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

    \303\ See NAMA Letter; ABA Letter; Arlington SD Letter; GFOA
Letter.
    \304\ See GFOA Letter. According to the commenter, it surveyed
174 GFOA members primarily responsible for debt disclosure in their
respective jurisdictions.
    \305\ See Arlington SD Letter.
---------------------------------------------------------------------------

    The Commission has considered these comments and is revising its
cost estimates for issuers. As discussed in Section III.A.2., the
Commission has clarified and narrowed the scope of the amendments which
will substantially lessen the burden on issuers of monitoring,
evaluating, preparing, and filing event notices required by the
amendments to the Rule. The Commission expects that any external costs
that would have been incurred by issuers under the proposed amendments
would be similarly reduced by those changes. The Commission also
believes that the adopted amendments, by focusing on debt, debt-like,
and debt-related obligations, will reduce the need for issuers to
obtain outside counsel to assist with an event notice.\306\
---------------------------------------------------------------------------

    \306\ See, e.g., NAMA Letter (stating the ``too broad''
definition of financial obligation would force issuers to consult
counsel for ``many types of financings and financial obligations
that do not affect a government['s] . . . ability to pay debt); see
also BDA Letter (stating if the definition of financial obligation
were focused on competing debt, the responsibility to assess whether
an event notice was needed would be handled by an issuer's debt
finance department).
---------------------------------------------------------------------------

    However, the Commission acknowledges that some issuers may retain
outside counsel to assist in the evaluation and preparation of some of
the more complex event notices as a result of the amendments to the
Rule. As discussed above, the Commission estimates that the amendments
will generate 2,200 additional event notices a year.\307\ The
Commission believes a reasonable estimate is that issuers may retain
outside counsel on half of those event notices, 1,100, while preparing
the other half solely internally.\308\ The Commission further believes
that, for those 1,100 complex event notices in which issuers and
obligated persons seek assistance from outside counsel, one-half of the
burden of preparation of the event notices (including time for
monitoring and evaluation) will be carried by issuers internally (four
hours), and the other-half of the burden will be carried by outside
professionals retained by the issuer (four hours).\309\ Thus, the
Commission now estimates that issuers will incur an approximate annual
total cost of $1,760,000 \310\ to

employ outside counsel to assist in the examination, preparation, and
filing of certain event notices.
---------------------------------------------------------------------------

    \307\ See supra Section IV.D.2.iii.
    \308\ While some commenters stated that the assistance of
outside counsel would be required on nearly all event notices under
the proposed amendments, the Commission believes that the narrowed
scope of the adopted amendments, as well as the examples provided in
Section III.A.1. intended to assist issuers in determining
materiality under the Rule, will substantially reduce the need for
issuers to consult with outside counsel.
    \309\ See NABL OMB Letter (survey of outside bond counsel: ``If
asked to prepare a summary of a financial obligation, on average how
many hours would be required to comply?'' Median answer--4 hours).
    \310\ 1,100 (number of event notices requiring outside counsel)
x 4 (estimated time for outside attorney to assist in the
preparation of such event notice) x $400 (hourly wage for an outside
attorney) = $1,760,000. The Commission recognizes that the costs of
retaining outside professionals may vary depending on the nature of
the professional services, but for purposes of this PRA analysis we
estimate that costs of outside counsel would be an average of $400
per hour.
---------------------------------------------------------------------------

    Under the amendments to Rule 15c2-12 as adopted, the total cost to
issuers would be $16,229,000 annually,\311\ with a one-time cost of
$2,800,000.\312\ Table 5 below summarizes the Commission's PRA external
cost estimates for issuers in the 2015 PRA Notice (the Commission's
most recent estimates prior to these amendments), the Proposing
Release, and the Adopting Release.
---------------------------------------------------------------------------

    \311\ $1,760,000 (annual cost to employ outside counsel to
assist in preparation of certain event notices) + $14,469,000
(annual cost to employ designated agents to submit event notices) =
$16,229,000.
    \312\ See supra note 302.

           Table 5--Summary of PRA Cost Estimates for Issuers
------------------------------------------------------------------------
                                              Annual         One-time
                                           external cost   external cost
------------------------------------------------------------------------
                      Estimates in 2015 PRA Notice
------------------------------------------------------------------------
Issuers (that use the services of a           $9,750,000             n/a
 designated agent to submit continuing
 disclosure documents)..................
------------------------------------------------------------------------
                     Estimates in Proposing Release
------------------------------------------------------------------------
Issuers (that use the services of a           10,335,000              $0
 designated agent to submit continuing
 disclosure documents)..................
Issuers (to update template for                        0       2,000,000
 continuing disclosure agreements to
 reflect the proposed amendments).......
------------------------------------------------------------------------
                      Estimates in Adopting Release
------------------------------------------------------------------------
Issuers (that use the services of a           14,469,000               0
 designated agent to submit continuing
 disclosure documents)..................
Issuers (to update template for                        0       2,800,000
 continuing disclosure agreements to
 reflect the amendments)................
Issuers (to hire outside counsel to            1,760,000               0
 assist in preparing event notices).....
------------------------------------------------------------------------

F. Retention Period of Recordkeeping Requirements

    As an SRO subject to 17 CFR 240.17a-1 (Rule 17a-1 under the
Exchange Act), the MSRB is required to retain records of the collection
of information for a period of not less than five years, the first two
years in an easily accessible place. Broker-dealers registered pursuant
to Exchange Act Section 15 are required to comply with the books and
records requirements of 17 CFR 240.17a-3 and 240.17a-4 (Exchange Act
Rules 17a-3 and 17a-4). Participating Underwriters and dealers
transacting business in municipal securities are subject to existing
recordkeeping requirements of the MSRB.\313\ The amendments to the Rule
would contain no recordkeeping requirements for any other persons.
---------------------------------------------------------------------------

    \313\ See MSRB Rules G-8, G-9. Exchange Act Rules 17a-3 and 17a-
4 state that, for purposes of transactions in municipal securities
by municipal securities brokers and municipal securities dealers,
such entities will be deemed in compliance with Exchange Act Rules
17a-3 and 17a-4 if they are in compliance with MSRB Rules G-8 and G-
9, respectively.
---------------------------------------------------------------------------

G. Collection of Information Is Mandatory

    Any collection of information pursuant to the amendments to the
Rule would be a mandatory collection of information.

H. Responses to Collection of Information Will Not Be Kept Confidential

    The collection of information pursuant to the amendments to the
Rule would not be kept confidential and would be publicly
available.\314\ Specifically, the collection of information that would
be provided pursuant to the continuing disclosure documents under the
amendments would be accessible through the MSRB's EMMA system and would
be publicly available via the internet.
---------------------------------------------------------------------------

    \314\ Continuing disclosure agreements may not be available if
they are not subject to state Freedom of Information Act
requirements. Internal dealer notices would not generally be
publicly available but may be available to the Commission, the MSRB,
and FINRA.
---------------------------------------------------------------------------

V. Economic Analysis

A. Introduction

    The Commission is adopting, substantially as proposed, amendments
to Rule 15c2-12 under the Exchange Act to revise the list of event
notices that a Participating Underwriter in an Offering must reasonably
determine an issuer or obligated person has agreed to provide to the
MSRB in its continuing disclosure agreement.
    As discussed above, the main difference between the Rule as
proposed \315\ and the Rule as adopted \316\ is that the definition of
financial obligation is narrower in the adopted amendments. The
Commission believes that the revisions being made to the proposed
definition do not qualitatively change the overall assessment of the
economic impacts from the Proposing Release. While the amendments being
adopted may result in a smaller increase in disclosure than the
proposed amendments because of the narrower scope of the definition of
financial obligation, they will still lead to an increase in disclosure
compared to a baseline that consists of the existing regulatory
framework for municipal securities disclosure, including Rule 15c2-12
prior to these amendments, and current relevant MSRB rules. Therefore,
the economic effects of the amendments being adopted remain
qualitatively consistent with those under the

proposed amendments. More discussion on the relative costs and benefits
of the two approaches and why some of the economic effects cannot be
quantified follow in later sections.\317\
---------------------------------------------------------------------------

    \315\ See Proposing Release, supra note 3, 82 FR at 13937. In
the Proposing Release, the Commission defined the term ``financial
obligation'' to mean a debt obligation, lease, guarantee, derivative
instrument, or monetary obligation resulting from a judicial,
administrative, or arbitration proceeding, but not including
municipal securities as to which a final official statement has been
provided to the MSRB consistent with Rule 15c2-12.
    \316\ See supra Section III.A.2. The adopted definition of
financial obligation removes the term ``lease'' and ``monetary
obligation resulting from a judicial, administrative, or arbitration
proceeding'' from the proposed definition of financial obligation,
and limits the coverage of derivative or guarantee to those related
to a debt obligation. The Commission believes the revised definition
helps distinguish debt and debt-like obligations from obligations
incurred in an issuer's or obligated person's normal course of
operations, and focuses the amendments on the types of obligations
that could compete with a security holder's interests.
    \317\ See infra Section V.C.2.i and Section V.D.1.
---------------------------------------------------------------------------

    As discussed in the Proposing Release, the need for more timely
disclosure of information in the municipal securities market about
financial obligations is highlighted by market developments beginning
in 2009 which feature the increasing use of direct placements by
issuers and obligated persons as financing alternatives to public
offerings of municipal securities.\318\ According to the Consolidated
Reports of Condition and Income (``Call Report'') filed by financial
institutions,\319\ the dollar amount of commercial bank loans to state
and local governments has nearly tripled since the financial crisis,
increasing from $66.5 billion as of the end of 2010 to $190.5 billion
by the end of first quarter 2018. In comparison, the dollar amount of
municipal securities outstanding remained relatively flat over the same
time period.\320\
---------------------------------------------------------------------------

    \318\ See Proposing Release, supra note 3, 82 FR at 13929.
    \319\ Federal Deposit Insurance Corporation, Consolidated
Reports of Condition and Income, available at https://www.fdic.gov/regulations/resources/call/index.html. According to the FDIC, every
national bank, state member bank, insured state nonmember bank, and
savings association is required to file a call report as of the
close of business on the last day of each calendar quarter. The
dollar amount of commercial bank loans to state and local
governments is computed using Call Report data, available at https://cdr.ffiec.gov/public/. The dollar amount is the sum of item
RCON2107, ``OBLIGATIONS (OTHER THAN SECURITIES AND LEASES) OF STATES
AND POLITICAL SUBDIVISIONS IN THE U.S,'' across all the depository
institutions for the stated time period. Item RCON2107 is defined as
follows: ``Includes all obligations of states and political
subdivisions in the United States (including those secured by real
estate), other than leases and other those obligations reported as
securities issued by such entities in `Securities Issued by States
Political Subdivision in the U.S. (8496, 8497, 8498, and 8499)' or
`Mortgage-backed securities (8500, 8501, 8502, and 8503).' Excludes
all such obligations held for trading. States and political
subdivisions in the U.S. includes: (1) The fifty states of the
United States and the District of Columbia and their counties,
municipalities, school districts, irrigation districts, and drainage
and sewer districts; and (2) the governments of Puerto Rico and of
the U.S. territories and possessions and their political
subdivisions.'' See Board of Governors of the Federal Reserve
System, Micro Data Reference Manual, available at http://www.federalreserve.gov/apps/mdrm/data-dictionary (includes detailed
variable definition).
    \320\ As of the end of 2010, the dollar amount of municipal
securities outstanding was $3.94 trillion. See SIFMA, US Bond Market
Issuance and Outstanding, available at https://www.sifma.org/wp-content/uploads/2017/06/cm-us-bond-market-sifma.xls (``SIFMA Bond
Data''). See also Board of Governors of the Federal Reserve System,
Federal Reserve Board Historical Flow of Funds, available at https://www.federalreserve.gov/datadownload/Choose.aspx?rel=z1
(``Historical Flow of Funds''). As of the end of the first quarter
of 2018, the dollar amount of municipal securities outstanding was
$3.84 trillion. See Flow of Funds, supra note 22 at 121 Table L.
212.
---------------------------------------------------------------------------

