would be used as a “disposable lid” by a manufacturing plant
at a cost of $38.  The volatile HAPs are largely flammable.  Use of a
combustible material that is non-conductive, would warp and could not be
cleaned is not safe or recommended.  In addition, EPA estimates that
only 15% of the process vessels would need covers.  It is more likely
that all process vessels would require aluminum or stainless steel
covers that fit properly and could be maintained.  EPA estimated in the
MCM rule making that a cover would cost on average $3,600. Changing
these assumptions alone would change costs by two orders of magnitude.

In addition, the EPA has estimated that the cost to existing facilities
that already have these controls in place to be $149 dollars per year.
Most state air permits for facilities with dust collectors do not
require mandatory Method 9 observation  testing or if required, do not
require it to be conducted routinely. The cost to conduct the Method 9
observation test two times per year is estimated to be at least $1,500.

These are just two examples of where EPA has severely underestimated the
cost of this rule.

The applicability to the rule is flawed. The rule states that a facility
is subject to the rule if it performs paint and allied product
manufacturing that is an area source of  hazardous air pollutants (HAP)
emission and processes, uses or generates material containing one or
more of the following HAP: benzene, methylene chloride, compounds of
cadmium, chromium, lead and nickel.  In this situation, materials
containing HAP of concern means a material containing the aforementioned
chemicals in amounts greater than or equal to 0.1 percent by weight as
shown in formulation data provided by the manufacturer or supplier, such
as the Material Safety Data Sheet.

For the regulated community to be successful in complying with this
rule, the EPA must set some form of threshold or de minimus emission
level for applicability.  Without this, facilities will be subject to
the rule with extremely low or non-reportable emissions and may find
themselves out of compliance if a raw material supplier changes what is
reported on a MSDS.

By this definition, architectural, powder and small (less than 10
employees) manufacturing facilities will be drawn into this rule which
have extremely low or no reportable emissions of the HAP of concern.
Using EPA emission factors for particulate emission, one can determine
chemical throughput verses emission rate.  For example, a facility
processing 100,000 pounds per year of pigment with 1% metal HAP would
process 1,000 pounds of  HAP metal per year would emit 100 pounds per
year (assuming uncontrolled EPA emission factor of 1 percent of
throughput) resulting in  0.27 pounds per day.  If this source already
has emission control such as a dust collector, the throughput of pigment
could be increased to 10,000,000 pounds annually before achieving an
emission rate of 0.27 pounds per day.  A plant using a slurry or liquid
form of these raw materials would not have any emission regardless of
the throughput.  Yet, per the proposed applicability definition, these
facilities would be burdened to fully comply this rule.

Without a de minimus emission threshold, a facility that relies on a
supplier MSDS may find itself out of compliance simply by having a
supplier report a new trace metal constituent on the MSDS.  Based upon
personal experience, it is a given that suppliers do routinely update
information on their MSDS. Commonly the metals of concern are
contaminants in purchased raw materials   If the supplier’s raw
material source changes and the suppliers analysis begins to show higher
traces of a metal, they may begin to report these trace metals.  A
manufacturer would be out of compliance upon receiving this new MSDS,
even though no reportable emissions of the metal have occurred.

EPA must establish an applicability threshold based upon an emission
rate. At a minimum the applicably emission threshold should be based
upon emissions that would be meaningful, without causing undue burden on
the facilities that would be included despite no intentional use of
these HAP at the raw material level.

  PAGE  1


[Federal Register: August 7, 2008 (Volume 73, Number 153)]
[Notices]
[Page 46161-46167]
[DOCID:fr07au08-128]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58256; File No. SR-MSRB-2008-05]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of Proposed Rule Change Relating to the
Establishment of a Continuing Disclosure Service of the Electronic
Municipal Market Access System (EMMA)

July 30, 2008.
    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 July 29, 2008, the Municipal Securities Rulemaking Board (``MSRB'')
filed with the Securities and Exchange Commission (``Commission'' or
``SEC'') 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 is filing with the Commission a proposed rule change to
establish a continuing disclosure service (the ``continuing disclosure
service'') of the MSRB's Electronic Municipal Market Access system
(``EMMA''). The continuing disclosure service would receive electronic
submissions of, and would make publicly available on the Internet,
continuing disclosure documents and related information from issuers,
obligated persons and their agents pursuant to continuing disclosure
undertakings entered into consistent with Exchange Act Rule 15c2-12.
The MSRB requests approval of the continuing disclosure service to
commence operation on the later of January 1, 2009 or the effective
date of any provisions of Rule 15c2-12 providing for the MSRB to serve
as the sole central repository for all electronic continuing disclosure
information provided pursuant to Rule 15c2-12.
    The text of the proposed rule change is available on the MSRB's Web
site at http://www.msrb.org/msrb1/sec.asp, at the MSRB's principal
office, and at the Commission's Public Reference Room. If approved, the
rule text for the continuing disclosure service of EMMA would be
available on the MSRB's Web site at http://www.msrb.org/msrb1/
rulesandforms under the heading Information Facilities.

