[Federal Register Volume 84, Number 71 (Friday, April 12, 2019)]
[Notices]
[Pages 14988-15008]
[FR Doc No: 2019-07244]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85551; File No. SR-MSRB-2019-07]

Self-Regulatory Organizations; Municipal Securities Rulemaking
Board; Notice of Filing of a Proposed Rule Change To Amend Rules G-11
and G-32 and Form G-32 Regarding a Collection of Data Elements Provided
in Electronic Format to the EMMA Dataport System in Connection With
Primary Offerings

April 8, 2019.
    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 April 2, 2019 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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-11, on primary offering practices, MSRB Rule G-32, on
disclosures in connection with primary offerings and Form G-32,
regarding a collection of data elements provided in electronic format
to the Electronic Municipal Market Access Dataport (the ``EMMA
Dataport'') \3\ system in connection with primary offerings (the
``proposed rule change''). The proposed rule change seeks to update and
enhance the general practices undertaken by underwriters and others, as
applicable, in a primary offering of municipal securities.
---------------------------------------------------------------------------

    \3\ EMMA[supreg] is a registered trademark of the MSRB. The EMMA
Dataport is the submission portal through which information is
provided for display to the public on EMMA.
---------------------------------------------------------------------------

    Following the effectiveness of the proposed rule change, assuming
all amendments are approved, the MSRB will publish one or more
regulatory notices within 180 days of effectiveness, and such notices
shall specify the compliance dates for the respective rule changes,
which in any case shall be not less than 90 days nor more than one year
following the date of the notice establishing each such compliance
date. The MSRB will also make both amended Form G-32 as well as the
updated EMMA Dataport Manual for Primary Market Submissions and the
Specifications for Primary Market Submissions Service document \4\
available to underwriters in advance of relevant compliance date(s) to
aid them in completing the amended form. The MSRB will announce the
availability of amended Form G-32 and the updated manual and
specification document by publishing a regulatory notice at a later
date.
---------------------------------------------------------------------------

    \4\ The EMMA Dataport Manual for Primary Market Submissions
describes the requirements of MSRB Rule G-32 for underwriters to
submit primary offering disclosure documents and information to EMMA
and gives instructions for making such submissions. Rule G-32
requires that such submissions be made as set forth in the EMMA
Dataport Manual.
    The Specifications for Primary Market Submissions Service
document provides instructions for making continuous submissions of
multiple offerings of securities to the EMMA Dataport and contains
figures for making submissions to the EMMA Dataport through a
computer-to-computer interface.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the MSRB's
website at www.msrb.org/Rules-and-Interpretations/SEC-Filings/2019-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
Rule G-11--Primary Offering Practices
    Rule G-11 establishes terms and conditions for sales by brokers,
dealers and municipal securities dealers (together, ``dealers'') of new
issues of municipal securities in primary offerings, including
provisions on communications relating to the syndicate and designations
and allocations of securities. The rule was first adopted by the MSRB
in 1978, and was designed to

increase the scope of information available to syndicate managers
and members, other municipal securities professionals and the
investing public, in connection with the distribution of new issues
of municipal securities without impinging upon the right of
syndicates to establish their own procedures for the allocation of
securities and other matters.\5\
---------------------------------------------------------------------------

    \5\ MSRB Reports, Vol. 5, No. 6 (Nov. 1985).

    The MSRB noted that, in adopting Rule G-11, the Board generally
chose to require the disclosure of practices of syndicates rather than
dictate what those practices must be.\6\
---------------------------------------------------------------------------

    \6\ See, e.g., MSRB Reports, Vol. 2, No. 5 (Jul. 1982).
---------------------------------------------------------------------------

    Because of the evolving nature of the municipal securities market,
Rule G-11 has been amended several times over the years. More recently,
as part of a retrospective rule review, the MSRB considered how Rule G-
11 applies in the current market and whether amendments may be needed
to address changing practices in primary offerings of municipal
securities. In its review, the MSRB found there were opportunities to
enhance regulatory transparency, equalize information dissemination in
primary offerings, reinforce aspects of Rule G-11 to selling group
members regarding their existing obligations under the rule and align
the mandatory time frames for certain payments to syndicate members in
order to reduce credit risk.
    More specifically, the proposed amendments to Rule G-11 would
enhance the information dissemination requirements of Rule G-11 to
require the senior syndicate manager to disseminate free-to-trade
information to all syndicate and selling group members at the same
time, thus eliminating any potential for unfair advantages in secondary
market trading that could result from having advance notice that

an issue is free-to-trade. Additionally, the proposed rule change would
require the senior syndicate manager to provide the issuer with
information relating to the designations, group net sales credits and
allocations of the securities in a primary offering. The MSRB believes
this information could assist issuers in their review of the
distribution of compensation and compliance with the terms and
conditions of the primary offering. The proposed rule change also would
codify a selling group member's existing obligation to comply with the
issuer terms and conditions, priority provisions and order period
requirements, as communicated to them, in a primary offering. Finally,
the proposed rule change would further eliminate unnecessary credit
risk in the market and ensure the timely payment of sales credits by
aligning the timing of the payments of such credits to syndicate
members in group net and net designation transactions.
Rule G-32--Disclosures in Connection With Primary Offerings
    Rule G-32 sets forth the disclosure requirements applicable to
underwriters engaged in primary offerings of municipal securities.
Among other things, Rule G-32 requires underwriters in primary
offerings to submit electronically to the EMMA Dataport official
statements and advance refunding documents, if prepared, and related
primary market documents and new issue information, such as that
collected on Form G-32. The rule is designed to ensure that an investor
that purchases new issue municipal securities is provided with timely
access to information relevant to his or her investment decision. Rule
G-32 was originally adopted by the Board in 1977,\7\ and has been
amended periodically since then to help ensure that, as market
practices evolved and other regulatory developments occurred, Rule G-32
would remain current and achieve its goal of providing timely access to
relevant information about primary offerings.
---------------------------------------------------------------------------

    \7\ See File No. SR-MSRB-77-12 (Sept. 20, 1977). The SEC
approved Rule G-32 in Release No. 34-15247 (Oct. 19, 1978), 43 FR
50525 (Oct. 30, 1978).
---------------------------------------------------------------------------

    Again, as part of a retrospective rule review, the MSRB considered
the disclosures required pursuant to Rule G-32 and whether revisions
were needed to meet current market needs. The proposed changes to Rule
G-32 would ensure that access to information regarding CUSIP numbers
advance refunded is provided to all market participants at the same
time. Additionally, the proposed changes would eliminate the
requirement under Rule G-32(c) that when a dealer acting as a financial
advisor, prepares the official statement, it must provide the official
statement to the underwriter promptly after approval by the issuer.
Form G-32 Information Submission
    Pursuant to MSRB Rule G-34, on CUSIP numbers, primary offering, and
market information requirements, an underwriter of certain new issues
of municipal securities must, as applicable, make the primary offering
depository eligible and submit information about the new issue to the
Depository Trust Company's (DTC) New Issue Information Dissemination
Service (NIIDS).\8\ Separately, the underwriter in primary offerings of
municipal securities is required, pursuant to Rule G-32, to submit
electronically to the EMMA Dataport, in a timely and accurate manner,
certain primary offering disclosure documents and related information,
including the data elements set forth on Form G-32.\9\
---------------------------------------------------------------------------

    \8\ NIIDS is an automated, electronic system that receives
comprehensive new issue information on a market-wide basis for the
purposes of establishing depository eligibility and immediately re-
disseminating the information to information vendors supplying
formatted municipal securities information for use in automated
trade processing systems. See Rule G-34(a)(ii) regarding the
application for depository eligibility and dissemination of new
issue information and the exclusion of certain issues as set forth
in that subsection.
    DTC sets forth the criteria for making a security depository
eligible and thus NIIDS eligible. According to DTC, securities that
can be made depository eligible include those that have been issued
in a transaction that: (i) Has been registered with the SEC pursuant
to the Securities Act of 1933, as amended (``Securities Act''); (ii)
was exempt from registration pursuant to a Securities Act exemption
that does not involve (or, at the time of the request for
eligibility, no longer involves) transfer or ownership restrictions;
or (iii) permits resale of the securities pursuant to Rule 144A or
Regulation S under the Securities Act, and, in all cases, such
securities otherwise meet DTC's eligibility criteria. See The
Depository Trust Company, Operational Arrangements p. 2 (Oct. 2018).
    \9\ See Rule G-32(b)(i)(A), on Form G-32 information
submissions, and Rule G-32(b)(vi), on procedures for submitting
documents and Form G-32 information. Form G-32 submissions may be
made by the underwriter or its designated agent through the EMMA
Dataport accessed via MSRB Gateway. The EMMA Dataport is the utility
through which submissions of documents and related information are
made to the MSRB and its Market Transparency Programs.
---------------------------------------------------------------------------

    In 2012, the MSRB adopted amendments to Rule G-32 and Rule G-34 to
streamline the process by which underwriters submit data in connection
with primary offerings. The amendments integrated the submission of
certain matching data elements to NIIDS with the EMMA Dataport,
obviating the need for duplicative submissions of information in NIIDS-
eligible primary offerings.\10\
---------------------------------------------------------------------------

    \10\ See MSRB Notice 2012-64 (Dec. 24, 2012).
---------------------------------------------------------------------------

    For a ``NIIDS-eligible primary offering,'' the underwriter must
submit all information to NIIDS as required under Rule G-34.\11\
Subsequently, Form G-32 is auto-populated by the data the underwriter
has input into NIIDS. Information required to be included on Form G-32
and for which no corresponding data element is available through NIIDS
must be submitted manually through the EMMA Dataport on Form G-32
(i.e., it would not be auto-populated from NIIDS) pursuant to Rule G-
32(b)(i)(A)(1)(a). Any correction to NIIDS data (and thus Form G-32
data) must be made promptly and, to the extent feasible, in the manner
originally submitted. For a primary offering ineligible for NIIDS,\12\
the underwriter of the offering must submit information required by
Form G-32 manually as set forth under Rule G-32(b)(i)(A)(2).
---------------------------------------------------------------------------

    \11\ Non-NIIDS-eligible offerings would include, for example,
private placements that are not registered under the Securities Act
or issuances that are subject to restrictions on resales.
    \12\ See supra footnote 8 regarding depository eligibility
criteria. Additionally, Rule G-34(d) exempts from all Rule G-34
requirements any issue of a municipal security (and for purposes of
secondary market municipal securities, any part of an outstanding
maturity of an issue) which (i) does not meet the eligibility
criteria for CUSIP number assignment or (ii) consists entirely of
municipal fund securities.
---------------------------------------------------------------------------

    The requirement under Rule G-34(a)(ii)(C) that an underwriter of a
primary offering of municipal securities that is NIIDS-eligible submit
certain information about the new issue to NIIDS was designed to
facilitate timely and accurate trade reporting and confirmation, among
other things. Additionally, the submission of this information was
meant to address difficulties dealers have in obtaining descriptive
information about new issues of municipal securities.\13\ While
underwriters of issues that are NIIDS-eligible submit a great deal of
information about a primary offering to NIIDS, much of this information
is not currently auto-populated into Form G-32 because not all of the
fields required to be submitted to NIIDS are required fields on Form G-
32.\14\
---------------------------------------------------------------------------

    \13\ The requirement to provide this information and the process
for doing so are addressed in Rule G-34 and Rule G-32, respectively.
While NIIDS provides the system for submitting the information, its
use does not obviate the requirement that information submitted
pursuant to Rule G-34 be timely, comprehensive and accurate. See
MSRB Notice 2007-36 (Nov. 27, 2007).
    \14\ The proposed rule change includes an attachment showing
those NIIDS data fields the MSRB is proposing to include on Form G-
32. Data fields marked with an ``N'' are not currently auto-
populated into Form G-32 because Form G-32 does not have
corresponding data fields to receive the information. While the MSRB
is currently not aware of any reason NIIDS would become unavailable,
the inability to auto-populate information from NIIDS would not
negate the requirement that information be provided pursuant to MSRB
Rule G-32.