    The use of direct placements or other debt obligations may benefit
issuers and obligated persons in the form of convenience or lower
borrowing costs relative to a public offering of municipal securities--
there is typically no requirement to prepare an offering document or
obtain a credit rating, liquidity facility, or bond insurance.\321\ On
the other hand, the use of these financial obligations may negatively
affect existing investors for several reasons. First, the incurred
financial obligations, if material, could substantially increase or
change an issuer's or obligated person's overall indebtedness and
impact its liquidity and overall creditworthiness, and thereby affect
the value of the municipal securities held by investors. Second, an
issuer or obligated person may agree to covenants of a financial
obligation that may negatively affect security holders' contractual
rights. For example, the covenants could alter the debt payment
priority structure of the issuer's or obligated person's outstanding
securities, or pledge the assets previously available to secure the
bonds to the lender, both of which could dilute existing security
holders' claims or create contingent liquidity risk, credit risk, or
refinancing risk. Similarly, ``default, event of acceleration,
termination event, modification of terms, or other similar events under
the terms of a financial obligation'' as included in the rule text in
paragraph (b)(5)(i)(C)(16), could also impact the value of municipal
securities held by investors.\322\
---------------------------------------------------------------------------

    \321\ See Daniel Bergstresser and Peter Orr, Direct Bank
Investment in Municipal Debt, 35 Mun. Fin. J. 1, 3 (2014)
(``Bergstresser and Orr''); California Debt and Investment Advisory
Commission, New Frontiers in Public Finance: A Return to Direct
Lending (Oct. 3, 2012), available at http://www.treasurer.ca.gov/cdiac/webinars/2012/20121003/presentation.pdf.
    \322\ Although historically municipal securities have had
significantly lower rates of default than corporate and foreign
government bonds, as mentioned in Section II, defaults by issuers
and obligated persons have occurred. Since 2011, the municipal
securities market has experienced six of the seven largest municipal
bankruptcy filings in U.S. history. See supra note 28.
---------------------------------------------------------------------------

    However, under the current regulatory framework, investors and
other market participants may not have any access or timely access to
information related to the incurrence of financial obligations and
other events included in the amendments, despite their potential impact
on the risks of, and returns to, municipal securities.\323\ Moreover,
to the extent information about a financial obligation is disclosed and
accessible to investors and other market participants, such information
currently may not include certain details about a financial
obligation.\324\ As a result, investors could be making investment
decisions on whether to buy, sell or hold municipal securities without
current information about an issuer's or obligated person's outstanding
debt and other market participants could also be undertaking credit
analyses without such information.
---------------------------------------------------------------------------

    \323\ See supra Section III.A. See also Proposing Release, supra
note 3, 82 FR at 13929-30.
    \324\ Id.
---------------------------------------------------------------------------

    As described in Section III.A and the Proposing Release, numerous
market participants, including the MSRB, FINRA, academics, and industry
groups, have encouraged issuers and obligated persons to voluntarily
disclose information about certain financial obligations.\325\ However,
despite these ongoing efforts, few issuers or obligated persons have
made voluntary disclosures of financial obligations, including direct
placements, to the MSRB.
---------------------------------------------------------------------------

    \325\ See supra note 52. See also Bergstresser and Orr, supra
note 321.
---------------------------------------------------------------------------

    The Commission is mindful of the costs imposed by and benefits
obtained from its rules. In the Proposing Release, the Commission
solicited comments on all aspects of the costs and benefits associated
with the amendments, including any effect the Rule may have on
efficiency, competition, and capital formation. The Commission has
considered these comments, which are discussed in more detail in the
sections below, and continues to believe that the amendments to Rule
15c2-12 will facilitate investors' and other market participants'
access to more timely and informative disclosure in the secondary
market about financial obligations of issuers and obligated persons.
The Commission believes that more timely and informative disclosure
allows investors to make more informed investment decisions and
analysts to produce more informed analyses, and such disclosure can
therefore enhance transparency in the municipal securities market and
investor protection. The discussion below elaborates on the likely
costs and benefits of the amendments and their potential impact on
efficiency, competition, and capital formation.
    Where possible, the Commission has attempted to quantify the costs,
benefits, and effects on efficiency, competition, and capital formation
that may result

from the Rule amendments. However, the Commission is unable to quantify
some of the economic effects of the amendments because many of the key
variables or inputs for calculating such effects are not available. For
example, the Commission is unable to reasonably estimate the scope of
the improvement in pricing of municipal securities under the
amendments. In order to estimate the improvement in pricing, one needs
to first estimate the level of the mispricing under both the Rule prior
to these amendments and the amended Rule, and to do that requires
information about the true value, or fundamental value, of securities.
That fundamental value, in turn, depends on a number of factors, many
of which are not observable. As one example, credit risk of the issuer
or obligated person is a crucial factor in determining the value of its
securities. But as already discussed, issuers and obligated persons may
incur material financial obligations without disclosing them for an
extended period of time under current rules. Since it is not known
whether issuers and obligated persons have incurred material financial
obligations and the resulting amount of debt they have outstanding, and
since the terms of such financial obligations, including interest rate,
maturity, and priority structure are also unknown, the Commission
cannot measure the change in estimates of issuers' and obligated
persons' credit risks that the Commission anticipates would result from
this new information. Without robust estimates of credit risk, among
other necessary inputs, it is not possible to quantify the improvement
in pricing, even if it is assumed the amendments would completely
eliminate mispricing.
    Similarly, due to an absence of data, the Commission is unable to
provide a reasonable estimate of the potential change in borrowing
costs issuers or obligated persons may experience as a result of the
amendments. For example, loan rate determinants include the
characteristics of the issuer or obligated person (e.g., size, credit
risk, etc.), loan characteristics (e.g., size of the loan, maturity,
priority structure and covenants, etc.), and the issuer's or obligated
person's relationship with the lenders (e.g., the length of the
relationship and the number of lenders). Because of the unavailability
of this information, the Commission is not able to quantify the
amendments' impact on borrowing costs.
    There are other factors that also limit the Commission's ability to
quantify the future economic impact of the amendments. For example,
recent federal tax law changes may also affect borrowing costs of
issuers and obligated persons as well as investor demand for municipal
debt, among other things.\326\ Because the impacts from the changes in
the federal tax laws and the amendments are likely to overlap, it may
not be possible to disentangle the two. In addition, the amendments'
impact may vary significantly across different issuers and obligated
persons, which poses additional challenges to quantifying the
amendments' effects. Additional discussion of these factors and issues
on quantification follows in later sections.
---------------------------------------------------------------------------

    \326\ See supra notes 124, 125, and 126.
---------------------------------------------------------------------------

B. Economic Baseline

    To assess the economic impact of the amendments to Rule 15c2-12,
the Commission is using as its baseline the existing regulatory
framework for municipal securities disclosure, including Rule 15c2-12
prior to these amendments, and current relevant MSRB rules.
1. The Current Municipal Securities Market
    As discussed above and in the Proposing Release, the need for more
timely and informative disclosure of financial obligations is
highlighted by market developments beginning in 2009, which feature the
increasing use of direct placements by issuers and obligated persons as
financing alternatives to public offerings of municipal securities.
Below is an overview of the current state of the municipal securities
market and issuers' and obligated persons' use of direct placements
based on data from the Federal Reserve Board's Flow of Funds data,\327\
and Call Report data from the FDIC.\328\
---------------------------------------------------------------------------

    \327\ Municipal securities are defined in the table description
for the Flow of Funds data as follows. ``Municipal securities are
obligations issued by state and local governments, nonprofit
organizations, and nonfinancial corporate businesses. State and
local governments are the primary issuers; detail on both long and
short-term (original maturity of 13 months or less) debt is shown.
This instrument excludes trade debt of, and U.S. government loans
to, state and local governments. Debt issued by nonprofit
organizations includes nonprofit hospital bonds and issuance to
finance activities such as lending to students. Debt issued by the
nonfinancial corporate business sector includes industrial revenue
bonds. Most municipal debt is tax-exempt; that is, the interest
earned on holdings is exempt from federal income tax. Since 1986,
however, some of the debt issued has been taxable, including the
Build America Bonds authorized under the American Recovery and
Reinvestment Act of 2009.'' See Federal Reserve Board, Financial
Accounts of the United States: All Table Descriptions, at 31-32
(Mar. 8, 2018) available at http://www.federalreserve.gov/apps/fof/Guide/z1_tables_description.pdf.
    \328\ See Call Report, supra note 319.
---------------------------------------------------------------------------

    According to Flow of Funds data, the notional amount of the total
municipal securities outstanding in the U.S. was $3.84 trillion as of
the end of the first quarter of 2018.\329\ Prior to (and during) the
2008 financial crisis, the amount of municipal securities outstanding
was increasing steadily, growing from $2.87 trillion in 2004 to a post-
crisis peak of $3.94 trillion in 2010.\330\ Since 2010, the overall
size of the municipal securities market has remained flat.\331\
---------------------------------------------------------------------------

    \329\ Flow of Funds, supra note 22, at 121 Table L. 212.
    \330\ See SIFMA Bond Data, supra note 320.
    \331\ See id.
---------------------------------------------------------------------------

    However, the involvement of commercial banks in the municipal
capital markets has increased dramatically in terms of purchases of
municipal securities and extensions of loans to state and local
governments and their instrumentalities.\332\ U.S. chartered depository
institutions' holdings of outstanding municipal securities have grown
rapidly, from 6.46% of the total outstanding (or $254.6 billion) in
2010 to 14.4% of the total outstanding (or $554.4 billion) in the first
quarter of 2018, an over two-fold increase.\333\ The fastest growth has
been in direct lending to state and local governments and their
instrumentalities. The dollar amount of bank loans to state and local
governments has nearly tripled since the 2008 financial crisis,
increasing from $66.5 billion at the end of 2010 to $190.5 billion by
the end of the first quarter of 2018, or equivalently, an increase from
1.69% of total municipal securities outstanding to 4.95%.\334\
---------------------------------------------------------------------------

    \332\ See Bergstresser and Orr, supra note 321.
    \333\ See SIFMA Bond Data and Historical Flow of Funds, supra
note 320.
    \334\ See Call Report, supra note 319. See also SIFMA Bond Data,
supra note 320.
---------------------------------------------------------------------------

    The incurrence of financial obligations can result in an increase
in the issuer's or obligated person's outstanding debt, negatively
affecting the liquidity and creditworthiness of the issuer or obligated
person and the prices of their outstanding municipal securities.
However, currently, there is a lack of secondary market disclosure
about these financial obligations, a topic that has been discussed by
the MSRB, certain market participants, and academics.\335\ As a result,
investors and other market participants may not have access or timely
access to information regarding financial obligations, and such
information may not be incorporated in the prices of issuers' or
obligated persons' outstanding municipal securities. As discussed in
the Proposing Release, recognizing the

credit implications of direct placements, at least one rating agency
now requires, and other rating agencies strongly encourage, issuers and
obligated persons to notify them of the incurrence of direct
placements, and to provide all relevant documentation related to such
indebtedness.\336\ This rating agency also stated it may suspend or
withdraw its ratings should issuers and obligated persons fail to
provide such notification in a timely manner.\337\ While such efforts
can induce more disclosure and help mitigate mispricing, each rating
agency would have to implement a similar process to collect the same
information, and issuers and obligated persons would have to provide
identical responses multiple times, which might not be an efficient way
to increase disclosure in the municipal securities market.
---------------------------------------------------------------------------

    \335\ See supra note 52. See also Bergstresser and Orr, supra
note 321.
    \336\ See Proposing Release supra note 3, 82 FR at 13934.
    \337\ See id.
---------------------------------------------------------------------------

2. Rule 15c2-12
    As discussed above, the Commission first adopted Rule 15c2-12 in
1989 as a means reasonably designed to prevent fraud in the municipal
securities market by enhancing the quality, timing, and dissemination
of disclosures in the municipal securities primary market.\338\
Currently, Rule 15c2-12, most recently amended in 2010, prohibits a
Participating Underwriter from purchasing or selling municipal
securities in connection with an Offering unless the Participating
Underwriter reasonably determines that the issuer or obligated person
has undertaken in a continuing disclosure agreement to provide the MSRB
with: (1) Annual filings; (2) event notices; and (3) failure to file
notices.\339\ The Rule prior to these amendments does not impose on a
Participating Underwriter any obligation to reasonably determine that
an issuer or obligated person has undertaken in its continuing
disclosure agreement to disclose the events covered in these
amendments. As discussed in Section III.A, investors and other market
participants may not learn that the issuer or obligated person has
incurred a financial obligation if the issuer or obligated person does
not provide annual financial information or audited financial
statements to EMMA or does not subsequently issue debt in a primary
offering subject to Rule 15c2-12 that results in the provision of a
final official statement to EMMA.
---------------------------------------------------------------------------

    \338\ See supra Section II.
    \339\ See supra notes 16, 17, and 18.
---------------------------------------------------------------------------