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
    The proposed rule change would establish, as a component of EMMA,
the continuing disclosure service for the receipt of, and for making
available to the public of, continuing disclosure documents and related
information to be submitted by issuers, obligated persons and their
agents pursuant to continuing disclosure undertakings entered into
consistent with Rule 15c2-12.\3\ As proposed, all continuing disclosure
documents and related information would be submitted to the MSRB, free
of charge, through an Internet-based electronic submitter interface or
electronic computer-to-computer data connection, at the election of the
submitter, and public access to the documents and information would be
provided through the continuing disclosure service on the Internet (the
``EMMA portal'') at no charge as well as through a paid real-time data
stream subscription service.\4\
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    \3\ EMMA was originally established, and began operation on
March 31, 2008, as a complementary pilot facility of the MSRB's
existing Official Statement and Advance Refunding Document (OS/ARD)
system of the Municipal Securities Information Library (MSIL)
system. See Securities Exchange Act Release No. 57577 (March 28,
2008), 73 FR 18022 (April 2, 2008) (File No. SR-MSRB-2007-06)
(approving operation of the EMMA pilot to provide free public access
to the MSIL system collection of official statements and advance
refunding documents and to the MSRB's Real-Time Transaction
Reporting System historical and real-time transaction price data)
(the ``Pilot Filing'').
    \4\ The pilot EMMA portal currently is accessible at http://
emma.msrb.org.
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    Under Rule 15c2-12(b)(5), an underwriter for a primary offering of
municipal securities subject to the rule currently is prohibited from
underwriting the offering unless the underwriter has determined that
the issuer or an obligated person \5\ for whom financial information or
operating data is presented in the final official statement has
undertaken in writing to provide certain items of information to the
marketplace.\6\ Rule 15c2-12(b)(5) provides that such items include:
(A) Annual financial information concerning obligated persons; \7\ (B)
audited financial statements for obligated persons if available and if
not included in the annual financial information; (C) notices of
certain events, if material; \8\ and (D) notices of failures to provide
annual financial information on or before the date specified in the
written undertaking.\9\
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    \5\ Rule 15c2-12(f)(10) defines ``obligated person'' as any
person, including an issuer of municipal securities, who is either
generally or through an enterprise, fund, or account of such person
committed by contract or other arrangement to support payment of all
or part of the obligations on the municipal securities sold in a
primary offering (other than providers of bond insurance, letters of
credit, or other liquidity facilities).
    \6\ See also Rule 15c2-12(d)(2).
    \7\ Rule 15c2-12(f)(9) defines ``annual financial information''
as financial information or operating data, provided at least
annually, of the type included in the final official statement with
respect to an obligated person, or in the case where no financial
information or operating data was provided in the final official
statement with respect to such obligated person, of the type
included in the final official statement with respect to those
obligated persons that meet the objective criteria applied to select
the persons for which financial information or operating data will
be provided on an annual basis.
    \8\ Under Rule 15c2-12(b)(5)(C), such events currently consist
of principal and interest payment delinquencies; non-payment related
defaults; unscheduled draws on debt service reserves reflecting
financial difficulties; unscheduled draws on credit enhancements
reflecting financial difficulties; substitution of credit or
liquidity providers, or their failure to perform; adverse tax
opinions or events affecting the tax-exempt status of the security;
modifications to rights of security holders; bond calls;
defeasances; release, substitution, or sale of property securing
repayment of the securities; and rating changes.
    \9\ Under Rule 15c2-12(b)(5)(i), annual filings are to be sent
to all existing nationally recognized municipal securities
information repositories (``NRMSIRs'') and any applicable state
information depositories (``SIDs''), while material event notices
may be sent to all existing NRMSIRs or to the MSRB, as well as to
any SIDs. The MSRB, which currently operates CDINet to process and
disseminate notices of material events submitted to the MSRB,
previously petitioned the Commission to amend Rule 15c2-12 to remove
the MSRB as a recipient of material event notices due to the very
limited level of submissions received by the MSRB, constituting a
negligible percentage of material event notices currently provided
to the marketplace. See Letter from Diane G. Klinke, General
Counsel, MSRB, to Jonathan G. Katz, Secretary, Commission, dated
September 8, 2005. The Commission has published proposed amendments
to Rule 15c2-12 to this effect. See Exchange Act Release No. 54863
(December 4, 2006), 71 Fed. Reg. 71109 (December 8, 2006). In light
of this proposed rule change, the MSRB is considering at this time
whether to withdraw its petition. In addition, the MSRB intends, on
a future date, to file a proposed rule change with the Commission
for permission to discontinue CDINet in view of the establishment of
EMMA's continuing disclosure service.