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

    The proposed rule change would add 57 data fields to Form G-32 to
capture data that an underwriter already is required to input into
NIIDS, as applicable, for NIIDS-eligible offerings.\15\ These new Form
G-32 data fields would be auto-populated, as applicable, by NIIDS
submissions made by the underwriter, pursuant to G-34 or otherwise
required for NIIDS eligibility.\16\ By adding these data fields to Form
G-32, the MSRB ensures its continued access \17\ to relevant and
accurate new issue information. For non-NIIDS-eligible offerings, the
underwriter would be required to manually complete the data field that
indicates the original minimum denomination of the offering. The
underwriter in a non-NIIDS-eligible offering would not be required to
manually complete the other 57 additional fields.
---------------------------------------------------------------------------

    \15\ See Rule G-34(a)(ii) regarding the application for
depository eligibility and dissemination of new issue information.
See also DTC Important Notice 3349-08 (April 9, 2008); SEC Release
No. 34-57768 (May 2, 2008), 90 FR 26181 (May 8, 2008) (File No. SR-
OTC-2007-10), regarding NIIDS trade and settlement eligibility
requirements.
    \16\ An underwriter currently completes data fields in NIIDS
that are applicable to the particular primary offering. Not all
NIIDS data fields are completed in a typical primary offering and
thus, the Form G-32 data fields will not all be auto-populated for
every offering. Specifically, for a newly issued municipal security
an underwriter must input the key data elements required for the
reporting, comparison, confirmation, and settlement of trades in
municipal securities (``NIIDS Data Elements'') into NIIDS. NIIDS
Data Elements are defined as data needed for trade reporting, trade
matching and to set up trade confirmations (``Trade Eligible
Data''). Additional data elements are also needed for a municipal
security to settle at DTC and are settlement eligible data
(``Settlement Eligible Data''). See The Depository Trust Company
Operational Arrangements (June 2018).
    \17\ As used herein, ``continued access'' means that MSRB would
be able to obtain and, if it determines to do so, disseminate
information, independent of integrated data from a third-party or
utilities.
---------------------------------------------------------------------------

    Currently, the MSRB, securities data providers, other regulators
and industry participants that have set up a communications link with
DTC, have access to NIIDS data in real time. Additionally, the MSRB may
disseminate some or all of the information in the future.
    In addition to the data fields auto-populated by NIIDS submissions,
the proposed rule change also would add nine data fields to Form G-32
for manual completion by underwriters in NIIDS-eligible offerings. Of
these nine data fields, underwriters in non-NIIDS-eligible primary
offerings would be required to complete two of these nine additional
data fields. Specifically, as discussed in more detail below,
underwriters in non-NIIDS-eligible offerings would be required to
manually complete the data fields that provide a ``yes/no'' flag to
indicate whether the minimum denomination for the issue has the ability
to change and the ``yes/no'' flag to indicate if the primary offering
is being made with restrictions.\18\ As previously noted, the MSRB may
disseminate some or all of this information, in the future.
---------------------------------------------------------------------------

    \18\ See infra discussion on amending Form G-32 to include nine
additional data fields not currently collected by NIIDS.
---------------------------------------------------------------------------

Proposed Rule Change
    On September 14, 2017, the MSRB published a concept proposal
(``Concept Proposal'') requesting comment on possible amendments to the
current primary offering practices of dealers.\19\ The MSRB received 12
comment letters in response to the Concept Proposal,\20\ which formed
the foundation for a subsequent Request for Comment on Draft Rule
Changes Related to Primary Offering Practices, published on July 19,
2018 (``Request for Comment'').\21\ The MSRB received 10 comment
letters in response to the Request for Comment.\22\ Following review of
the comments, the MSRB conducted additional outreach with various
market participants. The comments received and follow-up conversations
formed the basis for the proposed rule change.
---------------------------------------------------------------------------

    \19\ MSRB Regulatory Notice 2017-19 (Sept. 14, 2017).
    \20\ Letter from Mike Nicholas, Chief Executive Officer, Bond
Dealers of America, dated Nov. 16, 2017 (``BDA Letter I''); Letter
from City of San Diego, undated (``City of San Diego Letter I'');
Letter from Robert W. Doty, dated Nov. 2, 2017 (``Doty Letter I'');
Email from Stephan Wolf, Global Legal Entity Identifier Foundation,
dated Nov. 6, 2017 (``GLEIF Letter I''); Letter from Emily Brock,
Director, Federal Liaison Center, Government Finance Officers
Association, dated Nov. 27, 2017 (``GFOA Letter I''); Letter from
Alexandra M. MacLennan, National Association of Bond Lawyers, dated
Nov. 17, 2017 (``NABL Letter I''); Letter from Susan Gaffney,
Executive Director, National Association of Municipal Advisors,
dated Nov. 13, 2017 (``NAMA Letter I''); Letter from Julie Egan,
NFMA Chair 2017 and Lisa Washburn, NFMA Industry Practices &
Procedures Chair, National Federation of Municipal Analysts, dated
Nov. 9, 2017 (``NFMA Letter I''); Email from Michael Paganini, dated
Sept. 15, 2017 (``Paganini Email I''); Letter from Leslie M.
Norwood, Managing Director and Associate General Counsel, Securities
Industry Financial Markets Association, dated Nov. 15, 2017 (``SIFMA
Letter I''); Letter from John S. Craft, Managing Director, TMC Bonds
LLC, dated Nov. 13, 2017 (``TMC Bonds Letter I''); and Letter from
Gilbert L. Southwell III, Vice President, Wells Capital Management,
Inc., dated Nov. 1, 2017 (``Wells Capital Letter I'').
    \21\ MSRB Notice 2018-15 (July 19, 2018).
    \22\ Letter from Noreen P. White, Co-President and Kim M.
Whelan, Co-President, Acacia Financial Group, Inc., dated Sept. 17,
2018 (``Acacia Letter II''); Letter from Mike Nicholas, Chief
Executive Officer, Bond Dealers of America, dated Sept. 17, 2018
(``BDA Letter II''); Email from Stephen Holstein, CFI, dated Jul.
25, 2018 (``CFI Email II''); Letter from Steve Apfelbacher, Ehlers
Associates, Inc., dated Sept. 17, 2018 (``Ehlers Letter II'');
Letter from Emily S. Brock, Director, Federal Liaison Center,
Government Finance Officers Association, dated Sept. 19, 2018
(``GFOA Letter II''); Letter from Susan Gaffney, Executive Director,
National Association of Municipal Advisors, dated Sept. 18, 2018
(``NAMA Letter II''); Letter from Julie Egan, NFMA Industry
Practices & Procedures Chair, and Lisa Washburn, NFMA Industry
Practices & Procedures Co-Chair, National Federation of Municipal
Analysts, dated Sept. 17, 2018 (``NFMA Letter II''); Letter from
Marianne F. Edmonds, Public Resources Advisory Group, dated Sept.
18, 2018 (``PRAG Letter II''); Letter from Leslie M. Norwood,
Managing Director and Associate General Counsel, Securities Industry
and Financial Markets Association, dated Sept. 17, 2018 (``SIFMA
Letter II''); Letter from Rick A. Fleming, Investor Advocate, U.S.
Securities and Exchange Commission, Office of the Investor Advocate,
dated Sept. 17, 2018 (``SEC Investor Advocate Letter II'').
---------------------------------------------------------------------------

Proposed Rule Change Under Rule G-11
Codify That Selling Group Members Have an Existing Obligation To Comply
With Communications Relating to the Issuer Terms and Conditions,
Priority Provisions and Order Period Requirements
    The proposed rule change would amend Rule G-11(f) to codify an
existing obligation of selling group members to comply with the written
communications they receive from the senior syndicate manager relating
to, among other things, issuer requirements, priority provisions and
order period requirements. Rule G-11(f) currently states that prior to
the first offer of any securities by the syndicate, the senior
syndicate manager is required to provide, in writing, to syndicate
members and selling group members, if any, ``(i) a written statement of
all terms and conditions required by the issuer, (ii) a written
statement of all of the issuer's retail order period requirements, if
any, [and] (iii) the priority provisions . . .'' The senior syndicate
manager must also promptly furnish in writing to the syndicate members
and the selling group members any changes in the priority provisions or
pricing information.
    Additionally, the MSRB has stated that the activities of all
dealers should be viewed in light of the basic fair dealing principles
of Rule G-17, on conduct of municipal securities and municipal advisor
activities.\23\ In 2013, the MSRB amended Rule G-11 to, among other
things, address concerns related to retail order period practices and
required expressly that the senior syndicate manager's written
statement of all terms and conditions required by

the issuer also be delivered to selling group members.\24\ The
amendment also added Rule G-11(k) to require that any dealer that
submits an order designated as retail during a retail order period must
provide certain information that would assist in determining if the
order is a bona fide retail order. The 2013 amendments to Rule G-11
coupled with the Rule G-17 guidance indicates selling group members are
subject to the issuer requirements in allocating securities to their
investors.\25\
---------------------------------------------------------------------------

    \23\ See MSRB Notice 2009-42 (July 14, 2009).
    \24\ See Release No. 34-70532 (Sept. 26, 2013), 78 FR 60956
(Oct. 2, 2013) (File No. SR-MSRB-2013-05).
    \25\ See also Rule G-11(b) which requires that every dealer that
submits an order to a syndicate or to a member of a syndicate for
the purchase of securities must disclose at the time of submission
if the order is for its dealer account or a related account of the
dealer.
---------------------------------------------------------------------------

    By codifying this existing obligation, the amendment would
highlight that selling group members must comply with the priority
provisions and other issuer terms and conditions when they receive
written notification of such from the syndicate manager.
Require That the Senior Syndicate Manager Communicate to All Syndicate
and Selling Group Members, at the Same Time, When the Issue Is Free To
Trade
    The proposed rule change would amend Rule G-11(g) to add new
subsection (ii) which would require the senior syndicate manager to
notify all members of the syndicate and selling group, at the same time
via free-to-trade wire or electronically by other industry-accepted
method of communication, that the offering is free to trade at a price
other than the initial offering price.\26\
---------------------------------------------------------------------------

    \26\ The other provisions of Rule G-11(g) would be renumbered
accordingly to account for this addition.
---------------------------------------------------------------------------

    In a primary offering of municipal securities where a syndicate is
formed (i.e., not a sole-managed offering), a free-to-trade wire is
sent by the senior syndicate manager to syndicate members once all of
the municipal securities in the issue or particular maturity (or
maturities) are free to trade. That is, the free-to-trade wire
communicates to members of the syndicate that they may trade the bonds
in the secondary market at market prices which could be the same or
different than the initial offering price.\27\
---------------------------------------------------------------------------

    \27\ For purposes of reporting transactions after the free-to-
trade information has been disseminated, the MSRB has indicated that
once a new issue has been released for trading (i.e., is free to
trade), normal transaction reporting rules will apply to the
syndicate managers, syndicate members and selling group members. See
Release No. 34-49902; (Jun. 22, 2004), 69 FR 38925 (Jun. 29, 2004)
(File No. SR-MSRB-2004-02).
---------------------------------------------------------------------------

    The MSRB believes equal access to information is important to the
fair and effective functioning of the market for primary offerings of
municipal securities. Therefore, the MSRB believes requiring
dissemination of this information for receipt by all syndicate and
selling group members at the same time would prevent preferential
access to the free-to-trade information (thus, understanding that they
are then able to commence selling bonds at market prices) by some while
other syndicate and selling group members, who are not aware of the
information, are delayed in knowing that they may transact at prices
other than the initial offering price.
    The MSRB understands that methods of communication evolve and
change over time. As a result, the dissemination of free-to-trade
information eventually may be made by methods other than the
traditional ``free-to-trade wire.'' While the MSRB is not proposing to
dictate the timing of when, or the form of how, the free-to-trade
communication should be sent, requiring dissemination of this
information electronically by an industry-accepted method that ensures
all syndicate and selling group members receive the information at the
same time would level the playing field.\28\
---------------------------------------------------------------------------

    \28\ The MSRB reminds dealers that such distributed
communication would be subject to the record retention requirements
of Rule G-9(b)(viii)(C) which requires the dealer to maintain, among
other things, all written and electronic communications received and
sent relating to the conduct of the municipal securities activities
of such dealer and Exchange Act Rule 17a-4(b)(4) which requires
dealers to maintain copes of all communications sent by the dealer
relating to its business as such.
---------------------------------------------------------------------------