    Even if investors and other market participants have access to
disclosure about an issuer's or obligated person's financial
obligations, such access may not be timely if, for example, the issuer
or obligated person has not submitted annual financial information or
audited financial statements to EMMA in a timely manner or does not
frequently issue debt that results in a final official statement being
provided to EMMA. Typically, as discussed above and in the Proposing
Release, investors and other market participants do not have access to
an issuer's or obligated person's annual financial information or
audited financial statements until several months or up to a year after
the end of the issuer's or obligated person's applicable fiscal year,
and a significant amount of time could pass before an issuer's or
obligated person's next primary offering subject to Rule 15c2-12.\340\
---------------------------------------------------------------------------

    \340\ See Proposing Release, supra note 3, 82 FR at 13929.
---------------------------------------------------------------------------

    Furthermore, to the extent the information about financial
obligations is disclosed and accessible to investors and other market
participants, such information currently may not include certain
details about the financial obligations. Specifically, disclosure of a
financial obligation in an issuer's or obligated person's financial
statements may be a line item about the amount of the financial
obligation, and may not provide investors and other market participants
with information relating to an issuer's or obligated person's
agreement to covenants, events of default, remedies, priority rights,
or other similar terms of a financial obligation, any of which affect
security holders, if material.\341\
---------------------------------------------------------------------------

    \341\ See supra note 97.
---------------------------------------------------------------------------

3. MSRB Rules
    MSRB rules do not address the disclosure of the events covered in
the amendments. However, as described above and in the Proposing
Release, the MSRB has highlighted the increased use of direct
placements as a financing alternative.\342\ The MSRB has encouraged
issuers to voluntarily disclose direct placements on EMMA,\343\
including providing instructions to issuers on how they may provide
such disclosures using EMMA. Despite the MSRB's efforts to encourage
voluntary disclosure, the number of disclosures made using EMMA has
been limited.\344\
---------------------------------------------------------------------------

    \342\ See Proposing Release, supra note 3, 82 FR at 13933 and
note 76.
    \343\ See supra note 52.
    \344\ See supra note 34.
---------------------------------------------------------------------------

    In March 2016, the MSRB published a regulatory notice requesting
comment on a concept proposal to require municipal advisors to disclose
information regarding the direct placements of their municipal entity
clients to EMMA.\345\ On August 1, 2016, the MSRB announced that it had
decided not to pursue the ideas set forth in the MSRB Request for
Comment. Many who commented on the MSRB's Request for Comment stated
that the best way to ensure disclosure of direct placements is to amend
Rule 15c2-12.\346\
---------------------------------------------------------------------------

    \345\ See id.
    \346\ See Proposing Release, supra note 3, 82 FR at 13933 and
note 76.
---------------------------------------------------------------------------

4. GASB Statement No. 88
    GASB released in April 2018 Statement No. 88, Certain Disclosures
Related to Debt, including Direct Borrowings and Direct
Placements.\347\ In issuing the guidance, GASB stated the ``guidance
[is] designed to enhance debt-related disclosures in notes to financial
statements, including those addressing direct borrowings and direct
placements.'' \348\ GASB Statement No. 88 states ``[t]he primary
objective of this Statement is to improve the information that is
disclosed in notes to government financial statements related to debt,
including direct borrowings and direct placements. It also clarifies
which liabilities governments should include when disclosing
information related to debt. This Statement defines debt for purposes
of disclosure in notes to financial statements. . . .'' \349\
---------------------------------------------------------------------------

    \347\ See GASB Statement No. 88--Certain Disclosures Related to
Debt, including Direct Borrowings and Direct Placements, supra note
44.
    \348\ See GASB, GASB Establishes New Guidance on Debt
Disclosures, Addresses Direct Borrowings and Direct Placements (Apr.
2, 2018), available at http://www.gasb.org/cs/Satellite?c=GASBContent_C&cid=1176170309590&d=Touch&pagename=GASB%2FGASBContent_C%2FGASBNewsPage.
    \349\ See GASB Statement No. 88--Certain Disclosures Related to
Debt, including Direct Borrowings and Direct Placements, supra note
44.
---------------------------------------------------------------------------

    GASB Statement No. 88 also ``requires that additional essential
information related to debt be disclosed in notes to financial
statements, including unused lines of credit, assets pledged as
collateral for the debt, and terms specified in debt agreements related
to significant events of default with finance-related consequences,
significant termination events with finance-related consequences, and
significant subjective accelerations clauses.'' \350\
---------------------------------------------------------------------------

    \350\ Id.
---------------------------------------------------------------------------

    As discussed more fully above, although GASB Statement No. 88 could
result in the disclosure of more information related to debt disclosed
in issuers' or obligated persons' audited financial statements
consistent with that

under new paragraph (b)(5)(i)(C)(15) of the Rule, the new guidance does
not improve the timeliness of the disclosure investors and market
participants will receive, nor does it cover the events under paragraph
(b)(5)(i)(C)(16) of the Rule.\351\ Additionally, currently, not all
state and local governments follow GASB standards for their annual
financial reports.\352\
---------------------------------------------------------------------------

    \351\ See supra note 44.
    \352\ See, e.g., Emilia Istrate, Cecilia Mills and Daniel
Brookmyer, National Association of Counties, Counting Money: State
and GASB Standards for County Financial Reporting (Feb. 2016),
available at http://www.naco.org/sites/default/files/documents/Counting%20Money_Full%20Report.pdf.
---------------------------------------------------------------------------

5. Federal Tax Law Changes
    Recent changes to federal tax laws \353\ could impact, or may have
already impacted, the municipal securities market in several ways.
First, because the new law caps the state and local tax deduction
allowed to be taken on an individual federal income tax return, the law
may increase the demand for tax-free investments such as municipal
bonds, driving up bond prices and driving down bond yields.\354\
---------------------------------------------------------------------------

    \353\ See supra note 125.
    \354\ See, e.g., Carla Fried, The Tax Law Gives Municipal Bonds
a New Allure, N.Y. Times, (Feb. 23, 2018), available at https://www.nytimes.com/2018/02/23/business/the-tax-law-gives-municipal-bonds-a-new-allure.html.
---------------------------------------------------------------------------

    Second, a decline in the federal corporate income tax rate may
increase the interest rates on issuers' or obligated persons' direct
placements, reducing the demand for direct placements. Prior to the
changes in the federal tax law, municipal issuers and obligated persons
enjoyed lower interest rates than their corporate counterparts in part
because banks benefitted from tax-free interest income. The reduction
in the corporate income tax rate diminishes the relative benefit for
the municipal tax exemption, making direct placements less
attractive.\355\ In addition, as discussed above, interest rates on
issuers' and obligated persons' direct placements may also increase as
a result of certain provisions being triggered by the reduction in the
federal corporate income tax rate,\356\ reducing the demand for direct
placements.
---------------------------------------------------------------------------

    \355\ See, e.g., Kyle Glazier, Why Muni Issuers Are Eschewing
Bank Loans, The Bond Buyer, (May 21, 2018), available at https://www.bondbuyer.com/news/why-muni-issuers-are-eschewing-bank-loans
(noting that ``issuers are already removing direct bank loans from
their portfolios in favor of other types of more traditional debt
thanks to the new tax law as well as rising interest rate'').
    \356\ See supra notes 124 and 126.
---------------------------------------------------------------------------

    Third, as discussed above, because the new tax law eliminated state
and local governments' ability to use tax-exempt bonds to advance
refund outstanding bonds, some issuers and obligated persons may be
incentivized to use complex strategies and derivative products to
refund outstanding bond issues,\357\ potentially increasing these
issuers' and obligated persons' credit risk.
---------------------------------------------------------------------------

    \357\ See, e.g., Lynn Hume, Alternatives to Tax-exempt Advance
Refundings Would Cost Issuers, The Bond Buyer (Nov. 22, 2017),
available at https://www.bondbuyer.com/news/issuers-have-costlier-alternatives-to-advance-refundings; GFOA, Potential Impacts of Tax
Reform on Outstanding and Future Municipal Debt Issuance, available
at http://www.gfoa.org/potential-impacts-tax-reform-outstanding-and-future-municipal-debt-issuance; see also supra note 139. See also
supra note 150.
---------------------------------------------------------------------------

6. Existing State of Efficiency, Competition, and Capital Formation
    Under current rules, certain inefficiencies may arise in the
municipal securities market as a result of the lack of timely
disclosure of information on important credit events. As discussed
above and in the Proposing Release, currently investors and other
market participants may not learn about the new information related to
the issuer's or obligated person's financial obligations for months or
over a year after the end of the issuer's or obligated person's fiscal
year. Since the market is not able to incorporate into prices the most
recent credit risk information about issuers and obligated persons, the
securities offered by issuers or obligated persons of different credit
risks could be priced identically. For example, all else equal, an
issuer or obligated person that incurs a large amount of undisclosed
financial obligations may be more likely to default on its payment
obligations than one that does not. However, in the absence of public
disclosure, market participants could assign the same price to both
issuers' or obligated persons' securities. Mispricing on the basis of
undisclosed risks could lead to inefficiency in the allocation of
financial resources across high- and low-risk issuers and obligated
persons.
    Rule 15c2-12 prior to these amendments may create competitive
advantages for certain market participants. As discussed above and in
the Proposing Release, because the market might not be able to
differentiate securities offered by high-risk issuers and obligated
persons from those offered by low-risk issuers and obligated persons
because of lack of disclosures under Rule 15c2-12 prior to these
amendments, low-risk issuers and obligated persons could be subject to
disadvantages if they are unable to credibly demonstrate to market
participants that they are low-risk. As another example, municipal
securities investors are also in a disadvantageous position relative to
private lenders. As discussed above and in the Proposing Release, the
terms of a financial obligation incurred by an issuer or obligated
person may include covenants that alter the debt payment priority
structure of the issuer's or obligated person's outstanding securities,
or give the lender a lien on assets or revenues that were previously
pledged to secure repayment of an issuer's or obligated person's
outstanding municipal securities, effectively diluting existing
security holders' claims and adversely affecting their contractual
rights without their knowledge. In the Commission's view, the existence
of these scenarios does not represent a fully competitive market.
    The price inefficiencies in the municipal securities market and the
disparity in available information for different types of investors
could result in inefficient allocation of capital. For example, as
mentioned above, the inability of the market to differentiate high-risk
issuers or obligated persons from low-risk ones could lead to a
mismatch of investors to securities appropriate for their risk
preferences, leading to suboptimal allocation of capital.

C. Benefits, Costs and Effects on Efficiency, Competition, and Capital
Formation

    The Commission has considered the potential costs and benefits
associated with the amendments and the comments received regarding the
proposed amendments.\358\ The Commission continues to believe that the
primary economic benefits of the amendments stem from the potential
improvement in the timeliness and informativeness of municipal
securities disclosure. The Commission believes that the Rule 15c2-12
amendments will facilitate investors' access to more timely and
informative disclosure, help investors make more informed investment
decisions, and enhance investor protection. The Commission also
believes that improved disclosure can assist other market participants,
including rating agencies and municipal securities analysts, in
providing more accurate credit ratings and credit analyses as they will
have more timely

access to information regarding an issuer's or obligated person's
outstanding debt. Disclosure that is both more timely and informative
can positively affect efficiency, competition, and capital formation.
---------------------------------------------------------------------------

    \358\ The Commission understands that it is possible that the
issuer or obligated person may not comply with its previous
continuing disclosure undertakings and may not provide the MSRB with
notice of the events pursuant to Rule 15c2-12 amendments, in which
case, the actual costs and benefits of the amendments would depend
on the issuer's or obligated person's commitment to disclosure.
---------------------------------------------------------------------------

    At the same time, the Commission continues to recognize that the
amendments will introduce costs to relevant parties, including issuers,
obligated persons, dealers, and lenders. However, it is the
Commission's belief that the costs are justified in light of the
benefits. A discussion of the economic costs and benefits of the
amendments, including the effects on efficiency, competition, and
capital formation, is set forth in more detail below.
1. Anticipated Benefits of Rule 15c2-12 Amendments
i. Benefits to Investors
    The Commission believes that these amendments may yield several
benefits to municipal securities investors. First, the amendments will
facilitate investors' access to more timely and informative disclosures
about an issuer's or obligated person's financial obligations, and
thereby assist them in making more informed investment decisions when
trading in the secondary market.
    As discussed in the Proposing Release, the information regarding
the events described in the amendments is relevant for investors'
investment decision making. For example, the incurrence of a financial
obligation that results in an increase or change in an issuer's or
obligated person's outstanding debt may impact the issuer's or
obligated person's liquidity and overall creditworthiness. For another
example, an agreement to covenants, events of default, remedies,
priority rights, or other similar terms of a financial obligation, any
of which affect security holders, may result in, among other things,
contingent liquidity and credit risks that potentially impact the
issuer's or obligated person's liquidity and overall creditworthiness
and reduce value for existing security holders.\359\ The occurrence of
a default, event of acceleration, termination event, modification of
terms, or other similar event under terms of a financial obligation of
the issuer or obligated person, any of which reflects financial
difficulties, could provide relevant information regarding whether the
financial condition of the issuer or the obligated person has changed
or worsened, and whether the issuer or obligated person has agreed to
new terms that would provide the counterparty with superior rights to
assets or revenues that were previously pledged to existing security
holders.\360\ All these events contain relevant information about the
underlying risk of a municipal security, and can have a direct impact
on its pricing. Without such information, the prices of municipal
securities could be distorted from their fundamental value in both the
primary and secondary markets.
---------------------------------------------------------------------------