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    As proposed, the continuing disclosure service would accept
submissions of (i) continuing disclosure documents as described in Rule
15c2-12, and (ii) other disclosure documents specified in continuing
disclosure undertakings entered into consistent with Rule 15c2-12 but
not specifically described in Rule 15c2-12. In connection with
documents submitted to the continuing disclosure service, the submitter
would provide, at the time of submission, information necessary to
accurately identify: (i) The category of information being provided;
(ii) the period covered by any annual financial information, financial
statements or other financial information or operating data; (iii) the
issues or specific securities to which such document is related or
otherwise material (including CUSIP number, issuer name, state, issue
description/securities name, dated date, maturity date, and/or coupon
rate); (iv) the name of any obligated person other than the issuer; (v)
the name and date of the document; and (vi) contact information for the
submitter. Submitters would be responsible for the accuracy and
completeness of all documents and information submitted to EMMA.
    The MSRB proposes that submissions to the continuing disclosure
service be made as portable document format (PDF) files configured to
permit documents to be saved, viewed, printed and retransmitted by
electronic means. If the submitted file is a reproduction of the
original document, the submitted file must maintain the graphical and
textual integrity of the original document. In addition, starting in
the first calendar quarter beginning at least nine months after
approval by the Commission of this filing, such PDF files must be word-
searchable (that is, allowing the user to search for specific terms
used within the document through a search or find function available in
most standard software packages), provided that diagrams, images and
other non-textual elements would not be required to be word-searchable
due to current technical hurdles to uniformly producing such elements
in word-searchable form without incurring undue costs. Although the
MSRB would strongly encourage submitters to immediately begin making
submissions as word-searchable PDF files (preferably as native PDF or
PDF normal files, which generally produce smaller and more easily
downloadable files as compared to scanned PDF files), implementation of
this requirement would be deferred as noted above to provide issuers,
obligated persons and their agents with sufficient time to adapt their
processes and systems to provide for the routine creation or conversion
of continuing disclosure documents as word-searchable PDF files.
    All submissions to the continuing disclosure service pursuant to
this proposal would be made through password protected accounts on EMMA
by: (i) Issuers, which may submit any documents with respect to their
municipal securities; (ii) obligated persons, which may submit any
documents with respect to any municipal securities for which they are
obligated; and (iii) designated agents, which may be designated by
issuers or obligated persons to make submissions on their behalf.
Issuers and obligated persons would be permitted under the proposal to
designate agents to submit documents and information on their behalf,
and would be able to revoke the designation of any such agents, through
the EMMA on-line account management utility. Such designated agents
would be required to register to obtain password-protected accounts on
EMMA in order to make submissions on behalf of the designating issuers
or obligated persons. Any party identified in a continuing disclosure
undertaking as a dissemination agent or other party responsible for
disseminating continuing disclosure documents on behalf of an issuer or
obligated person would be permitted to act as a designated agent for
such issuer or obligated person, without a designation being made by
the issuer or obligated person as described above, if such party
certifies through the EMMA on-line account management utility that it
is authorized to disseminate continuing disclosure documents on behalf
of the issuer or obligated person under the continuing disclosure
undertaking. The issuer or obligated person, through the EMMA on-line
account management utility, would be able to revoke the authority of
such party to act as a designated agent.
    As proposed, electronic submissions of continuing disclosure
documents through the continuing disclosure service would be made by
issuers, obligated persons and their agents, at no charge, through
secured, password-protected interfaces. Continuing disclosure
submitters would have a choice of making submissions to the proposed
continuing disclosure service either through a Web-based electronic
submission interface or through electronic computer-to-computer data
connections with EMMA designed to receive submissions on a bulk or
continuous basis.
    All documents and information submitted through the continuing
disclosure service pursuant to this proposed rule change would be
available to the public for free through the EMMA portal on the
Internet, with documents made available for the life of the securities
as PDF files for viewing, printing and downloading.\10\ As proposed,
the EMMA portal would provide on-line search functions to enable users
to readily identify and access documents that relate to specific
municipal securities based on a broad range of search parameters. In
addition, the MSRB proposes that real-time data stream subscriptions to
continuing disclosure documents submitted to EMMA would be made
available for a fee.\11\ The MSRB would not be responsible for the
content of the information or documents submitted by submitters
displayed on the EMMA portal or distributed to subscribers through the
continuing disclosure subscription service.
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    \10\ The MSRB understands that software currently is generally
available for free that permits users to save, view and print PDF
files, as well as to conduct word searches in word-searchable PDF
documents. The MSRB would provide links for downloading such
software on the EMMA portal.
    \11\ Fees for subscriptions to the continuing disclosure
collection would be established in a separate filing to be submitted
to the Commission pursuant to Section 19(b)(2) of the Exchange Act
prior to the commencement of operation of the continuing disclosure
service, if approved by the Commission.
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    The MSRB has designed EMMA, including the EMMA portal, as a
scalable system with sufficient current capacity and the ability to add
further capacity to meet foreseeable usage levels based on reasonable
estimates of expected usage, and the MSRB would monitor usage levels in
order to assure continued capacity in the future.
    The MSRB may restrict or terminate malicious, illegal or abusive
usage for such periods as may be necessary and appropriate to ensure
continuous and efficient access to the EMMA portal and to maintain the
integrity of EMMA and its operational components. Such usage may
include, without limitation, usage intended to cause the EMMA portal to
become inaccessible by other users, to cause the EMMA database or
operational components to become corrupted or otherwise unusable, to
alter the appearance or functionality of the EMMA portal, or to
hyperlink to or otherwise use the EMMA portal or the information
provided through the EMMA portal in furtherance of fraudulent or other
illegal activities

(such as, for example, creating any inference of MSRB complicity with
or approval of such fraudulent or illegal activities or creating a
false impression that information used to further such fraudulent or
illegal activities has been obtained from the MSRB or EMMA). Measures
taken by the MSRB in response to such unacceptable usage shall be
designed to minimize any potentially negative impact on the ability to
access the EMMA portal.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with
Section 15B(b)(2)(C) of the Act,\12\ which provides that the MSRB's
rules shall:
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    \12\ 15 U.S.C. 78o-4(b)(2)(C).
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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.