Require the Senior Syndicate Manager To Provide Information Required
Under Rule G-11(g)(ii) and (iii) to Issuers in a Primary Offering
    Currently, the senior syndicate manager is not required to provide
information to issuers regarding designations and allocations of
municipal securities in a primary offering.\29\ The proposed rule
change would amend Rule G-11(g)(ii) and (iii) \30\ to require the
senior syndicate manager to comply with the information-dissemination
provisions of this rule with respect to issuers in addition to just
syndicate members. Rule G-11(g)(ii) requires, in part, the senior
syndicate manager, within two business days following the date of sale,
to disclose to the syndicate, in writing, a summary by priority
category, of all allocations of securities accorded priority over
member orders. Rule G-11(g)(iii) requires the senior syndicate manager
to disclose, in writing and as set forth in the rule, to each member of
the syndicate information on the designations paid to syndicate and
non-syndicate members.
---------------------------------------------------------------------------

    \29\ ``Designation'' typically refers to the percentage of the
takedown or spread that a buyer directs the senior syndicate manager
to credit to a particular syndicate member (or members) in a net
designated order. ``Allocation'' generally refers to the process of
setting securities apart for the purpose of distribution to
syndicate and selling group members. See MSRB Glossary of Municipal
Securities Terms.
    \30\ Currently, these provisions are Rule G-11(g)(ii) and (iii).
However, with the proposed addition of Rule G-11(g)(ii) noted above,
these provisions would become Rule G-11(g)(iii) and (iv).
---------------------------------------------------------------------------

    The MSRB believes that providing this information to the issuer
along with information on group net sales credits, as described more
fully below, would better inform all issuers of the orders and
allocations of their primary offering. The MSRB believes this
information would be valued particularly by those issuers who are not
aware this information is available for their review. An issuer who
does not wish to receive or review this information need simply delete
the communication at its discretion.
Align the Timeframe for the Payment of Group Net Sales Credits With the
Payment of Net Designation Sales Credits
    The proposed rule change would amend Rule G-11(j) to align the
current timeframe for the payment of group net sales credits with the
existing timeframe for the payment of net designation sales credits as
set forth therein. Currently, Rule G-11(i) states that the final
settlement of a syndicate or similar account shall be made within 30
calendar days following the date the issuer delivers the securities to
the syndicate. Group net sales credits (i.e., those sales credits for
orders in which all syndicate members benefit according to their
participation in the account) are paid out of the syndicate account
when it settles pursuant to Rule G-11(i). As a result, syndicate
members may wait 30 calendar days following receipt of the securities
by the syndicate before they receive their group net sales credits. By
contrast, Rule G-11(j) states that sales credits due to a syndicate
member as designated by an investor in connection with the purchase of
securities (``net designation payments'') shall be distributed within
10 calendar days following the date the issuer delivers the securities
to the syndicate.
    The SEC approved amendments to Rule G-11(i) in 2009 to, among other
things, shorten the timeframe for settlement of the syndicate account
from 60 calendar days to 30 calendar days following the date the issuer
delivers the securities to the syndicate. The

amendments also shortened the timeframe for the payment of net
designation orders in Rule G-11(j) from 30 calendar days to 10 calendar
days. The MSRB indicated that the shortened timeframes were intended to
reduce the exposure of co-managers to the credit risk of the senior
manager pending settlement of the accounts.\31\
---------------------------------------------------------------------------

    \31\ See Release No. 34-60725 (Sept. 28, 2009), 74 FR 50855
(Oct. 1, 2009) (File No. SR-MSRB-2009-12).
---------------------------------------------------------------------------

    The proposed amendments would not impact the timing of the
settlement of the syndicate account, but rather would merely align the
timeframe for the payment of group net and net designation sales
credits. The MSRB believes aligning the time frames for the payment and
receipt of sales credits would be a minor adjustment that would ensure
uniform practice in making and receiving such payments in a timely
manner. In addition, this proposed rule change would reduce credit risk
by decreasing the exposure of syndicate trading account members to the
potential deterioration in the credit of the syndicate or account
manager during the pendency of account settlements. The MSRB further
believes that the time period of 10 calendar days would provide balance
between reducing risk of exposure of co-managers and the credit risk of
the senior manager while still providing the senior syndicate manager
with the time needed to process and pay the sales credits.
    As a result of the alignment of these payments, the information
that is currently provided within 30 calendar days of delivery of
securities to the syndicate under Rule G-11(h)(ii)(B) would now be
provided within 10 business days following the date of sale under
revised Rule G-11(g)(iv). Thus, the proposed rule change would delete
Rule G-11(h)(ii)(B), and Rule G-11(h)(ii)(C) would be amended to become
Rule G-11(h)(ii)(B).
Proposed Rule Change Under Rule G-32
Provide Equal Access To Advance Refunding Documents and Related
Information \32\
---------------------------------------------------------------------------

    \32\ In general, advance refunding issues are those municipal
bonds issued more than 90 days before the redemption of the refunded
bonds. See MSRB Interpretive Guidance--Current Refundings (Aug. 8,
1991).
---------------------------------------------------------------------------

    The proposed rule change would amend Rule G-32(b)(ii) to require
that in an advance refunding, where advance refunding documents are
prepared, the underwriter must provide access to the documents and
certain related information to the entire market at the same time.\33\
---------------------------------------------------------------------------

    \33\ This means underwriters would be precluded from
disseminating advance refunding documents and information to any
market participant, without first submitting it to the EMMA
Dataport; provided that this restriction does not prohibit
communication with anyone that may require such information for
purposes of facilitating the completion of the transaction.
---------------------------------------------------------------------------

    Currently, Rule G-32(b)(ii) requires the advance refunding
documents and applicable Form G-32 information be submitted to the EMMA
Dataport, no later than five business days after the closing date for
the primary offering. However, the MSRB understands that in some
instances, some market participants may be informed of the advance
refunding details before the information is submitted and made public
on EMMA.
    The MSRB believes that equal access to advance refunding
information is important for the efficient functioning of the primary
and secondary market for municipal securities. The MSRB also believes
requiring underwriters to provide information to the market regarding
CUSIP numbers advance refunded in a manner that allows access to the
information by the entire market at the same time would support this
effort.
Repeal the Requirement That a Dealer Financial Advisor That Prepares
the Official Statement Must Make It Available to the Managing or Sole
Underwriter After the Issuer Approves It for Distribution
    The proposed rule change would repeal the current requirement under
Rule G-32(c) that a dealer financial advisor that prepares an official
statement on behalf of an issuer with respect to a primary offering of
municipal securities make the official statement available to the
managing underwriter or sole underwriter in a designated electronic
format, promptly after the issuer approves its distribution.
    In the Concept Proposal and Request for Comment the MSRB sought
comment on whether the requirement under Rule G-32(c) should be
extended to require all financial advisors (i.e., both dealer and non-
dealer) that have prepared the official statement to provide the
official statement to the underwriter promptly after approved by the
issuer. Upon review of comment letters and discussions with various
market participants, the MSRB is proposing to repeal this requirement
under Rule G-32(c).
    Rule G-32 was adopted in 1977 to ensure that investors purchasing
new issue municipal securities are provided with all available
information relevant to their investment decision by settlement of the
transaction.\34\ The Board has recognized that the MSRB cannot
prescribe the content, timing, quantity or manner of production of the
official statement by the issuer or its agents.\35\ Thus, the MSRB
crafted Rule G-32(c) to ensure that once the official statement is
completed and approved by the issuer, dealers acting as financial
advisors would be obligated to begin the dissemination process
promptly. The Board further urged that issuers using the services of
non-dealer financial advisors hold those financial advisors to the same
standards for prompt delivery.\36\ The Board noted that the requirement
under Rule G-32(c) was not meant to diminish a dealer's obligations
under Securities Exchange Act Rule 15c2-12(b)(3).
---------------------------------------------------------------------------

    \34\ See File No. SR-MSRB-77-12 (Sept. 20, 1977). The SEC
approved Rule G-32 in Release No. 34-15247 (Oct. 19, 1978), 43 FR
50525 (1978).
    \35\ See Release No. 34-40230 (July 17, 1998); 63 FR 40148 (July
27, 1998) (File No SR-MSRB-97-14).
    \36\ Id.
---------------------------------------------------------------------------

    Exchange Act Rule 15c2-12(b)(3) requires that an underwriter
contract with the issuer or its agent to obtain copies of the official
statement within the time period mandated by the rule. According to the
SEC, the purpose of this provision is to ``facilitate the prompt
distribution of disclosure documents so that investors will have a
reference document to guard against misrepresentations that may occur
in the selling process.'' \37\
---------------------------------------------------------------------------

    \37\ See Release No. 34-26985 (June 28, 1989); 54 FR 28799 at
28805 (Jul. 10, 1989).
---------------------------------------------------------------------------

    In adopting the rule, the SEC recognized the existing delivery
requirements under Rule G-32 and noted that

    By adopting paragraph (b)(3), which serves as a foundation for
fostering compliance with the requirements of MSRB rule G-32, the
Commission wishes to emphasize the importance it places on the
prompt distribution of final official statements.\38\
---------------------------------------------------------------------------

    \38\ Id.

    The SEC noted that in adopting Rule 15c2-12(b)(3), it was leaving
the determination of the ``precise method and timing of delivery'' of
the official statement to the MSRB.\39\
---------------------------------------------------------------------------

    \39\ See 54 FR 28799 at 28806.
---------------------------------------------------------------------------

    The MSRB understands that several participants in a primary
offering may be responsible for preparing the official statement,\40\
and while dealers acting as

financial advisors and non-dealer municipal advisors may be engaged to
review and contribute to portions of the document, they are less
frequently engaged to ``prepare'' the official statement as they might
have been in the past. Therefore, while the goal of Rule G-32(c) is
consistent with the overall goal of Rule G-32 and Exchange Act Rule
15c2-12(b)(3), that is, to facilitate the prompt distribution of the
official statement to the market and investors, that section of the
rule itself is limited in such a way that its usefulness in the current
market is questionable. The MSRB understands that Rule G-32(c)
requirements apply to a limited universe of market participants (i.e.,
dealers acting as financial advisors that prepare the official
statement). This leaves a gap such that Rule G-32(c) does not extend to
parties other than dealers acting as financial advisors who prepare the
official statement.
---------------------------------------------------------------------------

    \40\ For example, the MSRB understands that bond counsel or
underwriter's counsel frequently prepares the official statement on
behalf of the issuer and may seek input on various components from
the underwriter or the municipal advisor. However, Rule G-32(c) does
not apply to bond counsel or underwriter's counsel, and the MSRB
does not have jurisdiction over these parties in any event.
Therefore, if these parties were engaged to prepare the official
statement for the issuer, they would not be subject to the
requirements of Rule G-32(c).
---------------------------------------------------------------------------

    In reviewing Rule G-32(c) and considering whether to expand the
section of the rule to include non-dealer municipal advisors, the MSRB
considered whether the existing rule and/or the expansion thereof would
resolve a harm in the market. After discussions with various market
participants and consideration of the actual scope of the impact of the
rule, the MSRB believes any harm in the market related to the delivery
of official statements would not be resolved by Rule G-32(c) regardless
of whether dealers acting as financial advisors and non-dealer
municipal advisors are required to comply. The MSRB believes the scope
of Rule G-32(c) may be too limited to have any significant impact on
the official statement delivery requirements.
    The MSRB understands that the obligation under Exchange Act Rule
15c2-12(b)(3) for an underwriter to contract with the issuer or its
agent to receive the official statement within a defined period of time
already ensures that the underwriter would receive the official
statement within a certain period of time regardless of the party
preparing it.
Proposed Changes to Form G-32
Amend Form G-32 To Include 57 Additional Data Points Already Collected
by NIIDS
    The proposed rule change would amend Form G-32 to include 57
additional data fields that would be auto-populated with datapoints
already required to be input into NIIDS, as applicable, for NIIDS-
eligible offerings. As previously noted, these data fields are
currently available to regulators and certain other industry
participants that have access to NIIDS. However, adding the data fields
to Form G-32 would ensure the MSRB's continued access to important
primary offering information, and enhance its ability to oversee the
accuracy and distribution of the information provided.
    At this time, however, the MSRB believes requiring the manual
completion of all the above data fields for non-NIIDS-eligible issues
such as private placements and other restricted offerings that are not
intended for secondary market trading would be burdensome on
underwriters.\41\ Thus, for a non-NIIDS-eligible primary offering, an
underwriter would continue to be required to manually complete the same
data fields on Form G-32 that it currently completes with the addition
of one of the 57 data fields discussed above. The additional data field
would indicate the original minimum denomination of the offering, as
applicable. As with the other data points currently required on Form G-
32, once an underwriter provides the information, it would be available
to regulators. Regulators could use this information to determine
whether a new issue of municipal securities is trading at the
appropriate minimum denomination in the secondary market. Additionally,
as with the other NIIDS data points discussed above, the MSRB may
disseminate this information in the future.
---------------------------------------------------------------------------