    \359\ See Proposing Release supra note 3, 82 FR at 13935-36.
    \360\ See id. at 13940.
---------------------------------------------------------------------------

    However, currently, investors and other market participants may not
have any access or timely access to information related to the
incurrence of financial obligations and other events included in the
amendments. For example, investors and other market participants may
not learn of these events if the issuer or obligated person does not
provide annual financial information or audited financial statements to
EMMA or does not subsequently issue debt in a primary offering subject
to Rule 15c2-12 that results in the provision of a final official
statement to EMMA. Further, even if investors and other market
participants have access to disclosure about these events, such access
may not be timely if, for example, the issuer or obligated person has
not submitted annual financial information or audited financial
statements to EMMA in a timely manner or does not frequently issue debt
that results in a final official statement being provided to EMMA.
Typically, as discussed above and in the Proposing Release, investors
and other market participants do not have access to an issuer's or
obligated person's annual financial information or audited financial
statements until several months or up to a year after the end of the
issuer's or obligated person's applicable fiscal year, and a
significant amount of time could pass before an issuer's or obligated
person's next primary offering subject to Rule 15c2-12.
    Moreover, to the extent the information about financial obligations
is disclosed and accessible to investors and other market participants,
such information currently may not include certain details.
Specifically, the disclosure may include only the existence of the
financial obligation that the issuer or obligated person has incurred,
but not specified material terms of the financial obligation that can
affect security holders, including those terms that, for example,
affect security holders' priority rights. Therefore, existing security
holders could be making investment decisions without the knowledge that
the value of the securities and their contractual rights have been
adversely impacted, and potential investors could be buying these
securities at an inflated price. As such, the current level of
disclosure regarding an issuer's or obligated person's financial
obligations is neither timely nor adequately informative.
    To the extent that investors in the municipal securities market
rely on credit ratings as a meaningful indicator of credit risk, the
recent efforts of certain credit rating agencies to collect information
from issuers and obligated persons about the incurrence of direct
placements may help improve the accuracy of credit ratings and mitigate
potential mispricing in the municipal securities market.\361\ However,
because not all credit rating agencies require information on direct
placements to provide a rating, and there are other undisclosed
financial obligations and significant events (such as defaults) that
may affect the issuers' and obligated persons' creditworthiness besides
the incurrence of financial obligations, such efforts alone are
unlikely to remove all potential mispricing related to direct
placements.
---------------------------------------------------------------------------

    \361\ See supra note 336. For academic evidence on pricing
effect of credit rating agencies' actions, see John R. M. Hand,
Robert W. Holthausen, and Richard W. Leftwich, The Effect of Bond
Rating Agency Announcements on Bond and Stock Prices, 47 J. Fin. 733
(1992).
---------------------------------------------------------------------------

    Under the amendments to Rule 15c2-12, Participating Underwriters in
an Offering are required to reasonably determine that an issuer or
obligated person has agreed in its continuing disclosure agreement to
provide notices for the new events within ten business days.
Consequently, pursuant to the amendments, municipal securities
investors and other market participants will have access to the
specified disclosures within ten business days as opposed to waiting
for the issuer's or obligated person's next primary offering subject to
Rule 15c2-12, waiting for the release of annual financial information
or audited financial statements, or having no access to such
information at all. In addition, the event notices generally should
include a description of material terms of the financial obligations,
which might include the date of incurrence, principal amount, maturity
and amortization, interest rate, if fixed, or method of computation, if
variable (and any default rates),\362\ so the disclosures provided to
the MSRB should be informative about not just the existence of the
incurred financial obligation, but generally should also include
additional details about the

incurred financial obligation. More timely and informative disclosure
can help reduce mispricing in the municipal securities market, and
allow investors to make more accurate assessments of the risks
associated with their investments, and ultimately allow them to make
more informed investment decisions.\363\
---------------------------------------------------------------------------

    \362\ See supra Section III.A.1.iii.
    \363\ As discussed above in Section V.B.5, the amendments could
be particularly informative in light of the recent changes to
federal tax law. The tax reform bill passed in December 2017
eliminated state and local governments' ability to use tax-exempt
bonds to advance refund outstanding bonds, which may incentivize
some issuers to use complex strategies and derivative products to
refund outstanding bond issues. See supra note 309 and accompanying
text. These derivatives entered into in connection with a debt
obligation would be disclosed under the amendments, and keep
investors and other market participants informed about the credit
risk associated with the derivatives.
---------------------------------------------------------------------------

    Second, more timely and informative disclosures may reduce the
information disadvantage investors have relative to other more informed
parties such as issuers, obligated persons, counterparties, and
lenders, and enhance their protection. As discussed above and in the
Proposing Release, for example, a bank loan agreement could alter the
debt payment priority structure of the issuer's or obligated person's
outstanding securities, or give the lender a lien on assets or revenues
that also secure the repayment of an issuer's or obligated person's
outstanding municipal securities, diluting existing security holders'
claims and adversely affecting their contractual rights. However, under
the Rule prior to these amendments, existing security holders may not
learn about such events and may therefore be unable to take any actions
they might have taken had they been informed, such as exiting their
position. More timely and informative disclosure of the events covered
in the amendments should promote a fairer information environment that
allows current investors to monitor whether their contractual rights
have been negatively impacted by undisclosed financial obligations and
take appropriate actions.
ii. Benefits to Issuers or Obligated Persons
    In the Proposing Release, the Commission discussed that the
amendments would benefit issuers and obligated persons because greater
transparency regarding an issuer's or obligated person's financial
obligations might lead to a decrease in borrowing costs, particularly
the costs associated with their public debt. One comment the Commission
received urged the Commission to further study borrowing costs, because
the commenter asserted that the Commission ``does not genuinely address
systemic increased borrowing costs that may result from this rule.''
\364\ The Commission discussed the potential for increased borrowing
costs in its proposal for amendments to Rule 15c2-12.\365\
---------------------------------------------------------------------------

    \364\ See Lisante Letter.
    \365\ See Proposing Release, supra note 3, 82 FR at 13952.
---------------------------------------------------------------------------

    As discussed in the Proposing Release, in the context of corporate
disclosure, economic theories suggest information asymmetry can lead to
an adverse selection problem and reduce the level of liquidity.\366\ In
an asymmetric information environment, uninformed investors recognize
that they may be disadvantaged when trading with privately or better
informed counterparties, and therefore either price-protect or exit the
market to minimize possible losses from trading under such
circumstances. Both of these actions can reduce the liquidity in the
corporate securities market. Because illiquidity and high bid-ask
spreads impose transaction costs on investors, and investors demand
compensation for the transaction costs they bear, high illiquidity and
information asymmetry lead to high cost of capital.\367\ Therefore, by
committing to increased levels of disclosure, a firm can reduce
information asymmetry, and thereby mitigate the risk of adverse
selection faced by investors and the discount they demand, and
ultimately decrease the firm's cost of capital. The arguments linking
information asymmetry and adverse selection to cost of capital apply to
financial markets more generally. In particular, the Commission
believes that a similar analysis can be applied to municipal
securities, and therefore, the amendments should result in greater
municipal securities disclosures and may decrease the cost of public
debt for issuers and obligated persons.
---------------------------------------------------------------------------

    \366\ See Proposing Release, supra note 3, 82 FR at 13952
(citing Douglas W. Diamond and Robert E. Verrecchia, Disclosure,
Liquidity, and the Cost of Capital, 46 J. Fin. 1325 (1991)).
    \367\ See Proposing Release, supra note 3, 82 FR at 13952.
---------------------------------------------------------------------------

    The Commission continues to believe that the additional disclosures
are likely to reduce borrowing costs for issuers or obligated persons.
The Commission has further examined academic studies on the
relationship between disclosures and municipal borrowing costs in light
of commenter concerns. While relatively limited, most of the available
studies on disclosure and municipal borrowing costs provide evidence
that more disclosure regulation or stringent accounting and auditing
requirements are associated with lower municipal borrowing costs. This
literature also supports the Commission's view that disclosure reduces
information asymmetry and the cost of capital.\368\
---------------------------------------------------------------------------

    \368\ See William R. Baber and Angela K. Gore, Consequences of
GAAP Disclosure Regulation: Evidence from Municipal Debt Issues, 83
Acct. Rev. 565 (2008). See also Robert W. Ingram and Ronald M.
Copeland, Municipal Market Measures and Reporting Practices: An
Extension, 20 J. Acct. Res. 766 (1982). See also Earl D. Benson,
Barry R. Marks and Krishnamurthy K. Raman, State Regulation of
Accounting Practices and Municipal Borrowing Costs, 3 J. Acct. &
Pub. Pol'y 107 (1984). See also Lisa M. Fairchild and Timothy W.
Koch, The Impact of State Disclosure Requirements on Municipal
Yields, 51 Nat'l Tax J. 733 (1998).
    For additional reference to borrowing costs in corporate
securities markets, see also Christian Leuz and Peter D. Wysocki,
The Economics of Disclosure and Financial Reporting Regulation:
Evidence and Suggestions for Future Research, 54 J. Acct. Res. 525
(2016); Thomas E. Copeland and Dan Galai, Information Effects on the
Bid[hyphen]Ask Spread, 38 J. Fin. 1457 (1983); David Easley and
Maureen O'Hara, Price, Trade Size, and Information in Securities
Markets, 19 J. Fin. Econ. 69 (1987); David Easley and Maureen
O'Hara, Information and the Cost of Capital, 59 J. Fin. 1553 (2004);
Yakov Amihud and Haim Mendelson, Asset Pricing and the Bid-Ask
Spread, 17 J. Fin. 223 (1986).
---------------------------------------------------------------------------

    Also in response to the commenter's concern, the Commission further
considered the amendments' impact on the cost of issuers' and obligated
persons' private debt, including direct placements and other financial
obligations. As discussed in the Proposing Release, the amendments
should promote competition for investment opportunities between
municipal securities investors and private lenders by reducing
information asymmetry.\369\ Accordingly, it is possible that increased
disclosure from municipal issuers and obligated persons may result in
lower costs of privately placed debt for them. Additionally, the
potential decrease in the cost of public debt as a result of the
amendments could also put competitive pressure on loan pricing, and
drive down the cost of private debt including direct placements and
other financial obligations. Limited existing research on the cost of
private debt finds that companies that consistently make detailed,
timely, and informative disclosures face lower interest costs on
private debt contracts.\370\ Other publicly available information such
as auditor assurance is also shown to be used by private lenders to
determine loan rates.\371\ These findings suggest that, despite
lenders' ability to gather private information

from borrowers, they still incorporate the quality of a company's
disclosure in their estimation of its default risk, a primary
determinant of loan pricing.\372\
---------------------------------------------------------------------------

    \369\ See Proposing Release, supra note 3, 82 FR at 13954.
    \370\ See Sumon C. Mazumdar and Partha Sengupta, Disclosure and
the Loan Spread on Private Debt, 61 Fin. Analysts J. 83 (2005).
    \371\ See David W. Blackwell, Thomas R. Noland and Drew B.
Winters, The Value of Auditor Assurance: Evidence from Loan Pricing,
36 J. Acct. Res. 57 (1998).
    \372\ See supra note 370.
---------------------------------------------------------------------------

    Overall, the Commission believes that the amendments could benefit
issuers and obligated persons by reducing the cost of both publicly
issued and privately placed debt including direct placements and other
financial obligations. The Commission also recognizes that borrowing
costs could increase in some cases as a result of the amendments, which
would constitute a cost to issuers and obligated persons. More
discussion on the cost and overall impact of the amendments will be
provided in a later section.\373\
---------------------------------------------------------------------------