    The MSRB believes that the proposed rule change is consistent with
the Act. The continuing disclosure service would serve as an additional
mechanism by which the MSRB works toward removing impediments to and
helping to perfect the mechanisms of a free and open market in
municipal securities. The continuing disclosure service would help make
information useful for making investment decisions more easily
available to all participants in the municipal securities market on an
equal basis throughout the life of the securities without charge
through a centralized, searchable Internet-based repository, thereby
removing potential barriers to obtaining such information. Broad access
to continuing disclosure documents through the continuing disclosure
service should assist in preventing fraudulent and manipulative acts
and practices by improving the opportunity for public investors to
access material information about issuers and their securities.
    Furthermore, the continuing disclosure service should reduce the
effort necessary for issuers and obligated persons to comply with their
continuing disclosure undertakings by making submissions to a single
venue \13\ using an electronic submission process, which should result
in lower costs to issuers and savings to their citizens. Similarly, a
single centralized and searchable venue for free public access to
disclosure information should promote a more fair and efficient
municipal securities market in which transactions are effected on the
basis of material information available to all parties to such
transactions, which should allow for fairer pricing of transactions
based on a more complete understanding of the terms of the securities
and the potential investment risks. Free access to this information--
previously available in most cases only through paid subscription
services or on a per-document fee basis--should reduce transaction
costs for dealers and investors.
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    \13\ Some states may require issuers and/or obligated persons to
submit disclosure information to state information depositories or
other venues pursuant to state law.
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    All of these factors serve to promote the statutory mandate of the
MSRB to protect investors and the public interest.

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

    The MSRB 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. Documents and information
provided through the continuing disclosure service would be available
to all persons simultaneously. In addition to making the documents and
information available for free on the EMMA portal to all members of the
public, the MSRB would make such documents and information available by
subscription on an equal and non-discriminatory basis without imposing
restrictions on subscribers from, or imposing additional charges on
subscribers for, re-disseminating such documents or otherwise offering
value-added services and products based on such documents on terms
determined by each subscriber.
    The MSRB has considered carefully a commentator's concern regarding
the MSRB's plans to develop EMMA,\14\ as well as expressions of
interest from private enterprises in entering this market.\15\ One
commentator on the Pilot Filing \16\ stated that the MSRB's intention
to combine continuing disclosures with primary market disclosures and
trade price data ``breaks new ground among regulatory bodies in terms
of value-added content available to the public at no charge,'' arguing
that the MSRB would ``effectively take over the business of providing
value-added content.'' \17\ Another commentator on the Pilot Filing
argued in favor of the creation of a ``publicly accessible storage and
dissemination system'' for all filings in the municipal securities
market, stating that the current municipal securities disclosure model
``severely limits innovation and access'' to disclosures and ``locks up
public documents in private hands while the proposed portal run by a
public entity will encourage transparency in the municipal securities
market and create a healthy ecosystem of information that will
ultimately benefit both the investment community and the municipalities
that seek access to public markets.'' \18\
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    \14\ See comments from Peter J. Schmitt, CEO, DPC DATA Inc.
(``DPC''), dated January 23, 2008.
    \15\ See letter from Philip C. Moyer, CEO, EDGAR Online, Inc.
(``EDGAR Online''), to Ernesto A. Lanza, Senior Associate General
Counsel, MSRB, dated December 17, 2007. In addition, the MSRB has
received several inquiries through the pilot EMMA portal's feedback
(http://emma.msrb.org/AboutEMMA/Feedback.aspx) and contact (http://
emma.msrb.org/AboutEMMA/ContactUs.aspx) Web forms from members of
the public seeking information on using EMMA documents and data,
through the EMMA portal or subscription services, for the purposes
of re-dissemination to their customers.
    \16\ See footnote 3 supra.
    \17\ See comments of DPC. DPC further stated, ``There is
precedent of other Self-Regulatory Organizations (SROs) offering
such sophisticated value-added information to the market, but only
on a fee basis.'' DPC also states that ``the MSRB's sample pilot
portal at http://www.msrb.org/msrb1/accessportal/
SampleComprehensiveDisclosureDisplay.htm provides a glimpse of
specific value-added features the MSRB intends to offer the public
free of charge. Among these are nine-digit CUSIP searches,
hyperlinks to bond issuers Web sites, an `alerts' service to users
of the portal, sophisticated document viewing options, links to
other related documents in the portals disclosure archive, and
subsequent event notifications that equate to custom research. These
features and capabilities are well in excess of the system that the
MSRB has pointed to as its model, the SEC's own EDGAR.''
    \18\ See letter from EDGAR Online. EDGAR Online further stated,
``In spite of a great deal of work by the Municipal Issuers on their
disclosures--a small group of companies control access for the
entire market to the documents that are supposed to be public. * * *
The rigid control of public information dissuades other information
providers from trying to enter or innovate for this market. This
means that there are few people working on improving ease of use,
depth of analysis, thoroughness of information or more effective
means of delivery * * * The process of managing these documents
consumes most of the resources of these few information providers
and the time of investors. As a result, the information contained in
these documents--risks and opportunities--are usually lost because
there are few sources of good comparability and data.''
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    The MSRB believes that the availability of continuing disclosure
documents through the EMMA portal and the continuing disclosure
subscription service, without the imposition of limitations on or
additional charges for redistribution of such documents to customers,
clients or other end-users of the subscriber,\19\