    \41\ Non-NIIDS-eligible securities are less likely to trade in
the secondary market because they typically are issued with trading
restrictions and, therefore, less liquid. They are different from
NIIDS-eligible securities, which by their nature are DTC eligible,
and are freely tradable in the market. See supra footnote 8. The
MSRB would continue to monitor the need for specific information
with respect to non-NIIDS-eligible offerings to determine whether
any other additional data elements may be required at a later time.
---------------------------------------------------------------------------

    The MSRB believes that, at this time, requiring this additional
information on Form G-32, as applicable, for NIIDS-eligible offerings,
and requiring the single additional data point for non-NIIDS-eligible
offerings would not only assist the MSRB in ensuring its continued
access to new issue information but would enhance MSRB regulatory
transparency initiatives.
Amend Form G-32 To Include Nine Additional Data Fields Not Currently
Collected by NIIDS
    The proposed rule change would amend Form G-32 to include nine
additional data fields, set forth below, for manual completion (i.e.,
not auto-populated from NIIDS), as applicable, by underwriters in
NIIDS-eligible primary offerings of municipal securities. Underwriters
in non-NIIDS-eligible primary offerings would be required to manually
complete two of these data fields: the ``yes'' or ``no'' indicator
regarding whether the original minimum denomination for a new issue has
the ability to change, and the ``yes'' or ``no'' indicator regarding
whether the new issue has any restrictions. However, underwriters in
non-NIIDS-eligible offerings would not be required to complete the
other seven data fields.
    The MSRB believes that the information collected by these data
fields would enhance MSRB regulatory transparency initiatives as all
the additional data elements would be immediately available to
regulators to perform regulatory oversight of primary offerings and
subsequent secondary market trading practices to ensure a fair and
efficient market. Additionally, the MSRB may disseminate some or all of
this information in the future.
    The proposed rule change would amend Form G-32 to add the following
data fields:
    Ability for original minimum denomination to change--The MSRB
believes providing a ``yes'' or ``no'' indicator at the time of
issuance as to whether the original minimum denomination for an issue
can change, would immediately enhance regulatory transparency and
provide useful information to investors, should the MSRB disseminate
this information in the future. In some primary offerings, for example,
if the official statement or other offering document indicates that a
municipal security is non-rated or below investment grade at the time
of issuance, but the security achieves an investment grade rating at
some point in the future, this could result in a change to the original
minimum denomination. Because an underwriter would not be required to
update this information over the life of the municipal security, having
this indicator would highlight the need to check relevant disclosure
documents for developments that could trigger a change in the original
minimum denominations.
    Additional syndicate managers--The MSRB believes that having a data
field

that indicates all the syndicate managers (senior and co-managers) on
an underwriting would provide useful information for regulators. For
example, regulators would be able to more easily identify where a
particular syndicate manager was engaged or seek more information about
particular syndicate managers, as needed, in performing oversight.
Additionally, should the MSRB disseminate this information in the
future, it could be used to evaluate the experience of a syndicate
manager for an upcoming offering.
    The MSRB believes the complete list of underwriters typically is
known at or before the pricing of an issue and, therefore, senior and
co-manager information is readily available to the senior underwriter
before Form G-32 is due.
    Call schedule--Requiring call schedule information on Form G-32
would include, for example, premium call dates and prices, and the par
call date. For primary offerings with call prices stated as a
percentage of the compound accreted value (CAV) the underwriter would
enter the premium call dates and percentage of CAV the new issue can be
called at as well as the par call date. All of which would immediately
increase regulatory transparency, providing regulators with
intermediate premium call dates and prices, and a means to
differentiate between a call price represented in dollars as opposed to
CAV. Additionally, should the MSRB disseminate this information in the
future, access to all the relevant call information could help
investors make more informed investment decisions.
    Identity of obligated person(s), other than the issuer--The MSRB
believes that providing the name(s) of the obligated person(s), other
than the issuer, for a primary offering of municipal securities is
important because they are responsible for continuing disclosures, and
this information is sometimes not easily identifiable for regulatory
transparency purposes. Also, having more ways of identifying those
legally committed to support payment of all or part of a primary
offering would increase transparency, should the MSRB disseminate this
information in the future. The MSRB recognizes that there may be
confusion in identifying other obligated persons in a manner that is
consistent. As a result, the MSRB believes the identity of the other
obligated person(s) should be input on Form G-32 the same as it appears
on the official statement, or if there is no official statement, in the
manner it appears in the applicable offering documents for the issue.
This would ensure uniform practice in the identity of the obligated
person(s), other than the issuer, with respect to that issue.
    LEI for credit enhancers and obligated person(s), other than the
issuer,\42\ if readily available--The LEI provides a method to uniquely
identify legally distinct entities that engage in financial
transactions. The goal of this global identification system is to
precisely identify parties to a financial transaction to assist
regulators, policymakers and financial market participants in
identifying and better understanding risk exposure in the financial
markets and to allow monitoring of areas of concern. The MSRB believes
that requiring this information for credit enhancers and obligated
persons, other than the issuer, if readily available, would promote the
value of obtaining LEIs and encourage industry participants to obtain
them as a matter of course. An LEI would be considered ``readily
available'' if it were easily obtainable via a general search on the
internet (e.g., web pages such as https://www.gleif.org/en/lei/search).
The MSRB also believes that obtaining this information, when readily
available, on credit enhancers and other obligated persons would help
advance the goal of having a global identification method for these
parties and improve the quality of municipal market financial data and
reporting.
---------------------------------------------------------------------------

    \42\ An LEI is a 20-digit alpha-numeric code that connects to
key reference information providing unique identification of legal
entities participating in financial transactions. Only organizations
duly accredited by GLEIF are authorized to issue LEIs. The MSRB
believes that, at this time, except for credit enhancers and
obligated person(s), other than the issuer, the LEI information
being sought is not critical in evaluating the financial risks of an
issuer, and because issuers typically do not obtain an LEI, the
likely time and costs associated with having to conduct a search to
determine if LEI information is readily available for an issuer,
would exceed any potential benefits.
---------------------------------------------------------------------------

    Dollar amount of each CUSIP number advance refunded--The MSRB
believes requiring information regarding the dollar amount of each
CUSIP number advance refunded on Form G-32 would provide regulators
important information regarding material changes to a bond's structure
and value and should the MSRB disseminate this information in the
future, may assist investors in making more informed investment
determinations.
    In the Request for Comment, the MSRB sought comment on a data field
that would show the percentage of each CUSIP number advance refunded.
Upon review of comments and discussions with certain market
participants, the MSRB believes requiring the dollar amount of each
CUSIP number advance refunded instead of the percentage advance
refunded would be more useful in understanding the value of the portion
of an issue being advance refunded and would be less burdensome for
underwriters to calculate.
    Retail order period by CUSIP number--Currently, primary offerings
are flagged in the EMMA Dataport to indicate whether there is/was a
retail order period. However, quite often not every maturity related to
the offering is subject to a retail order period. The MSRB believes
that requiring underwriters to mark a primary offering with a flag to
indicate the existence of a retail order period for each CUSIP number
would provide greater regulatory transparency as to the amount and
types of bonds being offered in that retail order period. For example,
a ``yes'' or ``no'' flag by CUSIP number would help regulators more
easily identify orders that may not comply with a retail order period.
    Name of municipal advisor--The MSRB believes including this
information would enhance regulatory transparency as key market
participants would be more easily identifiable to regulators.
Additionally, should the MSRB disseminate this information in the
future, it could also assist certain market participants in evaluating
the experience of the municipal advisor when reviewing primary
offerings, especially for similar credits and structures. Finally, the
MSRB intends to make this field autofill as the underwriter begins to
input the name of the municipal advisor into the applicable text box.
    Restrictions on the issue--The MSRB believes adding a ``yes'' or
``no'' flag to Form G-32 for an underwriter to indicate whether the
primary offering is being made with restrictions would help regulators
and, should the MSRB disseminate this information in the future, it
could help certain other market participants more easily identify this
information. An explanation would be provided on Form G-32 indicating
that ``yes'' should be selected for any offerings made with a
restriction on sales, resales or transfers of securities such as, for
example, sales only to qualified institutional buyers as defined under
Securities Act Rule 144A and sales only to accredited investors as
defined under Rule 501 of Regulation D under the Securities Act.
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,\43\ which provides that the MSRB's rules shall:
---------------------------------------------------------------------------

    \43\ 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,
---------------------------------------------------------------------------
municipal entities, obligated persons, and the public interest.

    The proposed rule change would promote just and equitable
principles of trade and remove impediments to and perfect the mechanism
of a free and open market by amending Rule G-11 to require the senior
syndicate manager to notify all syndicate and selling group members, at
the same time via free-to-trade wire or other industry-accepted
electronic communication method, that the offering is free to trade in
the secondary market. This proposed change would eliminate the
potential for an unfair advantage in the secondary sales of municipal
securities. Similarly, the proposed rule change would remove
impediments to and perfect the mechanism of a free and open market by
requiring the underwriter in an advance refunding to disclose advance
refunding information, so all market participants have access to such
information at the same time.
    The proposed rule change would promote just and equitable
principles of trade by codifying in Rule G-11 the existing obligation
of selling group members to comply with the issuer's terms and
conditions in a primary offering of municipal securities. The proposed
rule change also would promote just and equitable principles of trade
by ensuring issuers in a primary offering have information regarding
the designations and allocations of their offering. Additionally,
providing this information to issuers removes impediments to a free and
open market in municipal securities by giving issuers valuable
information they otherwise may not realize or know is available.
    The proposed rule change would promote just and equitable
principles of trade and foster cooperation and coordination with
persons engaged in processing information with respect to transactions
in municipal securities and municipal financial products by aligning
the payment of sales credits in net designation and group net sales
transactions. Additionally, aligning these payments would remove
impediments to a free and open market in municipal securities and
municipal financial products by reducing credit risk in the market and
allowing group net sales credit payments to be made to syndicate
members on a shortened timeframe.
    The inclusion on Form G-32 of additional data fields would foster
cooperation with persons engaged in regulating and processing
information with respect to transactions in municipal securities and
municipal financial products, by providing more transparency with
respect to municipal securities offerings. For example, by obtaining
this information, the MSRB and other regulators would have access to
more fulsome and useful market data to help inform its regulation of
the municipal securities markets.
    Finally, the proposed rule change would remove impediments to and
perfect the mechanism of a free and open market in municipal securities
by removing Rule G-32(c). By eliminating a rule that no longer resolves
a market harm, the proposed rule change seeks to more appropriately
respond to actual market practices, reduce regulatory burdens and thus
encourage compliance with a more appropriate and beneficial process by
which the underwriter receives the official statement in a primary
offering of municipal securities.