    \373\ See infra Section V.C.2.i.
---------------------------------------------------------------------------

iii. Benefits to Rating Agencies and Municipal Analysts
    The Commission continues to believe that the amendments will help
rating agencies and municipal analysts gain access to more updated
information about the issuer's and obligated person's credit and
financial position at a lower cost. As discussed in the Proposing
Release, rating agencies and municipal analysts have stated on a number
of occasions that direct placements can have credit implications for
ratings on an issuer's or obligated person's outstanding municipal
securities.\374\ Rating agencies must expend resources to collect
information about financial obligations including direct placements to
provide more accurate ratings. One rating agency stated that it would
suspend or withdraw ratings if issuers or obligated persons do not
provide such notification in a timely manner.\375\ The process for
suspending or withdrawing ratings could also be costly for a rating
agency.\376\ The amendments may reduce the need for rating agencies or
analysts to separately implement a process to gain more timely access
to the information regarding issuers' and obligated persons' financial
obligations. Therefore, under the amendments, rating agencies and
municipal analysts may have access to information they need to produce
more accurate credit ratings and analyses at a lower cost. A portion of
any cost savings may be passed through to investors and represent a
benefit to them depending on how much they rely on rating agencies for
information.
---------------------------------------------------------------------------

    \374\ See Moody's Investors Service, Special Comment: Direct
Bank Loans Carry Credit Risks Similar to Variable Rate Demand Bonds
for Public Finance Issuers (Sept. 15, 2011); see also Proposing
Release, supra note 3, 82 FR at 13934 note 81.
    \375\ See Proposing Release, supra note 3, 82 FR at 13934 note
81.
    \376\ See id.
---------------------------------------------------------------------------

2. Anticipated Costs of the Rule 15c2-12 Amendments
i. Costs to Issuers and Obligated Persons
    The Commission expects that, under the amendments, issuers and
obligated persons will experience an increase in administrative costs
from undertaking in their continuing disclosure agreements to produce
the additional event notices. As discussed above,\377\ an advantage of
a direct placement versus a public offering of municipal securities is
the lower costs because, among other things, there is no requirement to
prepare a public offering document for the borrowing transaction. Under
the amendments, Participating Underwriters in Offerings will be
required to reasonably determine that issuers or obligated persons have
undertaken in a continuing disclosure agreement to submit event notices
to the MSRB within ten business days of the events. Issuers and
obligated persons providing notices in a manner consistent with the
amendments will incur a cost to do so.
---------------------------------------------------------------------------

    \377\ See supra Section V.A.
---------------------------------------------------------------------------

    As discussed in Section IV.D.2 and Section IV.E.2, after carefully
considering the comments received, the Commission is revising certain
estimates of the annual paperwork burden and related cost for all
issuers and obligated persons.\378\ According to these new estimates,
the Commission currently anticipates that issuers and obligated persons
will incur an annual total cost of $4,928,000 in the preparation of
additional event notices.\379\ The Commission also estimates that
issuers and obligated persons will incur an additional estimated annual
cost of $819,000 in fees for designated agents to assist in the
submission of event notices.\380\ In addition, the Commission estimates
that each issuer or obligated person, if it employs an outside attorney
to update its template for continuing disclosure agreements, will incur
a cost of approximately $100, for a one-time total cost of $2,800,000
for all issuers and obligated persons.\381\
---------------------------------------------------------------------------

    \378\ See supra Section IV.D.2 and Section IV.E.2.
    \379\ As discussed in Section IV.E.2, the amendments are
estimated to generate 2,200 additional event notices, half of which
will be prepared internally, at an average of four hours per notice,
and half of which will require an average of four hours of internal
work and four hours of external work per notice. 1,100 (number of
event notices solely using internal compliance attorney) x 4
(estimated time for internal attorney to assist in the preparation
of such event notice) x $360 (hourly wage for an internal attorney)
+ 1,100 (number of event notices requiring both internal compliance
attorney and outside counsel) x (4 (estimated time for outside
attorney to assist in the preparation of such event notice) x $400
(hourly wage for an outside attorney) + 4 (estimated time for an
internal attorney to assist in the preparation of such event notice)
x $360 (hourly wage for an internal attorney)) = $4,928,000. The
$360 per hour estimate for an internal compliance attorney is from
SIFMA's Management and Professional Earnings in the Securities
Industry (2013), modified by Commission staff to account for an
1,800-hour work-year and multiplied by 5.35 to account for bonuses,
firm size, employee benefits and overhead, and adjusted for
inflation. For a discussion on the cost of retaining outside
professionals, see supra note 310.
    \380\ See supra Section IV.E.2. As discussed above, the
Commission estimated that 65% of issuers may use designated agents
to submit some or all of their continuing disclosure documents to
the MSRB. Based on the Commission's revised estimates of the number
of issuers, the Commission estimates that the average total annual
cost that would be incurred by issuers that use the services of a
designated agent would be $13,650,000. See supra note 294. The
Commission estimates that the two amendments would cause issuers
that use the services of a designated agent to incur additional
costs of six percent, or $819,000 ($13,650,000 x 6% = $819,000), for
a total of $14,469,000. See supra note 295.
    \381\ See supra note 302.
---------------------------------------------------------------------------

    Another area of inquiry is the potential of the amendments and
resulting disclosures to increase the cost of financial obligations for
issuers and obligated persons. In response to the comment mentioned
above,\382\ the Commission has also further considered whether
borrowing costs may increase under the amendments. As discussed above
and in the Proposing Release, currently, an issuer or obligated person
may agree to provide superior rights to the counterparty in assets or
revenues that were previously pledged to existing security holders when
they incur a financial obligation without disclosing this information
to the public. Public disclosure of such arrangements under the
amendments, therefore, could potentially reduce opportunities for
lenders to move ahead in the priority queue either because issuers and
obligated persons are discouraged from providing lenders with priority
at the current level, or because investors demand covenants which
prevent issuers and obligated persons from doing so and reduce the
benefits lenders currently enjoy. Currently, while investors may also
claim their rights under the covenants, they may not be aware that
their rights have been affected without the disclosures, and therefore
may fail to make such claims.
---------------------------------------------------------------------------

    \382\ See Lisante Letter.
---------------------------------------------------------------------------

    In addition, as also discussed above and in the Proposing Release,
existing banking literature suggests that lenders develop proprietary
information about the borrower during a lending relationship because
they actively engage in information gathering and

monitoring.\383\ Lenders and borrowers tend to form stable
relationships, and such stability provides economies of scale for the
lenders to offset the costly information production and monitoring and
benefits the borrowers by increasing the availability of financing and
lowering overall borrowing costs.
---------------------------------------------------------------------------

    \383\ See Mitchell A. Petersen and Raghuram G. Rajan, The
Benefits of Lending Relationships: Evidence from Small Business
Data, 49 J. Fin. 3 (1994).
---------------------------------------------------------------------------

    Therefore, to the extent that the disclosure of material terms of
financial obligations may reduce lenders' information advantage, there
could be incentive for lenders to increase loan rates as a way of
compensating for the lost benefit. However, as stated above, the
amendments do not specify or dictate the form and content of the
disclosure.\384\ Therefore, the level of disclosure's impact on the
lending relationship and rate will depend partly upon the amount of the
disclosure issuers and obligated persons actually provide in their
event notices. The Commission also notes that, regardless of the amount
of the increase in disclosure, lenders' information advantage over
other investors still remains because of the very nature of the lending
business--lenders actively engage in information gathering and
monitoring of the borrowers and develop proprietary information in the
course of the lending relationship, and the loans they make are likely
to remain senior to other obligations in the debt priority queue
because of the lending relationship they form.\385\ The amendments'
impact on existing lending relationships thus may be limited.
---------------------------------------------------------------------------

    \384\ See supra Section III.A.1.iii.
    \385\ According to academic literature, it is a generally
accepted fact that bank debt is typically senior to that of other
creditors, particularly for small-business borrowers. See Stanley D.
Longhofer and Jo[atilde]o A. C. Santos, The Importance of Bank
Seniority for Relationship Lending, 9 J. Fin. Interm. 57 (2000). See
also Ivo Welch, Why Is Bank Debt Senior? A Theory of Asymmetry and
Claim Priority Based on Influence Costs, 10 Rev. Fin. Stud. 1203
(1997). Recent evidence suggests that this is also true for
municipalities. See infra note 393.
---------------------------------------------------------------------------

    One commenter expressed concerns over ``the systemic increased
borrowing costs that may result from this rule could drastically affect
[the] entire municipal direct placement market and possibly shut many
smaller actors out of the market completely.'' \386\ The Commission has
carefully considered the comment and further assessed the amendments'
likely effects on issuers' and obligated persons' borrowing costs.
While the Commission recognizes that the amendments may potentially
increase the cost of private debt including direct placements and other
financial obligations as discussed above, it has also identified and
elaborated on, in prior sections, the multiple forces that could drive
down the borrowing costs as a result of the increased disclosure, and
potentially offset the cost increases posited by the commenter.\387\ As
stated above, the increase in disclosure could decrease the information
asymmetry in the market and therefore the cost of public debt.\388\
Also as stated above, cheaper public debt may drive down the cost of
private debt including direct placements and other financial
obligations, because lenders may consider offering lower rates in order
to stay competitive.\389\ Moreover, as discussed before, existing
empirical research does not provide evidence that disclosure increases
the cost of the privately placed debt, at least in the case of
corporate debt.\390\ Therefore, the Commission believes that the
increase in disclosure would not necessarily lead to an increase in
borrowing costs for issuers and obligated persons when the
countervailing effects of the amendments are viewed in totality. The
Commission continues to believe that there is a greater likelihood for
the overall borrowing costs to decrease than increase.
---------------------------------------------------------------------------

    \386\ See Lisante Letter.
    \387\ See supra Section V.C.1.ii.
    \388\ See id.
    \389\ See id.
    \390\ See id.
---------------------------------------------------------------------------

    Regarding the commenter's concern on the amendments' impact on
small issuers and obligated persons, the Commission recognizes that
certain small issuers and obligated persons that are particularly
reliant on private debt including direct placements or other financial
obligations may choose to stay out of the public debt market should
they find the additional disclosure becomes too burdensome or costly;
however, the amendments should not significantly affect their ability
to borrow in the private market given that this has been their primary
funding source. Therefore, the Commission disagrees with the
commenter's assessment that amendments' impact on the municipal direct
placement market may ``possibly shut many smaller actors out of the
market completely.'' \391\
---------------------------------------------------------------------------

    \391\ See Lisante Letter.
---------------------------------------------------------------------------

    Currently, the Commission is unable to provide reasonable estimates
of the potential change in borrowing costs as a result of the
amendments. The same comment also expressed concern that the
Commission's attempts to quantify the amendments' potential impact on
borrowing costs may be insufficient.\392\ The Commission has carefully
considered the comment. However, our assessment remains unchanged for
several reasons.
---------------------------------------------------------------------------

    \392\ Id.
---------------------------------------------------------------------------

    First, issuers' and obligated persons' borrowing costs include two
components--the cost of public debt and the cost of privately placed
debt including direct placements and other financial obligations. Both
types of costs may vary significantly depending on a number of factors.
For example, yields for municipal bonds offered to the public are
affected by, among other things, the size of the issuance, credit
rating, underwriter reputation, maturity and credit enhancement for
bonds. Loan rate determinants include the characteristics of the issuer
or obligated person (e.g., size, credit risk, etc.), loan
characteristics (e.g., size of the loan, maturity, priority structure
and covenants, etc.), and the issuer's or obligated person's
relationship with lenders (e.g., the length of the relationship and the
number of lenders). While some of these loan rate determinants are
observable, many are not readily available or are unobservable, such as
loan level characteristics and issuers' or obligated persons'
relationship with lenders. Without such information, we are unable to
provide a reasonable estimate on how much borrowing costs may increase
or decrease. In addition, as discussed above, the increase in
disclosure may have both increasing and decreasing effects on borrowing
costs.
    Second, the amendments' impact on borrowing costs may vary
significantly across different types of issuers or obligated persons.
For example, under the current Rule, securities issued by issuers or
obligated persons that have incurred a significant amount of previously
undisclosed financial obligations may be priced the same by the market
as those that did not incur such undisclosed financial obligations.
However, if these financial obligations were incurred after the
implementation of the amendments, the enhanced disclosure would allow
the market to incorporate the credit risk information and differentiate
the two types of issuers or obligated persons when pricing their
outstanding securities. As a result, all else equal, the issuers or
obligated persons that incurred financial obligations could experience
an increase in borrowing costs (e.g., bond yields) while those that did
not incur financial obligations may not. Similarly, the amendments may
also have a

differential impact on borrowing costs for issuers or obligated persons
depending on their level of reliance on private borrowing. Issuers or
obligated persons that are more reliant on private borrowing may
experience less benefit or more cost than those that are not. For
example, if some issuers or obligated persons are mostly funded by
private debt, including direct placements and other financial
obligations, and have few public bond issuances outstanding, they may
disclose more information regarding their financial obligations under
the amendments, assuming they keep the same borrowing pattern or debt
structure, but may have little to gain from reductions in the cost of
issuing public debt, if any, associated with their disclosures. On the
other hand, if issuers or obligated persons are primarily funded by
public debt, their compliance costs under the amendments will be
relatively lower because they incur fewer financial obligations, while
the potential benefit from the decrease in the cost of public debt
would be larger. To the extent that this difference in funding
structure could be particularly the case for small and large issuers
and obligated persons,\393\ they may be impacted differentially by the
amendments. Again, we are unable to estimate the impact on borrowing
costs because of the unavailability of loan-level data. In addition,
borrowing costs could also depend on the actual level of the disclosure
issuers or obligated persons committed themselves to provide under
their continuing disclosure agreements, which could vary significantly
across issuers and obligated persons.
---------------------------------------------------------------------------

