MSRB Files Technical Amendments to Rule G-8 and Rule G-15
On July 14, 2000, the Municipal Securities Rulemaking Board (the “MSRB” or “Board”) filed with the Securities and Exchange Commission (the “SEC”) a technical amendment to its filing of April 5, 2000 relating to municipal fund securities.[1] This amendment (i) revises the proposed rule change to section (g)(i) of rule G-8 and (ii) modifies certain language contained in the proposed Interpretation Relating to Sales of Municipal Fund Securities in the Primary Market. In addition, this amendment clarifies certain language contained in the statement on comments received on the proposed rule change set forth in the original filing.
Pursuant to this amendment, brokers, dealers and municipal securities dealers (“dealers”) effecting transactions in municipal fund securities would be permitted to meet their books and records requirements with respect to such transactions through the books and records maintained by a transfer agent only if such transfer agent is registered under Section 17A(c)(2) of the Securities Exchange Act of 1934.[2]
In addition, this amendment modifies the language in the penultimate sentence of the proposed Interpretation Relating to Sales of Municipal Fund Securities in order to eliminate any potential ambiguity as to its meaning.
Finally, this amendment modifies certain language in its Statement on Comments Received on the Proposed Rule Change by Members, Participants, and Others contained in the original filing to read as follows:
A firm wishing to determine if Board rules apply to services it provides to an issuer of local government pool or higher education trust interests may seek advice of counsel as to whether (1) such services constitute broker-dealer activities, or (2) such interests are municipal securities. In addition, the firm may seek no-action relief from SEC staff.[3]
July 14, 2000
Text of Amendments [4]
Rule G-8. Books and Records to be Made by Brokers, Dealers and Municipal Securities Dealers
(a) - (f) No additional changes.
(g) Transactions in Municipal Fund Securities.
(i) Books and Records Maintained by Transfer Agents. Books and records required to be maintained by a broker, dealer or municipal securities dealer under this rule solely with respect to transactions in municipal fund securities may be maintained by a transfer agent registered under Section 17A(c)(2) of the Act used by such broker, dealer or municipal securities dealer in connection with such transactions;
provided that, in the case of a broker, dealer or municipal securities dealer other than a bank dealer, the arrangements with such transfer agent have been approved by the Commission or, in the case of a bank dealer, such arrangements have been approved by the appropriate regulatory agency for such bank dealer, and furtherprovided that such broker, dealer or municipal securities dealer shall remain responsible for the accurate maintenance and preservation of such books and records.(ii) No additional changes.
* * * * *
Interpretation Relating to Sales of Municipal Fund Securities in the Primary Market
The penultimate sentence of the interpretation is amended as follows:
Thus, a dealer’s transactions in municipal fund securities may affect impact upon such dealer’s obligations under rules G-37 and G-38.
[1] See “Proposed Rule Changes Relating to Municipal Fund Securities Filed with the Securities and Exchange Commission” dated April 5, 2000 (the “April Notice”) posted on the MSRB’s web site at www.msrb.org. Comments sent to the SEC regarding the original filing and this amendment should refer to File No. SR-MSRB-00-6.
[2] New section (g)(i) of Rule G-8 included in the filing would permit a dealer effecting transactions in municipal fund securities to meet its books and records requirements by means of books and records maintained by a transfer agent for such municipal fund securities so long as those books and records meet the requirements of rule G-8 and such dealer remains responsible for the accurate maintenance and preservation of such books and records. As originally proposed, new section (g)(i) would require that, for dealers other than bank dealers, the arrangements with the transfer agent be approved by the SEC and, for bank dealers, the arrangements with the transfer agent be approved by the appropriate regulatory agency. However, SEC staff has informed the MSRB that the SEC does not in fact undertake to approve arrangements entered into by transfer agents.
[3] The second sentence in the quoted language originally read as follows: “It may seek comfort on counsel’s opinion from SEC staff through the SEC’s no-action procedure.” Language to this effect appears in the April Notice as well as in “Municipal Fund Securities – Revised Draft Rule Changes,” MSRB Reports, Vol. 19, No. 3 (Sept. 1999) at 3 (also posted on the MSRB’s web site). The MSRB understands that SEC staff typically does not reach or confirm legal conclusions set forth in an applicant’s request for a no-action position.
[4] Underlining indicates additions; strikethrough indicates deletions.