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.\44\ The
MSRB has considered the economic impact associated with the proposed
amendments to Rule G-11, Rule G-32 and Form G-32 including a comparison
to reasonable alternative regulatory approaches, relative to the
baseline.\45\ 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.
---------------------------------------------------------------------------

    \44\ Id.
    \45\ See Policy on the Use of Economic Analysis in MSRB
Rulemaking, available at http://msrb.org/Rules-and-Interpretations/Economic-Analysis-Policy.aspx. In evaluating whether there was a
burden on competition, the Board was guided by its principles that
required the Board to consider costs and benefits of a rule change,
its impact on capital formation and the main reasonable alternative
regulatory approaches.
---------------------------------------------------------------------------

    The MSRB believes the proposed rule change is needed to increase
regulatory transparency in the primary offering process and secondary
market trading. Additionally, the MSRB believes the proposed rule
change is necessary to ensure its continued access to important new
issue information, address possible information asymmetry that arises
from certain market practices and to improve the overall efficiency of
the market.
Rule G-11--Primary Offering Practices
    The proposed amendments to Rule G-11 would address free-to-trade
information dissemination, require information regarding designations,
group net sales credits and allocations be provided to the issuer in a
primary offering, align the time period for the payment of group net
sales credits with the payment of net designation sales credits and
explicitly state that selling group members must comply with the
issuer's terms and conditions in a primary offering. The need for the
proposed amendments arises from the MSRB's oversight of underwriters in
primary offerings of municipal bonds. The MSRB believes that by not
amending Rule G-11 and instead leaving the rule in its current state,
certain market issues would remain unaddressed. For example, market
transparency would not be enhanced, and information asymmetry would not
be reduced with respect to certain areas.
    The MSRB also considered other alternative approaches to the
proposed changes to Rule G-11. Regarding the requirement for the senior
syndicate manager to provide detailed information regarding
designations, group net sales credits and allocations of the securities
in a primary offering to the issuer, the MSRB could also require that
the information be provided to the issuer, but only upon the issuer's
request. However, the MSRB believes this alternative could result in
frequent issuers having better access to information than issuers who
are unaware that the information is available upon request. The
proposed change to this requirement is designed to ensure that all
issuers receive the relevant information on designations, group net
sales credits and allocations, and the obligation can be met with the
existing documents that are sent to syndicate members. A similar
alternative would be to require the senior syndicate manager to provide
designation, group net sales credit and allocation information to all
issuers with an option to opt out of receiving the information.
However, the MSRB is not aware of any likely rationale behind an
issuer's decision to decline the information other than the fact that
the issuer may decide the burden of

reviewing the information exceeds the benefits of the information
itself.\46\
---------------------------------------------------------------------------

    \46\ Issuers could choose to delete the information to avoid the
burden.
---------------------------------------------------------------------------

    The MSRB has taken into consideration the likely costs and benefits
associated with the proposed rule change and provides the following
analysis for each specific proposal.\47\
---------------------------------------------------------------------------

    \47\ In addition to the costs to dealers for compliance with the
proposed amendments to Rule G-11, the MSRB believes that there also
would be a small one-time cost associated with revising policies and
procedures by syndicate managers as a result of these proposals.
---------------------------------------------------------------------------

Benefits and Costs--Free-to-Trade Information Dissemination
    Requiring senior syndicate managers to disseminate free-to-trade
information to all syndicate and selling group members at the same time
should ensure timely access to critical information. As is the case for
all asymmetric information transactions, when a participant does not
have the same information as others in a transaction, they are at a
disadvantage. All syndicate and selling group members need to receive
the information simultaneously to reduce any risk of unfair practices.
    The free-to-trade information is typically issued by the senior
syndicate manager to all members of the syndicate. However, the MSRB
understands that the timing of receipt of the free-to-trade information
can vary such that information is not always received by all syndicate
members at the same time. It is the MSRB's understanding that,
typically, the free-to-trade information is sent electronically and
would be simple to provide to all syndicate and selling group members
at the same time. Therefore, above-the-baseline costs \48\ to senior
syndicate managers associated with this requirement are expected to be
insignificant. Syndicate and selling group members currently receiving
the free-to-trade information after others in the syndicate have
already received it would benefit from being notified earlier that they
may trade in the secondary market at market prices equal to or
different than the offering price. Thus, the MSRB believes that the
likely benefits of this requirement significantly outweigh its likely
costs.
---------------------------------------------------------------------------

    \48\ For economic evaluation the proposed rule changes, the
baseline is the current state under existing MSRB rules.
---------------------------------------------------------------------------

Benefits and Costs--Additional Information for the Issuer
    The main benefit of providing information regarding designations,
group net sales credits and allocations to the issuer is to provide
transparency to the issuer by giving them the same information received
by the syndicate members. This information is beneficial to the issuer
because it provides the issuer with relevant details regarding the
issue and assists the issuer in determining whether certain syndicate
rules or terms have been followed. Additionally, providing this
information, in the aggregate, may help issuers understand the
syndicate structures, the distinct responsibility of syndicate managers
and members and fees earned by each syndicate participant, which may
benefit issuers when they come to market again in the future.
    Because the senior syndicate manager is already required to provide
these disclosures to each syndicate member and could meet this
requirement with the same information that is sent to the syndicate
members, the incremental cost of providing this information to the
issuers as well should be negligible. The information on net
designations, group net sales credits and allocations is typically
provided electronically and therefore is easy to disseminate to
additional parties.
Benefits and Costs--Alignment of the Timeframe for the Payment of Group
Net Sales Credits With the Payment of Net Designation Sales Credits
    Aligning the timeframe for the payment of group net sales credits
to syndicate members with the timeframe for the payment of net
designation sales credits would promote a uniform practice among
payments of sales credits for syndicate members and limit the delay in
getting paid for group net orders, while reducing syndicate members'
exposure to the senior syndicate manager's credit risk.
    It is the MSRB's understanding that many firms acting as a senior
syndicate manager are already operating on the ten-day deadline for the
payment of group net sales credits. For the limited number of firms who
are not currently operating on the ten-day deadline, in order to meet
the new timeframe for the payment of group net sales credits, those
firms initially may need to revise certain internal processes, and thus
may incur some upfront costs. However, the MSRB is not proposing to
change the timeframe related to settlement of the syndicate or similar
account, but rather, the timeframe within which payment of the group
net sales credits occurs. Therefore, the associated costs should not be
significant once the new process is in place.
Benefits and Costs--Reinforce Selling Group Members' Existing
Obligations
    Currently, syndicate managers under Rule G-11(f) are required to
promptly furnish in writing the issuer's terms and conditions
information described in this section to other members of the syndicate
and selling group members. The benefit of this proposed rule change
would be to reinforce selling group members' existing obligation to
comply with the issuer's terms and conditions in a primary offering of
municipal securities. Without this change, the issuer has much less
certainty that their terms and conditions would be met.
    Selling group members presumably have a choice to become a member
if they determine that the benefits from the ability to participant in
a deal exceeds the compliance costs. This cost increase, however, would
not be applicable to selling group members who are already in
compliance with Rule G-11(f) when participating in a primary offering
of municipal securities. The MSRB is unable to quantify the percentage
of selling group members who are presently not in compliance and thus
provide an estimate of the material increase of costs. However, the
MSRB believes the overall benefits of full compliance by all selling
group members should exceed the costs borne by non-compliant selling
group members, as this has been the intended application of Rule G-
11(f).
Proposed Rule Change Under Rule G-11--Effect on Competition, Efficiency
and Capital Formation
    Since all four proposed changes to Rule G-11 would apply equally to
all primary offerings of municipal securities and associated
underwriters, they should not impose a burden on competition,
efficiency or capital formation. The proposed changes are meant to
improve the fairness and efficiency of the underwriting process and
thus should improve capital formation. Specifically, the proposed
changes are intended to protect issuers, syndicate members and
investors, and thus to increase confidence in the capital markets by
enhancing transparency and promoting fairness of the competition in the
primary offering process.
Rule G-32--Disclosures in Connection With Primary Offerings
    The proposed rule change as it relates to Rule G-32 would provide
equal access to market participants regarding CUSIP numbers advance
refunded and repeal the requirement for dealers acting as financial
advisors that prepare the

official statement to make the official statement available to the
underwriter promptly after approval by the issuer.
Benefits and Costs--Equal Access to the Disclosure of the CUSIP Numbers
Advance Refunded
    Currently, Rule G-32 requires underwriters of an advance refunding
to provide the advance refunding document, which only includes a list
of the advance refunded CUSIPs, to the EMMA Dataport and related
information on Form G-32, no later than five business days after the
closing date. The proposed change is needed to reduce information
asymmetry that may arise in the secondary markets. In the case of
advance refundings, information regarding the CUSIPs advance refunded
may currently be available to certain market participants before it is
available to others. This could result in negative consequences for the
less informed market participants by forcing them to make investment
decisions with less information than other market participants.
    The MSRB has considered the alternative of requiring the advance
refunding document to be submitted to the EMMA Dataport sooner than
five business days after closing to minimize the chance of discrepancy
in the timing of disclosures made to different market participants.
However, the MSRB understands that this information sometimes is not
available sooner than five days after closing and proposing a
requirement that the information be provided in a shorter timeframe may
not be feasible at this time.
    The main benefit of advance refunding disclosure is reduced
information asymmetry in the secondary market, which may in turn
improve the market's fairness and efficiency. Data are readily
available to the underwriter; therefore, costs above the baseline would
be limited to manually entering the amount of bonds advance refunded
per CUSIP number, since underwriters are already required to provide
advance refunding documents, if prepared, to the EMMA Dataport and
related information on Form G-32.
Effect on Competition, Efficiency and Capital Formation
    Since the proposed amendments would apply equally to all primary
offerings and associated underwriters, they should not impose a burden
on competition, efficiency or capital formation. In fact, since the
proposed amendments are meant to improve the fairness and efficiency
through equal access for all market participants of the underwriting
process and thereafter the secondary market trading, the proposed
amendments should improve capital formation. Specifically, the proposed
amendments protect investors, dealers and other market participants who
currently do not have the equal access to the CUSIP number advance
refunded information disclosure, and these protections could improve
the competitiveness of the primary and the secondary markets,
potentially benefiting issuers and investors alike.
Benefits and Costs--Repeal of Requirement for Dealers Acting as
Financial Advisors To Make the Official Statement Available to the
Underwriters
    The official statement contains information that is critical to
underwriters and market participants. Rule G-32(c) is limited in scope
as it only applies to delivery of the official statement when it has
been prepared by a dealer acting as a financial advisor. Exchange Act
Rule 15c2-12(b)(3) more broadly applies to the underwriter in
contracting with the issuer or its agent for receipt of the official
statement in a certain amount of time. By eliminating the requirement
for a dealer acting as a financial advisor to promptly deliver the
official statement to the underwriters, the proposed rule change would
promote the uniform practice of regulatory responsibility between
dealer financial advisors and non-dealer municipal advisors with a
potentially limited negative impact on the distribution of the official
statement to the underwriter. Therefore, eliminating this requirement
should not result in delayed information dissemination to market
participants or hamper their ability to make more informed investment
decisions. It will also reduce a burden for dealers acting as financial
advisors that is no longer deemed necessary.
    To promote regulatory consistency and uniform practice, the MSRB
considered the alternative of keeping the requirement and proposing to
expand the requirement to also require non-dealer municipal advisors to
make the official statement available to the underwriter after the
issuer approves its distribution. However, upon further review, the
MSRB believes this regulatory alternative would increase the burden for
non-dealer municipal advisors but would provide limited benefits to the
market. Based on market participant feedback, the MSRB understands that
underwriters and issuers more frequently rely upon the contractual
arrangements required by Exchange Act Rule 15c2-12(b)(3) for the
delivery of the official statement in a timely manner.
    While the MSRB believes the costs of sending an official statement
electronically to the underwriter is negligible, this proposed rule
change would nevertheless reduce costs for dealers acting as financial
advisors since they are no longer required to disseminate the official
statement to the underwriter unless required pursuant to Exchange Act
15c2-12(b)(3), regardless of who prepared the official statement.
Effect on Competition, Efficiency and Capital Formation
    The proposed rule change to eliminate the requirement for dealer
financial advisors that prepare the official statement to disseminate
the document to the underwriter is applicable to all dealer financial
advisors. The proposed rule change removes an imbalance among financial
advisors since currently dealer financial advisors are required to
provide the official statement, but non-dealer municipal advisors are
not. Therefore, the proposed rule change should not impose a burden on
competition, efficiency or capital formation. In fact, because the
amendments are meant to improve the fairness and consistency of
regulatory responsibility between dealer financial advisors and non-
dealer municipal advisors, they should create uniform practice which
should improve competition and thus benefit capital formation.
Eliminating this requirement should not result in delayed information
dissemination to some market participants, hampering their ability to
make more informed investment decisions.
Changes to Form G-32
    The proposed changes to Form G-32 would require additional data
fields that would be auto-populated from NIIDS on Form G-32 as well as
submission of additional data fields not currently in NIIDS on Form G-
32, as applicable. The economic analysis below discusses the two
categories of data fields separately.
    Broadly speaking, the need for the two categories of proposed
additional data fields on Form G-32 arises from the fact that the
existing information not currently on Form G-32, but proposed to be
included, would enhance the MSRB's regulatory transparency initiatives
and facilitate the MSRB's own usage of data. The two categories of
proposed additional data points on Form G-32 should also reduce the
MSRB's dependence on third-party data providers and utilities for
information disclosure and provide the MSRB greater flexibility in
ensuring the accuracy of the data. Additionally, as part of the MSRB's
long running