    \393\ A recent unpublished working paper finds that small
municipalities are particularly reliant on private bank financing.
See Ivan Ivanov and Tom Zimmermann, Claim Dilution in the Municipal
Debt Market, Finance and Economics Discussion Series 2018-011
(2018), available at https://doi.org/10.17016/FEDS.2018.011.
---------------------------------------------------------------------------

    Finally, recent changes to federal tax laws \394\ may also impact
the borrowing costs of issuers and obligated persons in ways that
complicate assessment of the likely impacts of the amendments on
borrowing costs in the future when certain data (e.g., bond yields)
become available. As discussed above,\395\ on one hand, because the new
law caps the state and local tax deduction allowed to be taken on an
individual federal income tax return, the law may increase the demand
for tax-free investments such as municipal bonds, driving up bond
prices and driving down yields.\396\ On the other hand, as also
discussed above, a decline in the federal corporate income tax rate may
increase the interest rates on issuers' or obligated persons' direct
placements because of the diminished relative benefit for the municipal
tax exemption as well as certain gross-up provisions being
triggered.\397\ Because the impacts from the tax law changes and the
amendments are likely to overlap, it may not be possible to disentangle
the two.
---------------------------------------------------------------------------

    \394\ See supra note 125.
    \395\ See supra Section V.B.5.
    \396\ See, e.g., supra note 354 and accompanying text.
    \397\ See supra notes 124, 126, and 355.
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ii. Costs to Dealers
    Pursuant to Rule 15c2-12, a dealer acting as a Participating
Underwriter in an Offering has an existing obligation to contract to
receive the final official statement.\398\ The final official statement
includes, among other things, a description of any instances in the
previous five years in which the issuer or obligated person failed to
comply, in all material respects, with any previous undertakings in a
written contract or agreement to provide certain continuing
disclosures.\399\ Dealers acting as Participating Underwriters in an
Offering also have an existing obligation under Rule 15c2-12 to
reasonably determine that an issuer or obligated person has undertaken
in its continuing disclosure agreement, for the benefit of holders of
the municipal securities, to provide notice to the MSRB of specified
events. In addition, dealers are prohibited under Rule 15c2-12 from
recommending the purchase or sale of municipal securities unless they
have procedures in place that provide reasonable assurance that they
will promptly receive event notices and failure to file notices with
respect to the recommended securities. Dealers typically use EMMA or
other third party vendors to satisfy this existing obligation.
---------------------------------------------------------------------------

    \398\ 17 CFR 240.15c2-12(a) and (b)(3).
    \399\ 17 CFR 240.15c2-12(f)(3).
---------------------------------------------------------------------------

    As a practical matter, dealers' obligations under the Rule 15c2-12
amendments will include verifying that the continuing disclosure
agreement contains an undertaking by the issuer or obligated person to
provide the additional event notices to the MSRB, verifying whether the
issuer or obligated person has complied with its prior undertakings,
and verifying whether the final official statement includes, among
other things, an accurate description of the issuer's or obligated
person's prior compliance with continuing disclosure obligations.
    As discussed in Section IV.D.1, the Commission is revising its
estimate of the one-time and annual burden on dealers.\400\ Meanwhile,
the Commission continues to believe that dealers would not incur any
additional external costs and that the task of preparing and issuing a
notice advising the dealer's employees about the amendments is
consistent with the type of compliance work that a dealer typically
handles internally.\401\ Based on the new estimates, as a result of the
amendments, dealers would incur an annual internal compliance cost of
$5,366,880 for the first year, and $4,916,880 in subsequent years.\402\
---------------------------------------------------------------------------

    \400\ See supra Section IV.D.1.
    \401\ See supra Section IV.E.1.
    \402\ First year costs: 1,250 hours (first year burden on
dealers) x $360 (average hourly cost of internal compliance
attorney) + 13,658 hours (annual increased hourly burden on dealers
due to the amendments) x $360 (average hourly cost of internal
compliance attorney) = $5,366,880. Subsequent annual costs: 13,658
hours (annual increased hourly burden on dealers due to the
amendments) x $360 (average hourly cost of internal compliance
attorney) = $4,916,880.
---------------------------------------------------------------------------

iii. Costs to Lenders
    Under the amendments, lenders may incur costs stemming from the
disclosure about financial obligations and the terms of the agreements
creating such obligations. As discussed above and in the Proposing
Release, lenders may enjoy certain priority rights in these financial
arrangements which may not be publicly disclosed or reflected in the
price of the issuer's or obligated person's outstanding municipal
securities. However, as discussed above, while the increased level of
disclosure may reduce lenders' information advantage over other
investors, it does not eliminate this advantage because private lenders
such as banks actively engage in information gathering and monitoring
of borrowers and thus develop proprietary information during the
lending relationship. Disclosure is also unlikely to alter the lender's
senior status in the debt priority queue. To the extent that the
benefits from a previously undisclosed financial arrangement are
reduced by the increased disclosure, lenders will incur a cost, but
such a cost translates into benefits to investors, because the benefit
originally accrued to lenders at the expense of investors in municipal
securities.
    In addition, since the amendments may decrease the costs incurred
by issuers and obligated persons in connection with the issuance of
public debt and increase the demand for public issuance, lenders may
experience reduced investment opportunities, or may have to decrease
loan rates in order to stay competitive, either of which

could generate a cost to them. However, the Commission does not believe
the amendments will significantly alter the composition of the existing
municipal debt market. While some issuers and obligated persons, seeing
the cost of public debt decrease, may have incentives to increase
public issuance, issuers and obligated persons that are heavily reliant
on direct placements may see the increase in disclosure as more costly
than the benefit from the reduced cost of public debt, and therefore
choose to use private debt exclusively. For reasons similar to those
discussed above, the Commission is unable to quantify the amendments'
impact on lenders because of the lack of data on loan characteristics
and lending relationships.
iv. Costs to the MSRB
    The Rule 15c2-12 amendments will increase the type of event notices
submitted to the MSRB which may result in the MSRB incurring costs
associated with such additional notices. As discussed in Section
IV.D.3, after further discussion with the MSRB, the Commission is
revising its burden estimate for the MSRB to implement the necessary
modifications to EMMA.\403\ According to the MSRB, the total estimated
one-time cost to the MSRB of updating EMMA would be $91,358.\404\
---------------------------------------------------------------------------

    \403\ See supra Section IV.D.3.
    \404\ This estimate was provided to the Commission by MSRB staff
and reflects the MSRB's assessment of the costs it expects to incur
to implement the necessary modifications to EMMA, based on an
estimated 1,700 hour schedule. In particular, it reflects an
estimate of 1,700 (estimated hours of burden) x $53.74 (the mean
hourly wage for a 2,080-hour work-year for Software Developers,
Systems Software as provided in the U.S. Department of Labor, Bureau
of Labor Statistics, Occupational Employment and Wages, May 2017,
available at https://www.bls.gov/oes/current/oes151133.htm#nat) =
$91,358.
---------------------------------------------------------------------------

3. Effects on Efficiency, Competition, and Capital Formation
    The Rule 15c2-12 amendments have the potential to affect
efficiency, competition, and capital formation by improving the
timeliness and informativeness of municipal securities disclosure and
reducing information asymmetry in the market.
    As discussed above and in the Proposing Release, lack of disclosure
can lead to information asymmetry and mispricing. When the market is
not able to incorporate the most recent credit risk information about
issuers and obligated persons in the pricing of municipal securities,
such prices will not reflect the true risk associated with any
particular security. The securities offered by low-risk issuers or
obligated persons could be undervalued and the ones offered by high-
risk issuers or obligated persons overvalued, and investors may not be
able to distinguish between the two.\405\ Moreover, as stated in the
Proposing Release, the inability of the market to differentiate the
high-risk and low-risk issuers and obligated persons could create
incentives for some high-risk issuers or obligated persons to further
exploit the mispricing by incurring more financial obligations because
it is relatively cheaper than a public offering, a scenario that may
sustain or even amplify the market inefficiency. Because we believe the
amendments will facilitate investors' and other market participants'
access to more timely and informative disclosure about financial
obligations of issuers and obligated persons, we also believe that as
the credit risk information gets incorporated in the pricing of
municipal securities in a more timely manner, the level of mispricing
will be mitigated, and the municipal securities market will become more
efficient.\406\
---------------------------------------------------------------------------

    \405\ Specifically, when there is asymmetric information about
material risks, investors may not be able to distinguish low-risk
securities from high-risk securities. In such cases, market
participants will only value securities as if they bear an average
level of risk, undervaluing low-risk securities and overvaluing
high-risk securities. Such mispricing can harm market efficiency and
distort capital allocation. See, e.g., Paul M. Healy and Krishna G.
Palepu, Information Asymmetry, Corporate Disclosure, and the Capital
Markets: A Review of the Empirical Disclosure Literature, 31 J.
Acct. & Econ. 405 (2001).
    \406\ Depending on data availability and market conditions, some
of these effects could be evaluated after the implementation of the
amendments. For example, disclosure of relevant information in event
notices may manifest as transaction activity, as market participants
update their valuations for municipal securities. Further,
reductions in information asymmetry may reduce the dispersion in
prices for transactions that occur close in time.
---------------------------------------------------------------------------

    In addition, as we have also discussed before, at least one rating
agency currently requires issuers and obligated persons to provide
notification and documentation of the incurrence of certain financial
obligations, including direct placements, in order to maintain their
credit ratings, a process that may involve duplicative costs, because
each rating agency would have to implement a similar process to collect
the same information, and issuers and obligated persons would have to
provide identical responses multiple times.\407\ Therefore, the
amendments may improve efficiency in the disclosure process by
eliminating such potential duplicative costs.
---------------------------------------------------------------------------

    \407\ See supra note 336.
---------------------------------------------------------------------------

    The Commission also believes that by potentially reducing
information asymmetries between municipal securities investors and
other more-informed market participants, including issuers, obligated
persons and lenders, the Rule 15c2-12 amendments can promote
competition in the municipal debt market. One commenter expressed
concern that disclosure of pricing terms of loans in ten business days
may ``set an unrealistic expectation among other obligated persons as
to the appropriate pricing for their direct purchase loan
transactions'' and early disclosures may have an ``anti-competitive''
effect that may increase pricing by setting a ``benchmark'' for certain
transactions.\408\ The Commission disagrees with this comment, and
believes that, on balance, disclosing pricing terms should inform
issuers and obligated persons about the approximate lending rate in the
market.\409\ Such disclosure adds to the information lenders, issuers,
and obligated persons can use in their negotiations and should help
promote competition among suppliers of capital.
---------------------------------------------------------------------------

    \408\ See ABA Letter (stating ``disclosure of pricing on a near
``real time'' basis (e.g., within ten business days of closing) may
set an unrealistic expectation among other obligated persons as to
the appropriate pricing for their direct purchase loan
transactions'').
    \409\ The Commission has also recognized that to the extent that
the lenders' information advantage may be reduced, they would incur
a cost. See Section V.C.2.iii for relevant discussion.
---------------------------------------------------------------------------

    The Commission also stated in the Proposing Release that more
timely and informative disclosure could reduce a lender's competitive
advantage over municipal securities investors under the Rule prior to
these amendments, and facilitate competition for investment
opportunities in the municipal debt market.\410\ Currently, for
example, a bank loan agreement could give the lender a lien on assets
or revenues that were previously pledged to secure repayment of an
issuer's or obligated person's outstanding municipal securities,
effectively diluting the cash flow claims of existing security holders
and adversely affecting their contractual rights. However, existing
security holders may not learn about such events and therefore would be
unable to take any action. Accordingly, the Commission continues to
believe that the amendments will promote a fairer, more efficient, and
more competitive municipal securities market.
---------------------------------------------------------------------------