would promote competition among private data vendors and other
enterprises engaged in or interested in becoming engaged in information
services by eliminating existing barriers to new entrants into the
market for municipal securities information services. Private
enterprises would be able to obtain a complete collection of all
continuing disclosure documents submitted by issuers, obligated persons
and their agents as contemplated by Exchange Act Rule 15c2-12 from a
single source using a single consistent indexing method since all such
documents would be submitted to the continuing disclosure service and
would be indexed as received using a single indexing logic. Currently,
parties wishing to obtain a complete collection of continuing
disclosure documents must consider whether continuing disclosure
documents have been uniformly provided to all existing nationally
recognized municipal securities information repositories as
contemplated under Rule 15c2-12 and, if not, might need to undertake
the effort and expense of obtaining continuing disclosure documents
from two or more of the existing sources, which may have differing
terms of use that may limit the ability to re-disseminate such
documents.
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    \19\ The MSRB notes that subscribers may be subject to
proprietary rights of third parties in information provided by such
third parties that is made available through the subscription.
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    Furthermore, the availability of all continuing disclosure
documents in a defined electronic format in one venue should make
document handling, storage and dissemination more efficient than under
the current situation in which documents may exist in paper form as
well as in various different electronic formats. The existence of a
single consistent indexing logic to be used by the continuing
disclosure service, and the inclusion of key indexing information on
the EMMA portal and in the continuing disclosure subscription service,
would relieve the burden that private information vendors would
otherwise have of creating such an index. The standardized continuing
disclosure document collection and indexing information provided
through the continuing disclosure service would be available equally to
existing information vendors and parties seeking to enter the market,
thereby promoting competition among all such private parties in a non-
discriminatory manner with respect to the value-added services they may
wish to offer based on the continuing disclosure document collection.
Such parties would likely bear some initial burden of ensuring that
their infrastructure and facilities are capable of receiving and
processing the information provided through the continuing disclosure
service, but the MSRB believes that such parties would realize savings
from the efficiencies described above.
    Thus, although the MSRB recognizes that the continuing disclosure
service might require private enterprises to modify some aspects of the
way they undertake their current business activities, the MSRB believes
that the continuing disclosure service would promote, rather than
hinder, further competition, growth and innovation in this area. The
MSRB further believes that the operation by the MSRB of the continuing
disclosure service would not result in the MSRB taking over the
business of providing value-added content but instead serve as a basis
on which private enterprises could themselves concentrate more of their
resources on developing and marketing value-added services. The MSRB
believes that much of the impact of the proposed rule change on
commercial enterprises would result from the increased competition in
the marketplace resulting from the entry of additional commercial
enterprises in competition with such existing market participants with
respect to value-added services, rather than from the operation of the
continuing disclosure service as a source of the raw documents and
related information to the public. The MSRB believes that the benefits
realized by the investing public from the broader and easier
availability of disclosure information about municipal securities that
would be provided through the continuing disclosure service would
justify any potentially negative impact on existing enterprises from
the operation of EMMA.

