SIFMA submits comments to the Municipal Securities Rulemaking Board (MSRB) on amendments to Rule G-23 filed with the Securities and Exchange Commission (SEC). As we expressed in previous comment letters on this issue, we oppose the general focus of the proposed changes to Rule G-23. We believe municipal bond issuers, especially smaller and infrequent issuers, are well served by the current Rule G-23.

 

The amendments to Rule G-23, on activities of financial advisors, propose to: (i) prohibit a dealer financial advisor from acquiring all or any portion of an issue directly or indirectly from the issuer as principal or acting as agent for the issuer in arranging the placement of such issue either alone or as a participant in a syndicate or other similar account formed for that purpose; (ii) apply the same prohibition to any dealer controlling, controlled by, or under common control with the dealer financial advisor; and (iii) prohibit a dealer financial advisor from acting as the remarketing agent for such issue. The MSRB has requested that the proposed rule change be made effective for new issues for which the Time of Formal Award (as defined in MSRB Rule G-34(a)(ii)(C)(1)(a)) occurs more than six months after SEC approval to allow issuers of municipal securities time to finalize any outstanding transactions that might be affected by the proposed rule change. The MSRB also filed a proposed interpretive notice that would provide guidance on when a dealer that provides advice to an issuer would be considered to be “acting as an underwriter” for purposes of Rule G-23, rather than a financial advisor.

The MSRB Notice can be found here: http://www.msrb.org/Rules-and-Interpretations/Regulatory-Notices/2011/2011-10.aspx, and SEC’s notice can be found here: http://www.sec.gov/rules/sro/msrb/2011/34-63946.pdf. This proposal was published in the Federal Register on February 28 and comments were due to the SEC by March 21, 2011. SIFMA’s comments to the SEC can be found here: http://www.sifma.org/issues/item.aspx?id=24029.

The revised rule will become effective for new issues for which the Time of Formal Award (as defined in MSRB Rule G-34(a)(ii)(C)(1)(a)) occurs after November 27, 2011.

The SEC approval notice of MSRB Rule G-23 can be found here: http://www.sec.gov/rules/sro/msrb/2011/34-64564.pdf. Amendment No. 1 can be found here: http://www.msrb.org/Rules-and-Interpretations/Regulatory-Notices/2011/~/media/Files/SEC-Filings/2011/SR-MSRB-2011-03-A-1.ashx.