transparency initiatives, the MSRB may disseminate some or all of this
information, in the future. The MSRB believes that providing
transparency of municipal market information is an important way to
reduce information asymmetry in the market and enhance data continuity.
If the MSRB chooses to disseminate some or all of the information, in
the future, investors would have an additional resource providing
access to the information used in their assessment of the market value
of the security.
Benefits and Costs--Auto Population of Additional Data Fields on Form
G-32 With Information From NIIDS
    An underwriter of a new issue that is NIIDS-eligible provides data
to NIIDS with respect to that issue, as applicable; however, only some
of that information is auto-populated into Form G-32. Therefore, the
MSRB may be limited in its long-term flexibility to make the
information transparent to the broader market on a sustained basis, as
a result of the MSRB not being in full control of the collection of
those additional data fields. The proposed changes would reduce the
MSRB's dependence on third-party data providers and utilities. These
additional data elements comprise pertinent information about the
municipal securities and not collecting the data would impede the
MSRB's goal of creating an ongoing transparent market for municipal
securities. Having these fields on Form G-32 would also ensure that the
MSRB would have continued access to vital primary offering information
now and in the future. While much of the information contained in the
proposed additional data fields is currently available to the public in
the official statement for a primary offering, it is often not easily
located or explicitly stated therein. Because official statements are
not consistently formatted, and the specific information sought is not
necessarily prominently displayed, at least some portion of retail and
other investors may be unaware of, or have difficulty locating,
pertinent information. Therefore, should the MSRB disseminate some or
all of this information in the future, having readily-available
information, on an ongoing basis is, consistent with the MSRB's mission
of market transparency.
    Underwriters of non-NIIDS-eligible offerings would be exempt from
the requirement to manually complete the data fields on Form G-32 that
would be auto-populated from NIIDS for NIIDS-eligible offerings, except
for one data field that indicates the original minimum denomination of
the offering. The MSRB considered the alternative of requiring
underwriters of non-NIIDS-eligible issues to manually input all the
applicable information from the 57 data fields onto Form G-32. However,
the MSRB believes that, at this time, this alternative would impose an
unnecessary burden on regulated entities by requiring them to devote
additional time and resources to providing information for issues that
are not likely to be traded in the secondary market and are less likely
to be traded by retail investors.\49\ The MSRB believes that, other
than the original minimum denomination information, the additional
information being sought in the proposed data fields is not critical in
evaluating these offerings at this time, and the likely costs
associated with inputting all of the applicable fields manually onto
Form G-32 would exceed the limited benefits.
---------------------------------------------------------------------------

    \49\ See supra footnote 39.
---------------------------------------------------------------------------

    The MSRB considered the alternative of collecting the additional
information from a third-party data vendor other than NIIDS, to the
extent one exists. However, this would require the third party to
obtain the information either from NIIDS, official statements, offering
circulars or from the underwriter directly, again requiring unnecessary
duplication of information input. Additionally, obtaining information
from a third party might limit the MSRB's ability to make the
information available, thus hindering the MSRB's goal of increasing
market transparency.
    The MSRB believes that expanding the number of data fields on Form
G-32 would improve the MSRB's flexibility regarding data usage.
Specifically, by collecting the NIIDS data for inclusion on Form G-32,
the MSRB would have greater control and flexibility for the foreseeable
future without depending on third-party data providers or utilities.
The effort would also have several long-term benefits for the MSRB,
including its ability to increase transparency, improve market
information and reduce the likelihood of information asymmetries,
should the MSRB disseminate some or all of the information, in the
future. In that regard, market participants, such as retail investors,
issuers and smaller-sized institutional investors, and municipal
advisors could have access to less information than market
professionals, possibly resulting in information asymmetry. Information
asymmetry could cause market price distortion and/or transaction volume
depression resulting in an undesirable impact on the municipal
securities market.
    Because underwriters are already required to submit this
information to NIIDS for NIIDS-eligible offerings, the costs associated
with providing these data elements are considered part of the baseline,
assuming full compliance with applicable provisions of Rule G-32 and
Rule G-34. The additional cost imposed on certain market participants
for data to be auto-populated from NIIDS onto Form G-32 should be
limited, which may include, for example, additional time to review the
pre-populated information for accuracy.\50\
---------------------------------------------------------------------------

    \50\ Presently, one firm submits data elements to Form G-32 via
a business-to-business connection (``B2B''), which is a computer-to-
computer connection that does not require any human intervention and
provides underwriters a direct data submission channel to Form G-32.
With respect to the proposed changes, this B2B submitter would
presumably continue to provide all of the proposed data elements via
the same B2B connection, because auto-population from NIIDS is not
possible with this format of submission. However, B2B is an
automated submission itself; therefore, the burden of providing
these additional data elements would be limited to the initial time
and cost of coding for the process. Subsequently, there should not
be additional burdens associated with providing this information to
the MSRB on a periodic basis.
---------------------------------------------------------------------------

    Underwriters of non-NIIDS-eligible primary offerings are already
obligated to complete Form G-32 manually pursuant to Rule G-
32(b)(i)(A)(2). Because the proposed rule change only requires
underwriters of non-NIIDS-eligible offerings to manually complete one
of the 57 data fields (e.g., original minimum denomination), the MSRB
believes the proposed addition should not impose any significant
additional time or burden on those underwriters.
Effect on Competition, Efficiency and Capital Formation
    Since the data is already provided to and available through NIIDS
from underwriters of primary offering municipal securities that are
NIIDS-eligible, the proposed changes would not impose a significant
burden on regulated entities. Submitters of Form G-32 would have a
continued responsibility to ensure that pre-populated information is
complete and accurate. However, this responsibility would not rise to
the level of a burden on competition since it would apply equally to
all underwriters inputting information for new issues.
Additional Data Fields on Form G-32 Not Auto-Populated With Information
From NIIDS
    Generally, the MSRB seeks to minimize the burden of rule amendments
by, for example, obtaining information from existing sources such as
NIIDS. Certain data elements that the

MSRB believes would be useful to regulators, however, are not currently
input into NIIDS or collected by the MSRB but once directly input on
Form G-32 they will be available to regulators. This information could
also be useful to certain market participants, such as investors,
issuers and municipal advisors and thus the MSRB may disseminate this
information, in the future.
    As discussed in detail above with regard to the additional data
elements not currently captured by NIIDS (i.e., ability for minimum
denomination to change, additional syndicate managers, call schedule,
legal entity identifiers for credit enhancers and obligated persons,
name of municipal advisor, name of obligated person, the dollar amount
of CUSIP advance refunded, restrictions on the issue and retail order
period by CUSIP number), the MSRB has considered the need to require
each of the proposed data elements individually. The MSRB believes that
this information is valuable and would immediately enhance regulatory
transparency. The information could also help promote a more efficient
secondary market for municipal securities, should the MSRB disseminate
some or all of the information, in the future. Not collecting the
additional data elements would prevent the benefits that are associated
with the proposed changes, including enhanced regulatory transparency,
and the option to disseminate the information in the future, from being
realized. Therefore, for the proposed changes to Form G-32 that are
related to additional data elements that are not currently submitted to
NIIDS, the MSRB is proposing to require underwriters of NIIDS-eligible
offerings to manually input this information onto Form G-32 and to
require underwriters of non-NIIDS-eligible offerings to include the
data field related to whether the minimum denomination has the ability
to change and whether the offering is being made with restrictions, as
described below.
    Like the alternative above for auto-population of data from NIIDS,
the MSRB has considered the alternative to collect this information
from a third-party vendor, to the extent one exists. However, reliance
on third-party vendors could limit the MSRB's flexibility and latitude
to make the data available to the market, thus hindering the goal of
increased regulatory transparency. The MSRB also considered collecting
all of the proposed additional data through NIIDS, including the newly
proposed data elements that are not currently input into NIIDS.
However, those data elements are currently not available from NIIDS;
thus, it is more practicable for the MSRB to collect the information
directly on Form G-32. If DTC were at some point to change its data
collection scope, the MSRB could revisit the approach.
    The MSRB believes there would be many benefits associated with
collection of the proposed additional data elements not currently
collected in NIIDS, as these new data elements are currently not
readily available or easily extractable by the MSRB. The proposed
changes would ensure the MSRB can provide this information to the
market, in the future, as appropriate, which would increase
transparency, reduce information asymmetry, enhance market efficiency,
and may assist individual investors and other market participants with
more informed decision making. Additionally, should the MSRB
disseminate some or all of this information, in the future, academic
studies support disclosure and have consistently demonstrated that
information disclosures on municipal bond issuances have benefited
investors, particularly retail investors who have higher information
acquisition costs than institutional investors.\51\
---------------------------------------------------------------------------

    \51\ See Christine Cuny, ``When Knowledge is Power: Evidence
from the municipal bond market,'' Journal of Accounting and
Economics, 2017, and Komla Dzigbede, ``Regulatory Disclosure
Interventions in Municipal Securities Secondary Markets: Market
Price Effects and the Relative Impacts on Retail and Institutional
Investors,'' Working Paper, State University of New York at
Binghamton, July 2017.
---------------------------------------------------------------------------

    Finally, all the additional data elements would be useful for
regulators to perform regulatory oversight of the primary offering
practices and the secondary market trading practices to ensure a fair
and efficient market.
    In the context of this proposal, the relevant costs are those
associated with providing information for the proposed new data
elements. For the most part, this information is readily available to
underwriters. However, it is useful to consider each of the below
elements individually.
     Ability for Minimum Denomination to Change--The proposed
rule change would include a ``yes/no'' flag on Form G-32 to indicate
whether the minimum denomination for the new issue could change. Since
this information is contained in the official statement, which is
readily available to underwriters prior to issuance, the MSRB believes
the costs associated with providing this information would be
negligible.
     Call Schedule--The proposed rule change would require
additional call information on Form G-32. Like most of the proposed
data elements, call information is known to underwriters prior to
issuance. Therefore, the costs associated with providing this
information on Form G-32 primarily take the form of additional time
needed to complete Form G-32. Like other proposed data elements, the
MSRB believes that the time required to provide this information (and
any subsequent cost) would not be significant.
     Names of Municipal Advisors, Obligated Persons, Other than
the Issuer and Additional Syndicate Managers (Senior and Co-Managers)--
The proposed rule change would require the names of municipal advisors,
obligated persons, other than the issuer, and additional syndicate
managers (if applicable) on Form G-32. This information is readily
available to underwriters and the incremental cost of providing this
information takes the form of additional time required to complete Form
G-32.
     Retail Order Period by CUSIP--The proposed rule change
would require more retail order period information on Form G-32.
Specifically, underwriters would be required to provide CUSIP-specific
retail order period information. Like other of the proposed data
elements, this information is well known to the underwriter prior to
issuance. Therefore, the burden of providing this proposed additional
information is limited to simply inputting it on the form. Thus, the
main associated burden would be the additional time required to
complete the form. Incrementally, this cost would be minor as it should
not require significant time to enter the information.
     Dollar Amount of Security Advance Refunded by Each CUSIP
Number--The proposed rule change would require the underwriter, in a
refunding, to provide the dollar amount of each CUSIP number advance
refunded in an issue. The dollar amount of CUSIP numbers being advance
refunded is readily available and should not be difficult for
underwriters to gather and to provide to the market, as underwrites
should already have the information on hand.
     LEIs for Credit Enhancers and Obligated Person(s), Other
than the Issuer, if Available--The proposed rule change would require
the LEI for the obligated person, other than the issuer, and any credit
enhancers to be provided, if readily available. In the case of the LEI
for credit enhancers, this

information would only be required if credit enhancements were used.
LEI information is publicly available through various platforms so the
cost of obtaining and providing this information would be limited.
Additional costs in the form of search time may be incurred if the
underwriter does not have the appropriate LEI(s) on hand.
     Restrictions on the Issue--The proposed rule change would
add a ``yes'' and ``no'' flag to Form G-32 for an underwriter to
indicate whether the offering is being made with restrictions. Because
this information should be readily available to underwriters prior to
issuance, the MSRB believes the costs associated with providing this
information would be negligible.
    As noted above, for non-NIIDS-eligible offerings, the underwriter
would not be required to manually complete these additional fields,
except for the data field that indicates the ability for the minimum
denomination of an offering to change, where the underwriter would
provide a ``yes/no'' flag to indicate whether the original minimum
denomination for the issue has the ability to change, and the data
field that indicates whether the offering is being made with any
restrictions.
    The MSRB believes that the immediate increase in regulatory
transparency and enhanced quality control, along with the potential
long-term accrued benefits of disseminating the information, in the
future, would outweigh the burden imposed on underwriters.\52\
---------------------------------------------------------------------------