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

    In a notice published by the MSRB on January 31, 2008, the MSRB
described its plan for implementing a continuing disclosure service
that would be integrated into other services to be offered through EMMA
(the ``2008 Notice'').\20\ In particular, the MSRB stated its plan to
institute the continuing disclosure service to accept submissions of
continuing disclosure information in a designated electronic format
directly from issuers, obligated persons and their designated agents
acting on their behalf. EMMA's continuing disclosure service would be
designed to accept such electronic submissions, including basic
indexing information, either through a Web-based interface or by
computer-to-computer upload or data stream. In addition to making
continuing disclosures available through the EMMA portal, the MSRB
would make such disclosures available through a paid real-time data
stream subscription for re-dissemination or other use by subscribers.
In publishing the 2008 Notice, the MSRB sought comment on certain basic
elements relating to the incorporation into EMMA of continuing
disclosure information provided by issuers and obligated persons under
Rule 15c2-12, as discussed below. The 2008 Notice had been published by
the MSRB following a series of other notices for comment (the ``Prior
Notices'') \21\ and the filing with the Commission of the Pilot Filing
in connection with the establishment of the MSRB's proposed centralized
disclosure utility.
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    \20\ See MSRB Notice 2008-05 (January 31, 2008).
    \21\ See MSRB Notice 2006-19 (July 27, 2006); MSRB Notice 2007-5
(January 25, 2007); MSRB Notice 2007-33 (November 15, 2007). Only
those comments of the commentators on the Prior Notice and the Pilot
Filing relating to the continuing disclosure service are discussed
in this filing.
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    Several commentators on the Prior Notices discussed issues relating
to continuing disclosure. These commentators stated that continuing
disclosures should be made available on the same platform as other
disclosures,\22\ with some commentators supporting the MSRB's
willingness to establish a comprehensive disclosure system that
included continuing disclosure.\23\ The MSRB's plan to establish the
continuing disclosure service as a component of EMMA would ensure that
continuing disclosure documents would be made available to the public
through the EMMA portal.
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    \22\ See letters from Leslie Norwood, Vice President and
Assistant General Counsel, Bond Market Association (now known as
Securities Industry and Financial Markets Association, or
``SIFMA''), to Mr. Lanza, dated September 15, 2006; Thomas Sargant,
President, Regional Municipal Operations Association, to Mr. Lanza,
dated September 27, 2006; Gary P. Machak, Chairman, Municipal
Advisory Council of Texas, to Mr. Lanza, dated September 14, 2006;
Elizabeth R. Krentzman, General Counsel, Investment Company
Institute (``ICI''), to Mr. Lanza, dated September 14, 2006; Ruth
Brod, Consultant, TRB Associates, to Mr. Lanza, dated September 14,
2006; Terry L. Atkinson, Managing Director, UBS Securities LLC, to
Mr. Lanza, dated September 15, 2006.
    \23\ See letters from Ms. Norwood, Managing Director and
Associate General Counsel, SIFMA, to Mr. Lanza, dated December 14,
2007; S. Lauren Heyne, Chief Compliance Officer, R.W. Smith &
Associates, Inc., to Mr. Lanza, dated December 17, 2007.
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    A commentator on the Pilot Filing suggested that, if the Commission
were to make the MSRB the sole secondary market disclosure filing venue
for issuers and obligated persons, the Commission would move ``closer
to the