    \410\ See Proposing Release, supra note 3, 82 FR at 13954.
---------------------------------------------------------------------------

    In addition, the amendments to Rule 15c2-12 may also promote
competition among issuers or obligated persons looking for funding. For
example, all else equal, the issuers or obligated persons that have
incurred a large amount of undisclosed financial obligations are likely
to be riskier than those that have not. However, under the Rule prior
to these amendments,

securities offered by issuers or obligated persons with different
levels of credit risks may be priced identically by the market due to
the lack of disclosure, placing more creditworthy issuers and obligated
persons at a competitive disadvantage. Since the increase in disclosure
could improve pricing efficiency and reduce mispricing, the amendments
may promote competition for capital among issuers and obligated
persons.
    The Commission continues to believe that the Rule 15c2-12
amendments can help facilitate capital formation by improving market
efficiency and liquidity. As illustrated by the example above,
mispricing and market inefficiencies can lead to a situation where the
securities offered by the high-risk issuers and obligated persons--
those that incurred a large amount of undisclosed financial
obligations--are priced identically to those offered by the low-risk
issuers and obligated persons. The inability to differentiate the two
types of investment opportunities by the market could lead to
underinvestment in the low-risk securities and overinvestment in the
other, leading to suboptimal allocation of capital. By increasing the
timeliness and informativeness of disclosure, the amendments can reduce
mispricing in the market and thus reduce potential for price
inefficiencies, resulting in improved allocation of capital.
    More timely and informative disclosure could also improve market
liquidity and therefore facilitate capital formation. According to
academic research, disclosure policy influences market liquidity
because uninformed investors, concerned about asymmetric information,
price protect themselves in their securities transactions by offering
to sell at a premium or buy at a discount. This price protection could
be manifested in higher bid-ask spreads and reduced market
liquidity.\411\ Therefore, by reducing information asymmetry in the
municipal securities market, the amendments can potentially improve
liquidity in the municipal market, which could allow capital to be
better deployed at an aggregate level and result in more efficient
capital allocation. Additionally, as the municipal securities market
becomes more transparent, and as investors become aware of stronger
protections, they may be more likely to participate in the municipal
securities market as a result. Therefore, to the extent that increased
participation in the municipal securities market reflects new
investment, as opposed to substitution away from other securities
markets, enhanced disclosure could also positively affect capital
formation.
---------------------------------------------------------------------------

    \411\ See Michael Welker, Disclosure Policy, Information
Asymmetry, and Liquidity in Equity Markets, 11 Contemp. Acct. Res.
801 (1995) (Welker provides evidence that disclosure policy reduces
information asymmetry and increases liquidity in equity markets).
See also Christian Leuz and Robert E. Verrecchia, The Economic
Consequences of Increased Disclosure, 38 J. Acct. Res. 91 (2000).
---------------------------------------------------------------------------

D. Alternative Approaches

    In addition to the Rule 15c2-12 amendments, the Commission has
considered several reasonable alternatives, which are discussed below.
1. Voluntary Disclosures
    Instead of these amendments, the Commission could encourage issuers
and obligated persons to voluntarily disclose on an ongoing basis the
new events covered in the amendments. A number of commenters
recommended the Commission further explore this approach. For example,
one commenter challenged the Commission's characterization of the
existing level of the voluntary disclosure as limited, arguing that
such conclusion was ``hastily'' drawn and recommended further
exploration of voluntary disclosure.\412\ Another commenter pointed out
that the volume of the voluntary disclosure has increased since the
MSRB introduced the new EMMA features in September 2016 to facilitate
filings, arguing that the Commission understated the efficacy of
voluntary reporting and suggested postponing the amendments for a two-
year period to allow for voluntary disclosure to continue to develop or
encourage undertakings to include voluntary commitments.\413\ While the
Commission recognizes that the level of the voluntary disclosure has
increased since the new EMMA features were introduced and the Proposing
Release was issued, the level of the bank loans to state and local
governments has also increased since the estimate set forth in the
Proposing Release--from $153.3 billion at the end of 2015 to $190.5
billion at the end of first quarter 2018, a 24% increase. In addition,
many of the disclosures provided to EMMA come from a relatively small
number of issuers or obligated persons. Therefore, the increase is not
uniformly distributed across issuers or obligated persons. Though the
Commission recognizes the potential for the level of voluntary
disclosure to continue to increase, it believes it is unrealistic to
assume that it would reach the same level of disclosure as under these
amendments as the commenter suggested.\414\
---------------------------------------------------------------------------

    \412\ See Lisante Letter (commenting that the rejection of
voluntary approaches is potentially problematic given that the
Commission cannot quantify the economic effects).
    \413\ See NABL Letter (``Reviewing filings under the subcategory
`Bank Loan/Alternative Financings Filings' yielded the following
results: 79 disclosures in 2015, 364 disclosures in 2016 and 338
disclosures in 2017 (through April 14, 2017)'' and ``[a]t this rate
of increase, even if the Proposed Amendments are not adopted,
voluntary disclosures may soon reach the Commission's expected
number of annual filings under the Proposed Amendments (2,200)'').
    \414\ Id.
---------------------------------------------------------------------------

    While the Commission recognizes the benefits of voluntary
disclosure for issuers and obligated persons, we continue to believe
that voluntary disclosure alone is not sufficient for the level of
investor protection the amendments are designed to achieve. The current
level of the voluntary disclosure of issuers' and obligated persons'
financial obligations is not sufficient, and that is why, as discussed
in Section II, municipal market participants, the MSRB, and industry
groups have made continuous efforts to elicit more disclosure.\415\ It
is unclear that any efforts to encourage voluntary disclosure on the
Commission's part would provide greater incentives for issuers or
obligated persons to disclose than these existing voluntary measures.
Therefore, as discussed above, the Commission believes it is unlikely
that the voluntary disclosure would reach the same level of timeliness
and informativeness as the disclosure under the amendments is designed
to achieve.
---------------------------------------------------------------------------

    \415\ See supra Section II; see also supra note 34.
---------------------------------------------------------------------------

2. Alternative Timeline
    Issuers and obligated persons could be provided additional time
(e.g., 15 days, 30 days, etc.) beyond the ten business day requirement
that currently applies to the disclosure of material events under the
Rule to provide additional event notices resulting from the amendments
to the MSRB. Under the amendments, the new event notices must be
provided to the MSRB in a timely manner not in excess of ten business
days after the occurrence of the event.
    As discussed in Section II and Section III.1.i.c, commenters were
concerned that ten business days was not enough time to disclose
material financial obligations. The Commission is adopting a narrower
definition of ``financial obligation'' than proposed, which will reduce
the burden on issuers, obligated persons, and dealers by significantly
limiting the number of transactions that they will need to identify and
assess for materiality. The narrower definition could partially
alleviate this concern.

    Under the alternative timeline approach, issuers' and obligated
persons' operational burden could be slightly reduced but their
substantive obligation to provide disclosure would remain. Moreover,
investors and other market participants would receive less timely
disclosure. The alternative would thus provide investors with less
protection, and the market would not operate as efficiently as it might
be under the amendments.
3. Relief for Small Issuers and Obligated Persons
    As discussed above,\416\ to the extent that some small issuers and
obligated persons could be more reliant on private debt than public
debt,\417\ these issuers or obligated persons may experience
significantly more disclosure-related costs, while incurring a
relatively smaller benefit from a decreased cost of public debt. Some
commenters expressed concerns over this possible differential
impact.\418\ In connection with these comments, the Commission
considered an exemption for small issuers and obligated persons.
---------------------------------------------------------------------------

    \416\ See supra Section V.C.2.i.
    \417\ See supra note 393 and accompanying text.
    \418\ See NABL Letter (``smaller issuers will be less able to
accommodate the substantial burdens of the Proposed Amendments, and
the purported investor benefit will be more substantially outweighed
by these burdens''). See also ABA Letter (pointing out that direct
bank loans provide access to funding at a cost that is lower than
accessing the public municipal securities market and it is
particularly the case for smaller municipalities; and smaller
obligated persons could lack the resources and expertise to process
the disclosure); Lisante Letter (stating that smaller actors could
be shut out of the market due to the amendments' impact).
---------------------------------------------------------------------------

    Under this alternative, the disclosure-related costs associated
with the amendments would be eliminated for small issuers and obligated
persons and their disclosure and borrowing practices would stay the
same as the baseline scenario. However, it is possible that over time
their securities could become further mispriced and potentially less
attractive to investors compared to those issued by issuers and
obligated persons that provide more disclosure. But issuers and
obligated persons would be able to provide voluntary disclosure if they
believe the benefits of more accurate pricing offset the cost of
disclosure.
    Under this alternative, investors in municipal securities that are
exempt from disclosure requirements under the final rules would not
experience the full benefits discussed above because they would not
receive more timely and informative disclosures about small issuers'
and obligated persons' financial obligations than they would otherwise
receive under the amendments, as adopted.
4. Adopt as Proposed, the Broader Definition of Financial Obligation
    Another alternative approach is to adopt, as proposed, the broader
definition of financial obligation. In the Proposing Release, the
Commission defined the term ``financial obligation'' to mean a debt
obligation, lease, guarantee, derivative instrument, or monetary
obligation resulting from a judicial, administrative, or arbitration
proceeding, but not include municipal securities as to which a final
official statement has been provided to the MSRB consistent with Rule
15c2-12.\419\ Commenters criticized the definition as overbroad and
vague and expressed concerns that the broad scope of the term financial
obligation, as proposed, would impose substantial burdens on issuers,
obligated persons, and other market participants.\420\
---------------------------------------------------------------------------

    \419\ See Proposing Release, supra note 3, 82 FR at 13937.
    \420\ See supra note 81.
---------------------------------------------------------------------------

    As discussed above, the Commission is narrowing the definition of
``financial obligation.'' As adopted, ``financial obligation'' means a
debt obligation; derivative instrument entered into in connection with,
or pledged as security or a source of payment for, an existing or
planned debt obligation; or a guarantee of either a debt obligation or
a derivative instrument entered into in connection with, or pledged as
security or a source of payment for, an existing or planned debt
obligation. The term financial obligation does not include municipal
securities as to which a final official statement has been provided to
the MSRB consistent with the Rule.
    If the amendments to the Rule were adopted as proposed, investors
and other participants would receive more information related to
issuers' and obligated persons' financial obligations because of the
proposed broader definition of ``financial obligation.'' This
alternative could allow credit rating agencies and municipal analysts
to produce more accurate ratings and forecasts, and could yield greater
improvements in market efficiency. This alternative could also allow
those investors capable of interpreting broader information about
issuers' and obligated persons' obligations to make more informed
financial decisions. However, the Commission also recognizes that a
higher volume of disclosure may not benefit all investors equally. The
Commission believes that the information disclosed under this
alternative would include information about obligations incurred in an
issuer's or obligated person's normal course of operations that do not
impact an issuer's or obligated person's liquidity, overall
creditworthiness, or an existing security holder's rights and thus may
not be as relevant to investment decisions.\421\ Additionally, issuers,
obligated persons, and Participating Underwriters would incur higher
costs and attendant legal exposure associated with disclosing this
additional information pursuant to the amendments under this
alternative.
---------------------------------------------------------------------------

    \421\ The Commission's belief is informed by comments received
in response to the proposed amendments and is reflected in the
Commission's decision to narrow the adopted definition of the term
``financial obligation'' to debt, debt-like, and debt-related
obligations of an issuer or obligated person that could impact an
issuer's or obligated person's liquidity, overall creditworthiness,
or an existing security holder's rights. See supra Section III.A.2.
---------------------------------------------------------------------------

VI. Regulatory Flexibility Certification

    The Commission certified, under section 605(b) of the Regulatory
Flexibility Act,\422\ that, when adopted, the proposed amendments to
the Rule would not have a significant economic impact on a substantial
number of small entities. This certification was set forth in Section
VII of the Proposing Release, where the Commission explained that no
Participating Underwriters would be small entities.\423\ The Commission
solicited comments regarding this certification and received no
comments. The Commission continues to believe this certification is
appropriate.
---------------------------------------------------------------------------

    \422\ 5 U.S.C. 605(b).
    \423\ See Proposing Release, supra note 3, 82 FR at 13956.
---------------------------------------------------------------------------

VII. Statutory Authority

    Pursuant to the Exchange Act, and particularly Sections 2, 3(b),
10, 15(c), 15B, 17 and 23(a)(1) thereof, 15 U.S.C. 78b, 78c(b), 78j,
78o(c), 78o-4, 78q and 78w(a)(1), the Commission is adopting amendments
to Sec.  240.15c2-12 of title 17 of the Code of Federal Regulations in
the manner set forth below.