    \52\ For B2B submissions, to provide the above-proposed data
elements, this submitter would incur development costs to code for
the new submission format since their information is not auto-
populated on Form G-32 from NIIDS. The MSRB realizes that this firm
would most likely face greater up-front costs in the event of a rule
change due to the one-time cost to revise the firm's B2B submission
code than firms submitting manually.
---------------------------------------------------------------------------

Effect on Competition, Efficiency and Capital Formation
    The MSRB believes that the proposed rule change may improve the
efficiency of the municipal securities market by promoting a uniform
practice and consistency and transparency of information. At present,
the MSRB is unable to quantitatively evaluate the magnitude of
efficiency gains or losses, or the impact on capital formation.
However, the MSRB believes that the benefits would outweigh the costs
over the long term. Additionally, in the MSRB's view, the proposed
changes would not result in an undue burden on competition since they
would apply to all underwriters equally.
    Overall, the MSRB believes, in aggregate, the above proposed
changes should bring additional benefits to the primary and secondary
markets, with relatively limited costs to market participants. The MSRB
has assessed the impact of the proposed changes and believes that the
likely aggregate benefits should accrue and outweigh the likely costs
over the long term.

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

    As previously noted, on September 14, 2017 and July 19, 2018, the
MSRB published the Concept Proposal \53\ and Request for Comment,\54\
respectively, seeking public comments on various aspects of current
primary offering practices and setting forth several questions related
to Rule G-11 and Rule G-32, as well as Form G-32 data fields. Following
its review of the comments, the MSRB also conducted additional outreach
with various market participants. The following summarizes the comments
received on both the Concept Proposal and the Request for Comment and
sets forth the MSRB's responses thereto. With regard to the Concept
Proposal, the MSRB only provides responses to comments regarding those
items that were not subsequently addressed in the Request for Comment.
With respect to the Request for Comment, the MSRB provides responses to
comments for each proposed change therein as set forth below.
---------------------------------------------------------------------------

    \53\ MSRB Regulatory Notice 2017-19 (September 14, 2017).
    \54\ MSRB Notice 2018-15 (July 19, 2018).
---------------------------------------------------------------------------

Summary of Comments Received in Response to the Concept Proposal
    The MSRB received 12 comment letters in response to the Concept
Proposal. BDA and SIFMA both indicated their belief that current
primary offering practices are adequate, and they saw no need for
sweeping changes. NABL focused its comments on questions in the Concept
Proposal that it believed could result in unintended consequences on
dealers in primary offerings. NAMA indicated that its main concern was
``that elements of the Concept Proposal suggest MSRB rule changes that
exceed the MSRB's statutory authority.'' Other commenters provided
views on various aspects of the Concept Proposal as set forth in the
summary below.
Rule G-11--Primary Offering Practices
Bona Fide Public Offering
    In the Concept Proposal, the MSRB sought comment on whether there
should be a requirement in Rule G-11 that syndicate members must make a
``bona fide public offering'' of municipal securities at the public
offering price. The MSRB asked, among other things, how such a
requirement would apply, what definition of ``bona fide public
offering'' should apply, what documentation would be necessary to
document compliance and whether issuing guidance might be a better
alternative.
    Four commenters provided comments on this issue,\55\ with three
commenters expressly opposing any rulemaking by the MSRB with respect
to ``bona fide public offerings.'' \56\ NABL and SIFMA noted that the
contract between the issuer and the underwriter dictates whether there
is a requirement to make a bona fide public offering at the public
offering price and that the MSRB should not inject itself into those
negotiations.\57\ SIFMA stated its concern that creating a regulatory
requirement that offerings must be undertaken in a bona fide public
offering would ultimately require a much more extensive set of
regulatory changes and line drawing to deal with many situations where
a traditional public offering may appropriately not be sought.\58\
According to SIFMA, this would raise considerable risk of regulations
driving market decisions rather than the intentions of the party or
free market forces.\59\ Finally, SIFMA noted that it is in the process
of reviewing its Master Agreement Among Underwriters (``AAU'') and will
consider what, if any, changes could be made to address some of the
issues related to a syndicate member's ``bona fide public offering''
obligations.\60\
---------------------------------------------------------------------------

    \55\ BDA Letter I, NABL Letter I, TMC Bonds Letter I and SIFMA
Letter I.
    \56\ BDA Letter I, NABL Letter I and SIFMA Letter I.
    \57\ NABL Letter I at 1; SIFMA Letter I at 4-5.
    \58\ SIFMA Letter I at 4.
    \59\ Id.
    \60\ SIFMA Letter I at 5-6.
---------------------------------------------------------------------------

    NABL suggested that the MSRB update its guidance with respect to
Rule G-17 to clarify that, if an underwriter is not contractually
obligated to conduct a bona fide public offering, the underwriter
should be required to indicate this point, as well as any material
risks to the issuer of not conducting a bona fide public offering, in
its disclosures under Rule G-17.\61\ SIFMA suggested that the MSRB
could

consider issuing interpretive guidance under Rule G-17 relating to
material failures of a syndicate member to adhere to the contractual
offering requirements that have a material adverse impact on the
syndicate or the issuer.\62\
---------------------------------------------------------------------------

    \61\ NABL Letter I at 1.
    \62\ SIFMA Letter I at 4-5.
---------------------------------------------------------------------------

    TMC Bonds stated that it is possible that the closed nature of the
traditional syndicate structure has an unintended consequence--instead
of assuring that the public has access to new issue municipal
securities, only members of the syndicate or participants in a
distribution agreement have such access.\63\ TMC Bonds suggested that
the MSRB could consider that a ``bona fide public offering'' may be
accomplished by posting new issues on a ``market center,'' independent
of syndicate structure, allowing investors (via a dealer) with no
access to the retail order period to enter orders for new issues.\64\
TMC Bonds noted that this would allow the ``public'' to have access to
new issues in a more transparent manner than in a syndicate retail
order period.\65\ TMC Bonds suggested that, among other requirements,
dealers submitting orders would need to provide an attestation that
orders are from ``bona fide'' retail investors, and anonymous orders
would not be allowed.\66\ Finally, SIFMA noted that the Internal
Revenue Service's (IRS) issue price rules should take the lead on
matters related to bona fide public offerings and initial offering
prices and that the MSRB should wait on any rulemaking in this area
until the market has adapted to the IRS requirements.\67\
---------------------------------------------------------------------------

    \63\ TMC Bonds Letter I at 1.
    \64\ TMC Bonds Letter I at 2.
    \65\ Id.
    \66\ Id.
    \67\ SIFMA Letter I at 5.
---------------------------------------------------------------------------

    In response to the comments received, the MSRB agrees with NABL and
SIFMA that the contract between the issuer and the underwriter dictates
whether there is a requirement to make a bona fide public offering at
the public offering price. As a result, the MSRB determined to set
aside discussions related to amending Rule G-11 to require syndicate
members to make a bona fide public offering of municipal securities.
Free-to-Trade Wire
    The MSRB sought comment on whether the senior syndicate manager
should issue the free-to-trade wire to all syndicate members at the
same time. Two commenters provided input on this issue.\68\ BDA
believed the MSRB should require all senior syndicate managers to send
a free-to-trade wire to all syndicate members once formal award has
been assigned and that the wire should be sent on a maturity-by-
maturity basis.\69\
---------------------------------------------------------------------------

    \68\ BDA Letter I and SIFMA Letter I.
    \69\ BDA Letter I at 2.
---------------------------------------------------------------------------

    Alternatively, SIFMA indicated that no regulatory requirements are
needed to address the distribution of the free-to-trade wire.\70\
SIFMA, in reviewing and revising its AAU, indicated it will consider
whether to include provisions that would make more explicit the method
by which free-to-trade information is communicated to syndicate members
and other dealers involved in the distribution of a new issue.\71\ If
the MSRB were to pursue a rulemaking in this area, SIFMA stated it
should be limited to ensuring communications occur on a material
simultaneous basis and not pursuant to specified timeframes.\72\
---------------------------------------------------------------------------

    \70\ SIFMA Letter I at 7.
    \71\ SIFMA Letter I at 5.
    \72\ SIFMA Letter I at 7.
---------------------------------------------------------------------------

Additional Information for the Issuer
    The MSRB asked commenters whether the senior syndicate manager
should be required to provide information to issuers on designations
and allocation of securities in an offering and, if so, whether there
would be a preferred method for providing the information.
Additionally, the MSRB asked whether there were reasonable alternatives
to this potential requirement and what benefits and burdens might be
associated therewith.
    Four commenters responded to this inquiry.\73\ BDA indicated that
not all issuers have access to detailed information about their
securities (and in fact, according to BDA, frequently even syndicate
members do not receive this information).\74\ BDA recommended that the
MSRB require syndicate managers to send the issuers such information,
as well as the underwriting spread breakdown, upon request.\75\
Similarly, GFOA noted that an issuer should be made aware of
information distributed to the syndicate and that such information
should be distributed to the entire syndicate at the same time, so no
syndicate member has an advantage over another.\76\ The City of San
Diego indicated that it actively requests and receives the relevant
information from syndicate managers. However, it stated that, if the
information is not currently provided to all issuers, the City of San
Diego believes that Rule G-11 should be amended to require the senior
syndicate manager to provide it unless the issuer opts out of receiving
it.\77\
---------------------------------------------------------------------------

    \73\ BDA Letter I, City of San Diego Letter I, GFOA Letter I and
SIFMA Letter I.
    \74\ BDA Letter I at 2.
    \75\ Id.
    \76\ GFOA Letter I at 1.
    \77\ City of San Diego Letter I at 1.
---------------------------------------------------------------------------

    The City of San Diego further indicated that the senior syndicate
manager in negotiated sales should be required to obtain the issuer's
approval of designations and/or allocations unless otherwise agreed to
between the parties.\78\ GFOA indicated that it is a best practice to
have discussions about the issuer's approval of designations and/or
allocations.\79\
---------------------------------------------------------------------------

    \78\ Id.
    \79\ GFOA Letter I at 1.
---------------------------------------------------------------------------

    SIFMA indicated that it was unaware of any circumstances where a
syndicate manager refused to provide information to an issuer or where
an issuer complained that such information was withheld.\80\ If the
MSRB were to undertake rulemaking in this area, SIFMA stated that the
senior syndicate manager should only be required to provide the
information to the issuer upon request.\81\ Finally, SIFMA stated that
a senior syndicate member should not be required to obtain the issuer's
approval of designations and/or allocations.\82\ According to SIFMA,
most issuers likely have no interest in approving allocations, and
those that do, normally reach agreement with the syndicate manager to
do so.\83\ SIFMA is unaware of circumstances where a syndicate manager
has agreed to allow the issuer to approve of designations/allocations
and then has failed to do so.\84\
---------------------------------------------------------------------------