Tower Amendment danger zone.'' \24\ As noted in section 3(b) of this
filing, the MSRB believes that the continuing disclosure service is
consistent with the MSRB's statutory mandate under Section 15B of the
Act. In particular, the MSRB believes that the operation of the
continuing disclosure service would in no way violate the restrictions
placed on the MSRB's activities by the so-called Tower Amendment.\25\
The MSRB believes that the proposed continuing disclosure service is
consistent with the MSRB's mandate under the Act to adopt rules that,
among other things, protect investors and the public interest by
providing a free centralized source of information for retail
investors.
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    \24\ See comments of DPC. See also footnote 14 supra.
    \25\ See Exchange Act Section 15B(d).
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    As discussed in greater detail in section 4 of this filing, this
commentator also stated that the MSRB's intention to combine continuing
disclosures with primary market disclosures and trade price data
``breaks new ground among regulatory bodies in terms of value-added
content available to the public at no charge,'' expressing the view
that the MSRB would ``effectively take over the business of providing
value-added content.''\26\ Another commentator on the Pilot Filing
argued in favor of the creation of a ``publicly accessible storage and
dissemination system'' for all filings in the municipal securities
market, stating that the current municipal securities disclosure model
``severely limits innovation and access'' to disclosures and ``locks up
public documents in private hands while the proposed portal run by a
public entity will encourage transparency in the municipal securities
market and create a healthy ecosystem of information that will
ultimately benefit both the investment community and the municipalities
that seek access to public markets.'' \27\
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    \26\ See comments of DPC.
    \27\ See letter from EDGAR Online. See also footnote 15 supra.
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    As discussed in greater detail in section 4 of this filing, the
MSRB believes that the operation by the MSRB of the continuing
disclosure service would not result in the MSRB taking over the
business of providing value-added content but instead serve as a basis
on which private enterprises could themselves concentrate more of their
resources on developing and marketing value-added services. The MSRB
believes that much of the impact of the proposed rule change on
commercial enterprises would result from the increased competition in
the marketplace resulting from the entry of additional commercial
enterprises in competition with such existing market participants with
respect to value-added services, rather than from the operation of
continuing disclosure service as a source of the raw documents and
related information to the public. Although the MSRB recognizes that
the continuing disclosure service might require private enterprises to
modify some aspects of the way they undertake their current business
activities, the MSRB believes that the continuing disclosure service
would promote, rather than hinder, further competition, growth and
innovation in this area.
    Most commentators on the 2008 Notice were supportive of the MSRB's
decision to begin planning for the continuing disclosure service,\28\
although some commentators would not commit fully to support this
process until reviewing possible Commission amendments to Rule 15c2-12
necessary for the development of the MSRB's continuing disclosure
service, as well as specific details relating to the implementation by
the MSRB of the proposed continuing disclosure service.\29\
Commentators representative of issuers encouraged the MSRB to work with
the issuer community in developing the submission process.\30\ The MSRB
has participated in a series of meetings and demonstrations with issuer
organizations to discuss the development of EMMA, including the
continuing disclosure service. The MSRB would continue to work with the
issuer community, as well as with the other relevant segments of the
municipal securities marketplace, as development of the continuing
disclosure service proceeds. In addition, the MSRB intends to work with
issuer organizations to assist issuers in adapting to the process for
submitting continuing disclosure documents to EMMA, including
coordinated efforts targeted at issuers making submissions under
continuing disclosure undertakings entered into prior to the continuing
disclosure service becoming operational, with a view to ensuring that
means for making submissions of continuing disclosure documents through
EMMA are available for issuers that have not yet fully adapted to
EMMA's all-electronic submission process.
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    \28\ See letters from Rob Yolland, Chairman, National Federation
of Municipal Analysts, to Mr. Lanza, dated March 10, 2008; Kathleen
A. Aho, President, National Association of Independent Public
Finance Advisors (``NAIPFA''), to Lynnette Hotchkiss, Executive
Director, MSRB, dated March 10, 2008; Robert Donovan, Executive
Director, Rhode Island Health and Educational Building Corporation,
Stephen M. Fillebrown, Director of Research, Investor Relations and
Compliance, NJ Health Care Facilities Financing Authority, and
Charles A. Samuels and Meghan B. Burke, Mintz Levin Cohn Ferris
Glovsky and Popeo PC, on behalf of National Association of Health
and Educational Facilities Finance Authorities (``NAHEFFA''), to Mr.
Lanza, dated March 3, 2008; Cristeena G. Naser, Senior Counsel,
American Bankers Association, to Mr. Lanza, dated February 28, 2008;
Rick Farrell, Executive Director, Council of Infrastructure
Financing Authorities (``CIFA''), to Mr. Lanza, dated February 25,
2008; Jack Addams, Managing Director, First Southwest Company
(``First Southwest''), to Mr. Lanza, dated February 25, 2008;
Jeffrey L. Esser, Executive Director and CEO, Government Finance
Officers Association (``GFOA''), Vernon L. Larson, President,
National Association of State Auditors, Comptrollers and Treasurers
(``NASACT''), & South Dakota State Treasurer, and Lynn Jenkins,
President, National Association of State Treasurers (``NAST''), &
Kansas State Treasurer, jointly, to Mr. Lanza, dated February 25,
2008; Heather Traeger, Assistant Counsel, ICI, to Mr. Lanza, dated
February 25, 2008; Ms. Norwood, SIFMA, to Mr. Lanza, dated February
25, 2008.
    \29\ See letters from CIFA; GFOA, NASACT and NAST; NAHEFFA;
NAIPFA. GFOA, NASACT and NAST also stated, and NAHEFFA agreed, that
``Rule 15c2-12 should only be changed to allow for electronic
submission of disclosure documents to one central location, and that
no other changes to the Rule should be made.''
    \30\ See letters from CIFA; GFOA, NASACT and NAST; NAHEFFA.
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    One commentator asked whether periodic filings other than
submissions of annual financial information, such as quarterly or
monthly financial results, would be accepted.\31\ A second commentator
sought clarification on whether continuing disclosure information for
offerings sold prior to the launch of the continuing disclosure service
would be accepted and made publicly available.\32\ Another commentator
asked whether historical documents would be included.\33\
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    \31\ See letter from NAHEFFA.
    \32\ See letter from J. Foster Clark, President, National
Association of Bond Lawyers (``NABL''), to Mr. Lanza, dated February
25, 2008.
    \33\ See letter from First Southwest.
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    The MSRB understands that issuers and obligated persons have often
sought to disseminate to the marketplace items of continuing disclosure
that are in addition to the specific items of continuing disclosure
described in Rule 15c2-12. Such additional items may include, but are
not limited to, quarterly or monthly financial information and notices
of other events. In some cases such additional items of disclosure may
be specified under a continuing disclosure undertaking entered into
consistent with Rule 15c2-12. The continuing disclosure documents to be
made publicly available through the EMMA portal would consist of the
specific items of continuing disclosure described in Rule 15c2-12 and
any additional disclosure items as specifically set forth in a
continuing