Text of Rule Amendments

List of Subjects in 17 CFR Part 240

    Brokers, Reporting and recordkeeping requirements, Securities.

    For the reasons set out in the preamble, title 17, chapter II, of
the Code of Federal Regulations is amended as follows.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
1. The authority citation for part 240 continues to read in part as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20,
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq., and
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350;
Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106,
sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *

0
2. Section 240.15c2-12 is amended by:
0
a. In paragraph (b)(5)(i)(C)(14), removing the word ``and''; and
0
b. Adding paragraphs (b)(5)(i)(C)(15) and (16) and (f)(11).
    The additions read as follows.

Sec.  240.15c2-12   Municipal securities disclosure.

* * * * *
    (b) * * *
    (5)(i) * * *
    (C) * * *
    (15) Incurrence of a financial obligation of the obligated person,
if material, or agreement to covenants, events of default, remedies,
priority rights, or other similar terms of a financial obligation of
the obligated person, any of which affect security holders, if
material; and
    (16) Default, event of acceleration, termination event,
modification of terms, or other similar events under the terms of a
financial obligation of the obligated person, any of which reflect
financial difficulties; and
* * * * *
    (f) * * *
    (11)(i) The term financial obligation means a:
    (A) Debt obligation;
    (B) Derivative instrument entered into in connection with, or
pledged as security or a source of payment for, an existing or planned
debt obligation; or
    (C) Guarantee of paragraph (f)(11)(i)(A) or (B).
    (ii) The term financial obligation shall not include municipal
securities as to which a final official statement has been provided to
the Municipal Securities Rulemaking Board consistent with this rule.
* * * * *

    By the Commission.

    Dated: August 20, 2018.
Brent J. Fields,
Secretary.

    Note: The following appendix will not appear in the Code of
Federal Regulations.

Exhibit A

Key to Comment Letters Submitted in Connection With the Adopting
Release Amendments to Exchange Act Rule 15c2-12 (File No. S7-01-17)

    1. Letter from John M. McNally, Hawkins Delafield & Wood LLP, to
Brent J. Fields, Secretary, Commission, dated March 21, 2017
(``Hawkins Letter'').
    2. Letter from Jody Johnson, to Brent J. Fields, Secretary,
Commission, dated April 2, 2017 (``Johnson Letter'').
    3. Letter from Clifford M. Gerber, President, National
Association of Bond Lawyers, to Shagufta Ahmed, Desk Officer for the
Securities and Exchange Commission, Office of Information and
Regulatory Affairs, Office of Management and Budget, and to Brent J.
Fields, Secretary, Commission, dated April 11, 2017 (``NABL OMB
Letter'').
    4. Letter from Lynnette Kelly, Executive Director, Municipal
Securities Rulemaking Board, to Brent J. Fields, Secretary,
Commission, dated April 14, 2017 (``MSRB Letter'').
    5. Letter from David Lisante, J.D. Candidate 2017, Cornell Law
School, to Brent J. Fields, Secretary, Commission, dated April 20,
2017 (``Lisante Letter'').
    6. Letter from Ken Martin, Assistant Commissioner Financial
Services/CFO, Texas Higher Education Coordinating Board, to Brent J.
Fields, Secretary, Commission, dated May 1, 2017 (``THECB Letter'').
    7. Letter from Tyler Brown, J.D. Candidate, Boston College Law
School, to Brent J. Fields, Secretary, Commission, dated May 1, 2017
(``Brown Letter'').
    8. Letter from Michael Phemister, Vice President, Treasury
Management, Dallas Fort Worth International Airport, to Brent J.
Fields, Secretary, Commission, dated May 4, 2017 (``DFW Letter'').
    9. Letter from Michael A. Genito, Commissioner of Finance, City
of White Plains, New York, to Brent J. Fields, Secretary,
Commission, dated May 5, 2017 (``White Plains Letter'').
    10. Letter from Brian C. Massey, Finance Director, Outagamie
County, Wisconsin, to Brent J. Fields, Secretary, Commission, dated
May 5, 2017 (``Outagamie Letter'').
    11. Letter from Erich Mueller, Finance Director, City of
Troutdale, Oregon, to Brent J. Fields, Secretary, Commission, dated
May 8, 2017 (``Troutdale Letter'').
    12. Letter from Neal D. Suess, President/CEO, Loup River Public
Power District, to Brent J. Fields, Secretary, Commission, dated May
9, 2017 (``Loup Power Letter'').
    13. Letter from Tracy Ginsburg, Executive Director, Texas
Association of School Business Officials, to Brent J. Fields,
Secretary, Commission, dated May 9, 2017 (``TASBO Letter'').
    14. Letter from Marina Scott, City Treasurer, Salt Lake City,
Utah, to Brent J. Fields, Secretary, Commission, dated May 9, 2017
(``Salt Lake City Letter'').
    15. Letter from Chad D. Gee, Superintendent, Yorktown
Independent School District, Texas, to Brent J. Fields, Secretary,
Commission, dated May 9, 2017 (``Yorktown SD Letter'').
    16. Letter from Julie Egan, Chair, and Lisa Washburn, Chair,
Industry Practices Procedures, National Federation of Municipal
Analysts, to Brent J. Fields, Secretary, Commission, dated May 10,
2017 (``NFMA Letter'').
    17. Letter from Robert Scott and Keith Dagen, Co-Chairs,
Financial Reporting and Regulatory Response Committee, Government
Finance Officers Association of Texas, to Brent J. Fields,
Secretary, Commission, dated May 10, 2017 (``GFOA TX Letter'').
    18. Letter from Jeff N. Heiner, President, Board of Education,
Ogden City School District, Utah, to Brent J. Fields, Secretary,
Commission, dated May 10, 2017 (``Ogden Letter'').
    19. Letter from Martin W. Bates, Ph.D., J.D., Superintendent,
and Terry Bawden, Board President, Granite School District, Utah, to
Brent J. Fields, Secretary, Commission, dated May 11, 2017
(``Granite SD Letter'').
    20. Letter from Grant Whitaker, President & CEO, Utah Housing
Corporation, to Brent J. Fields, Secretary, Commission, dated May
11, 2017 (``UHC Letter'').
    21. Letter from Ann Mackiernan, Chief Financial Officer,
Tualatin Hills Park & Recreation District of Oregon, to Brent J.
Fields, Secretary, Commission, dated May 12, 2017 (``THPRD
Letter'').
    22. Letter from Arthur J. ``Grant'' Lacerte, Vice President and
General Counsel, Kissimmee Utility Authority, Florida, to Brent J.
Fields, Secretary, Commission, dated May 12, 2017 (``Kissimmee
Letter'').
    23. Letter from Dr. Marcelo Cavazos, Superintendent, Arlington
Independent School District, Texas, to Brent J. Fields, Secretary,
Commission, dated May 12, 2017 (``Arlington SD Letter'').
    24. Letter from Cynthia A. Nichol, Chief Financial Officer, Port
of Portland, Oregon, to Brent J. Fields, Secretary, Commission,
dated May 12, 2017 (``Port Portland Letter'').
    25. Letter from Kristin M. Bronson, City Attorney, City and
County of Denver, Colorado, to Brent J. Fields, Secretary,
Commission, dated May 12, 2017 (``Denver Letter'').
    26. Letter from Ted Wheeler, Mayor, City of Portland, Oregon, to
Brent J. Fields, Secretary, Commission, dated May 12, 2017
(``Portland Letter'').
    27. Letter from Michele Trongaard, Assistant Superintendent for
Finance and Operation, Wylie Independent School District, Texas, to
Brent J. Fields, Secretary, Commission, dated May 15, 2017 (``Wylie
SD Letter'').
    28. Letter from Dorothy Donohue, Deputy General Counsel,
Securities Regulation, Investment Company Institute, to Brent J.
Fields, Secretary, Commission, dated May 15, 2017 (``ICI Letter'').
    29. Letter from Dennis M. Kelleher, President & CEO, Better
Markets, Inc., to Brent J. Fields, Secretary, Commission, dated May
15, 2017 (``BM Letter'').
    30. Letter from David W. Osburn, General Manager, Oklahoma
Municipal Power Authority, to Brent J. Fields, Secretary,
Commission, dated May 15, 2017 (``OMPA Letter'').
    31. Letter from Kurt J. Nagle, President and CEO, American
Association of Port Authorities, to Brent J. Fields, Secretary,

Commission, dated May 15, 2017 (``AAPA Letter'').
    32. Letter from Leslie M. Norwood, Managing Director and
Associate General Counsel, Securities Industry Financial Markets
Association, to Brent J. Fields, Secretary, Commission, dated May
15, 2017 (``SIFMA Letter'').
    33. Letter from Clifford M. Gerber, President, National
Association of Bond Lawyers, to Brent J. Fields, Secretary,
Commission, dated May 15, 2017 (``NABL Letter'').
    34. Letter from Charisse Mosely, Deputy City Controller, City of
Houston, Texas, to Brent J. Fields, Secretary, Commission, dated May
15, 2017 (``Houston Letter'').
    35. Letter from Joanne Wamsley, Vice President for Finance and
Deputy Treasurer, Arizona State University, to Brent J. Fields,
Secretary, Commission, dated May 15, 2017 (``AZ Universities
Letter'').
    36. Letter from Leo Karwejna, Managing Director and Chief
Compliance Officer, PFM, to Brent J. Fields, Secretary, Commission,
dated May 15, 2017 (``PFM Letter'').
    37. Letter from Robert W. Doty, to Brent J. Fields, Secretary,
Commission, dated May 15, 2017 (``Doty Letter'').
    38. Letter from Noreen Roche-Carter, Chair, Tax and Finance Task
Force, Large Public Power Council, Sacramento, California, to Brent
J. Fields, Secretary, Commission, dated May 15, 2017 (``LPPC
Letter'').
    39. Letter from Rebecca L. Peace, Deputy Executive Director and
Chief Counsel, Pennsylvania Housing Finance Agency, to Brent J.
Fields, Secretary, Commission, dated May 15, 2017 (``PHFA Letter'').
    40. Letter from John J. Wagner, Kutak Rock LLP, to Brent J.
Fields, Secretary, Commission, dated May 15, 2017 (``Kutak Rock
Letter'').
    41. Letter from Michael Nicholas, Chief Executive Officer, Bond
Dealers of America, to Brent J. Fields, Secretary, Commission, dated
May 15, 2017 (``BDA Letter'').
    42. Letter from Kevin M. Burke, President and CEO, Airports
Council International, North America, to Brent J. Fields, Secretary,
Commission, dated May 15, 2017 (``ACI Letter'').
    43. Letter from Marty Dreischmeier, Chief Financial Officer,
WPPI Energy, to Brent J. Fields, Secretary, Commission, dated May
15, 2017 (``WPPI Letter'').
    44. Letter from Diana Pope, Director, Financing and Investment
Division, and Lee McElhannon, Director, Bond Finance, Financing and
Investment Division, Georgia State Financing and Investment
Commission, to Brent J. Fields, Secretary, Commission, dated May 15,
2017 (``GA Finance Letter'').
    45. Letter from Ken Miller, NAST President, Treasurer, State of
Oklahoma, National Association of State Treasurers, to Brent J.
Fields, Secretary, Commission, dated May 15, 2017 (``NAST Letter'').
    46. Letter from Timothy Cameron, Esq. Head, and Lindsey Weber
Keljo, Esq., Managing Director and Associate General Counsel, Asset
Management Group, SIFMA, to Brent J. Fields, Secretary, Commission,
dated May 15, 2017 (``SIFMA AMG Letter'').
    47. Letter from Cristeena G. Naser, Vice President, Center for
Securities, Trust & Investments, American Bankers Association, to
Brent J. Fields, Secretary, Commission, dated May 15, 2017 (``ABA
Letter'').
    48. Letter from Robert W. Scott, Director of Finance, City of
Brookfield, Wisconsin, to Brent J. Fields, Secretary, Commission,
dated May 15, 2017 (``Brookfield Letter'').
    49. Letter from Richard Doyle, City Attorney, City of San Jose,
California, to Brent J. Fields, Secretary, Commission, dated May 15,
2017 (``San Jose Letter'').
    50. Letter from Donna Murr, President, National Association of
Health and Educational Facilities Finance Authorities, to Brent J.