    \80\ SIFMA Letter I at 7-8.
    \81\ SIFMA Letter I at 8.
    \82\ SIFMA Letter I at 9.
    \83\ Id.
    \84\ Id.
---------------------------------------------------------------------------

Alignment of the Payment of Sales Credits for Group Net Orders With the
Payment of Sales Credits for Net Designation Orders and Shortened
Timeframe
    The MSRB asked commenters whether the timing of the payment of
sales credits on group net orders should be aligned with the timing of
the payment of sales credits on net designated orders. Two commenters
responded.\85\
---------------------------------------------------------------------------

    \85\ BDA Letter I and SIFMA Letter I.
---------------------------------------------------------------------------

    BDA recommended that the MSRB align the time period for the payment
of sales credits on both group net and net designated to 10 business
days.\86\ SIFMA, on the other hand, indicated that absent evidence of
significant problems with the current timeframes, the MSRB should make
no changes.\87\

According to SIFMA, the determinations of these two payments are based
on different inputs that could drive the time disparity.\88\
---------------------------------------------------------------------------

    \86\ BDA Letter I at 3.
    \87\ SIFMA Letter I at 10.
    \88\ Id.
---------------------------------------------------------------------------

Priority of Orders and Allocation of Bonds
    Four commenters provided comment on whether Rule G-11 should be
amended to explicitly state the process by which orders must be given
priority.\89\
---------------------------------------------------------------------------

    \89\ BDA Letter I, City of San Diego Letter I, GFOA Letter I and
SIFMA Letter I.
---------------------------------------------------------------------------

    BDA and the City of San Diego believed that the rule should be
amended to require senior syndicate managers, in negotiated sales, to
allocate retail priority orders up to the amount of priority set by the
issuer before allocating to lower priority orders, unless the issuer
provides otherwise.\90\ SIFMA, however, stated that the current
priority provisions achieve an appropriate balance of competing
legitimate interests in the primary offering distribution process.\91\
SIFMA stated that syndicate members are obligated to follow the
direction given by the issuer with regard to the priority for filling
orders on that issuer's primary offering offerings, and it is critical
that MSRB rules not impede this practice.\92\ Further, according to
SIFMA, existing MSRB guidance under Rule G-17 is adequate to address
situations where the syndicate has materially departed from priority
requirements.\93\ GFOA stated that the issuer's priority of order
designations are stated on the pricing wire and, if the issuer has
indicated its preference for priority, the senior syndicate manager
should abide by the issuer's preference.\94\
---------------------------------------------------------------------------

    \90\ BDA Letter I at 3 and City of San Diego Letter I at 1.
    \91\ SIFMA Letter I at 10.
    \92\ Id.
    \93\ SIFMA Letter I at 12.
    \94\ GFOA Letter I at 1.
---------------------------------------------------------------------------

    In response to the comments received, the MSRB determined not to
seek additional comment on the proposed amendment to explicitly define
the process by which orders must be given priority in a primary
offering. The MSRB believes that the requirements under Rule G-11
regarding priority of orders and the interpretative guidance under Rule
G-17 expressly address how orders are given priority. At this time, the
MSRB believes that additional rulemaking would not enhance existing
priority and allocation related rules and guidance.
Rule G-32--Disclosures in Connection With Primary Offerings
Disclosure of the CUSIPs Advance Refunded and the Percentages Thereof
    The MSRB requested comment on whether the MSRB should require
underwriters to disclose, within a shorter timeframe than is currently
required, and to all market participants at the same time, CUSIPs
advance refunded and the percentages thereof. Six commenters provided
their views.\95\
---------------------------------------------------------------------------

    \95\ BDA Letter I, City of San Diego Letter I, NABL Letter I,
NFMA Letter I, SIFMA Letter I and Wells Capital Letter I.
---------------------------------------------------------------------------

    The City of San Diego, NFMA and Wells Capital agreed that
underwriters should disclose the refunding CUSIPs to all market
participants at the same time.\96\ Wells Capital noted that incomplete
refunding disclosures or selective disclosures can create inequitable
trading advantages for those obtaining refunding information prior to
it being posted on EMMA.\97\ NFMA stated that the most effective and
least costly solution to ensure all investors have equal access to
advance refunded CUSIP information is the disclosure of information to
EMMA at the same time, as soon as practicable.\98\ BDA agreed that the
MSRB should require the senior syndicate manager or sole manager to
disclose the CUSIPs advance refunded and the percentages thereof within
a short period following the pricing of the refunding bonds, if
available.\99\ SIFMA questioned the value of requiring submission of
the percentages.\100\
---------------------------------------------------------------------------

    \96\ City of San Diego Letter I at 1, NFMA Letter I at 2 and
Wells Capital Letter I at 2.
    \97\ Wells Capital Letter I at 2.
    \98\ NFMA Letter I at 2.
    \99\ BDA Letter I at 3.
    \100\ SIFMA Letter I at 14.
---------------------------------------------------------------------------

    NABL indicated that, while it has no view as to whether such a
requirement should be adopted, it does believe it is important that any
requirement not serve to indirectly regulate issuers by creating a de
facto requirement that CUSIPs be identified by the issuer at pricing or
any time before the issuer is otherwise obligated to provide such
information.\101\
---------------------------------------------------------------------------

    \101\ NABL Letter I at 2.
---------------------------------------------------------------------------

    SIFMA believed the deadline for submitting advance refunding
documents should remain at the current five business days after
closing.\102\ SIFMA noted that, while making information about advance
refunded bonds available at an earlier timeframe would be beneficial to
the marketplace, it cautioned that the MSRB should thoroughly analyze
the changes required to be made to Form G-32 and the EMMA primary
market submission system.\103\ Further, SIFMA stated that, if a
municipal advisor participates, the municipal advisor rather than the
underwriter should be required to submit the advance refunding document
and associated information to EMMA.\104\
---------------------------------------------------------------------------

    \102\ SIFMA Letter I at 13.
    \103\ Id.
    \104\ SIFMA Letter I at 14.
---------------------------------------------------------------------------

Submission of Preliminary Official Statements to EMMA
    Nine commenters addressed the question about whether Rule G-32
should require the posting of the preliminary official statement
(``POS'') to EMMA.\105\ Four commenters believed there should be a
requirement that the POS be submitted to EMMA promptly.\106\ The City
of San Diego noted that there is no valid reason for some market
participants to have access to the POS before others.\107\ It indicated
that the underwriter in a negotiated sale and the municipal advisor in
a competitive sale should be required to submit the POS to EMMA
concurrently with, or within one business day of, receiving
confirmation from the issuer that the POS has been electronically
printed/posted.\108\ If the information changes, the City of San Diego
believed the underwriter or municipal advisor should be required to
post a supplement or remove the POS if it becomes stale.\109\
Similarly, NFMA supported submission of the POS to EMMA prior to
pricing to ensure that all market participants, including holders of
parity bonds, have equal access to the latest disclosure documents of
an issuer.\110\ Paganini and Wells Capital urged the MSRB to require
underwriters (and municipal advisors, in the case of Wells Capital) to
promptly submit the POS to EMMA so all potential buyers/investors have
access to the information at the same time.\111\
---------------------------------------------------------------------------

    \105\ BDA Letter I, City of San Diego Letter I, GFOA Letter I,
NABL Letter I, NAMA Letter I, NFMA Letter I, Paganini Letter I,
SIFMA Letter I and Wells Capital Letter I.
    \106\ City of San Diego Letter I, NFMA Letter I, Paganini Email
I and Wells Capital Letter I.
    \107\ City of San Diego Letter I at 1-2.
    \108\ Id.
    \109\ City of San Diego Letter I at 2.
    \110\ NFMA Letter I at 2.
    \111\ Paganini Email I at 1 and Wells Capital Letter I at 2.
---------------------------------------------------------------------------

    Five commenters opposed requiring the mandatory posting of a POS to
EMMA.\112\ Three commenters believed such a requirement would be
outside the MSRB's jurisdiction and would be indirect regulation of
issuers by the MSRB in violation of the Exchange

Act.\113\ GFOA indicated that the POS should only be posted at the
direction of the issuer.\114\ NAMA believed that requiring the
municipal advisor to post the POS could cause them to be engaging in
broker-dealer activity and could possibly force them to violate their
fiduciary responsibilities to their municipal issuer clients if posting
the information may be counter to the issuer's wishes or benefit.\115\
According to SIFMA, the POS as a disclosure document is incomplete,
subject to change and quickly replaced by the final official statement;
as marketing material, it would transform EMMA from a disclosure and
transparency venue to a central marketplace.\116\ Additionally,
according to SIFMA, any pre-sale posting of the POS would require
issuer consent, thus the MSRB would need to work with the issuer
community to ensure they would be willing to give such consent. SIFMA
also noted that the MSRB previously sought comment on this same issue
in 2012 and noted that ``very little has changed since then.'' \117\ If
the MSRB chooses to pursue rulemaking in this area, SIFMA indicated
that the MSRB should carefully consider the points raised by SIFMA and
other commenters in response to the 2012 release.\118\ Two commenters
noted the difficulty in ensuring that updated information is
disseminated once a POS has been posted. For example, BDA stated that
the MSRB would need to develop a mechanism to ensure that everyone who
viewed a POS on EMMA would receive any supplements subsequently
provided.\119\ Similarly, NAMA asked how updated information would be
``flagged as being revised'' and how a dealer would reach investors who
had previously received a POS that was now stale.\120\
---------------------------------------------------------------------------

    \112\ BDA Letter I, GFOA Letter I, NABL Letter I, NAMA Letter I
and SIFMA Letter I.
    \113\ GFOA Letter I, NABL Letter I and NAMA Letter I.
    \114\ GFOA Letter I at 2.
    \115\ NAMA Letter I at 2-3.
    \116\ SIFMA Letter I at 15.
    \117\ SIFMA Letter I at 16.
    \118\ Id. See also MSRB Notice 2012-61 (Dec. 12, 2012).
    \119\ BDA Letter I at 4.
    \120\ NAMA Letter I at 3-4.
---------------------------------------------------------------------------

    The MSRB agrees with the majority of commenters that there should
not, at this time, be a requirement to post the preliminary POS to
EMMA. Because the POS is more likely to change than the OS, the MSRB
agrees that it would be difficult to ensure that the POSs posted were
current and not outdated and that posting such documents could lead to
confusion and misinformation about a particular issue. In addition,
issuers currently are free to upload their preliminary POS to EMMA if
they so choose.
Whether Non-Dealer Financial Advisors Should Make the Official
Statement Available to the Underwriter After the Issuer Approves It for
Distribution
    Three commenters provided comment on this question.\121\ BDA and
SIFMA urged the MSRB to amend Rule G-32(c) to apply to all municipal
advisors \122\ instead of only to dealer financial advisors.\123\ NAMA
indicated that the municipal advisor should not have the responsibility
to make the official statement available to the underwriter unless
tasked to do so by the issuer.\124\ NAMA noted that municipal advisors
should be removed all together from Rule G-32(c) because Exchange Act
Rule 15c2-12 sets forth a process by which an underwriter obtains the
official statement.\125\
---------------------------------------------------------------------------

    \121\ BDA Letter I, NAMA Letter I and SIFMA Letter I.
    \122\ In discussing the Request for Comment, commenters used the
terms ``financial advisor'' and ``municipal advisor''
interchangeably for purposes of describing a dealer acting as a
financial advisor.
    \123\ BDA Letter I at 4 and SIFMA Letter I at 19.
    \124\ NAMA Letter I at 2.
    \125\ NAMA Letter I at 4.
---------------------------------------------------------------------------

Whether the MSRB Should Auto-Populate Into Form G-32 Certain
Information That Is Submitted to NIIDS But Is Not Currently Required To
Be Provided on Form G-32
    The MSRB received three comments on the question of whether Form G-
32 should be amended to require certain additional data fields that
would be auto-populated with information currently submitted to
NIIDS.\126\ BDA recommended, generally, that the MSRB auto-populate
information from NIIDS into Form G-32, and NAMA indicated that this is
the type of review the MSRB should be undertaking to reduce the