disclosure undertaking.\34\ Continuing disclosure documents would be
made available for any issue for which such documents have been
submitted to EMMA, regardless of whether the continuing disclosure
undertaking was entered into before or after the establishment of the
continuing disclosure service. EMMA would make available only those
continuing disclosures submitted to EMMA on or after the launch of the
continuing disclosure service.\35\
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    \34\ The MSRB supports the dissemination of additional
continuing disclosures beyond the baseline established by Rule 15c2-
12 and may consider in the future the possible expansion of the
continuing disclosure service to include additional voluntary
secondary market disclosures, which would be the subject of future
filings with the Commission.
    \35\ While EMMA would not include historical documents, the
continuing disclosure documents that would be received by EMMA
through the continuing disclosure service would constitute the most
up-to-date disclosures made by or on behalf of submitting issuers
and obligated persons applicable to their securities.
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    One commentator asked whether all continuing disclosure documents
and information would be available for free on the EMMA portal or
whether some portions would only be available to paid subscribers.\36\
Other commentators sought clarification on the timing of information
that would be provided through a subscription as compared to the time
of posting the information on the EMMA portal.\37\ As noted in this
filing, all continuing disclosures received by the MSRB would be
accessible for free on the EMMA portal and would also be available,
simultaneously with posting on the EMMA portal, through a data-stream
subscription for a fee. The subscription would not provide any
documents or information in addition to what is made public through the
EMMA Web site.
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    \36\ See letter from NABL.
    \37\ See letters from NAHEFFA; First Southwest.
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    A commentator asked whether special software or other arrangements
would be necessary for issuers, obligated persons and their agents to
make submissions of continuing disclosure documents. This commentator
also asked whether submitters would be provided with electronic
confirmation that disclosure materials were received by the continuing
disclosure service.\38\ Continuing disclosure documents may be
converted from other electronic formats to PDF using various free or
commercially available software programs or plug-ins. In those cases
where the original continuing disclosure document exists solely in
paper format (which the MSRB believes is not common and should become
increasingly rare), submitters may use the services of widely available
commercial copying and document handling enterprises or may use
existing or newly acquired scanning hardware. The Web-based data-entry
process that would be established for on-line submissions to the
continuing disclosure service would require no special software other
than a Web browser. Similarly, on-line uploads of data files in
extensible markup language (XML) do not require any special software
but would require programming to create XML files and to provide a
process for accurately populating the XML files with necessary data.
Computer-to-computer connections, an optional means for submitting
continuing disclosures expected to be used primarily by agents acting
on behalf of multiple issuers and/or obligated persons, would require
submitters to use commercially available products or to undertake
programming (at the election of the submitter) to interface with an
EMMA Web service. All submission methods would provide appropriate
feedback to submitters for error correction and submission confirmation
purposes, which may require some programming by submitters to ensure
they realize the full benefit of such feedback.
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    \38\See letters from NAHEFFA.
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    The 2008 Notice sought comment on whether the continuing disclosure
service should accept continuing disclosure submissions from a third
party with respect to an issuer's securities only if the issuer has
affirmatively designated that such third party is authorized to act as
its agent, or whether submissions from any registered EMMA user should
be accepted on behalf of an issuer unless the issuer has affirmatively
indicated that it wishes to take control over which parties can submit
on its behalf.
    Three commentators jointly stated that ``third parties should be
able to submit on behalf of an issuer if and only if the issuer has
affirmatively designated the third party agent to do so [emphasis in
original].'' \39\ Two other commentators agreed,\40\ while another
disagreed,\41\ stating that it was ``concerned that if EMMA does not
accept continuing disclosure from a third party, unless an issuer
specifically authorizes the third party to EMMA, there will be cases of
issuer inaction preventing timely disclosure.'' This commentator stated
that, to avoid potential delays in the dissemination of disclosure to
the marketplace caused by a requirement that the issuer authorize an
agent to act on its behalf, it believed that ``the current practice set
forth in the standard Municipal Secondary Market Disclosure Information
Cover Sheet should be continued, which requires the person/entity
submitting information to represent affirmatively that the person is
authorized to submit the information.'' \42\
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    \39\ See letter from GFOA, NASACT and NAST.
    \40\ See letters from NAHEFFA; First Southwest.
    \41\ See second letter from SIFMA.
    \42\ See second letter from SIFMA. The Cover Sheet referenced in
the comment is a voluntary form created by industry participants for
use in connection with submissions of continuing disclosures.
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    The MSRB believes that the ultimate authority to determine who may
submit documents on behalf of the issuer or obligated person should lie
with such issuer or obligated person and, as a result, the MSRB is
proposing to provide that issuers and obligated persons may designate
agents to submit documents and information on their behalf, and may
revoke such designation, through the EMMA on-line account management
utility, and such designated agents must register to obtain password-
protected accounts on EMMA in order to make submissions on behalf of
the designating issuers or obligated persons. Any party identified in a
continuing disclosure undertaking as a dissemination agent or other
party responsible for disseminating continuing disclosure documents or
other disclosure documents specified pursuant to such continuing
disclosure undertaking may also act as a designated agent for such
issuer or obligated person, without the necessity of the issuer or
obligated person making a designation through the EMMA on-line account
management utility, upon such party certifying through the EMMA on-line
account management utility as to its authority to make submissions on
behalf of the issuer or obligated person under the continuing
disclosure undertaking. The issuer or obligated person, through the
EMMA on-line account management utility, may revoke such authority to
act as a designated agent.

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.
    The MSRB has consented to an extension of the time period specified
in Section 19(b)(2) of the Exchange Act to 120 days after the date of
publication of notice of filing of this proposed rule change.

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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-MSRB-2008-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-MSRB-2008-05. This file
number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such 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-2008-05 and should be
submitted on or before September 22, 2008.

    By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-17857 Filed 8-4-08; 8:45 am]

BILLING CODE 8010-01-P