New York, NY, May 5, 2018 – SIFMA today released revised versions of its municipal security issue price model documents.  The documents were initially released in May 2017 in an effort to aid industry market participants in compliance with new Treasury Department issue price rules for municipal securities.

“We appreciate the industry’s valuable input on the updates to the model documents”, said Leslie Norwood, managing director, associate general counsel and co-head of SIFMA’s Municipal Securities Division.  “They are designed to make it easier for our members to assist their issuer clients in complying with the issue price rules, in understanding the expectations of market participants while promoting transparency of sales terms for both issuers and underwriters, and to help reduce legal costs and regulatory risk while increasing legal certainty, for the benefit of all market participants.  We felt it important to update the existing documents to maximize their usefulness to the industry.”

The model documents include model riders to the Master Agreement Among Underwriters (MAAU) and Agreement Among Underwriters (AAU), the Selling Group Agreement, the Third-Party Distribution Agreement, the Bond Purchase Agreement (BPA) and the Notices of Sale (NOS).

Of note, the updated documents reflect the following changes:

• Notification to the Manager is required of sales of any Securities made to a related party and of failure to comply with the issue price rules.
• The Manager may assume, unless advised otherwise, that sales of the Securities have been made to the public and that each “underwriter” has complied with its obligations for establishing issue price.
• The reporting obligation following the Closing Date relating to sales of Securities subject to the 10% test may be at reasonable periodic intervals or otherwise upon request of the Manager/Representative or, as applicable, the Issuer or bond counsel; an additional drafter’s note has been added to clarify the reporting obligation and to confirm that if all maturities of the Securities are subject to hold-the-offering-price (“HTOP”), the related reporting obligation ends after the relevant period of five business days
• MAAU liability language has been expanded to address allocation of liability in the event of failure to comply with the issue price rules; similar liability language has been added to the Third-Party Distribution Agreement.
• An additional drafter’s note has been added to most of the riders to address the several liability of underwriters for the failure of an underwriter to comply with its obligations relating to the establishment of issue price.
• Selling group members are required to include parallel notice provisions in any third-party distribution agreement to be employed by the selling group member in connection with the initial sale of the Securities to the public.
• The Selling Group Agreement and Third-Party Distribution Agreement riders have been made applicable to competitive as well as negotiated transactions.
• The use of “related party” has been clarified to be more consistent among the various riders.
• The defined term used throughout the riders has been changed from “retail distribution agreement” to “third-party distribution agreement” in recognition of the fact that those agreements often are not limited to retail sales.
• Parallel changes are included in the riders for the BPA and NOS to obligate the Manager or winning bidder to include the required notice provisions described above in any AAU, selling group agreement and third-party distribution agreement.
• Language has been added in the Selling Group Agreement and the Third-Party Distribution Agreement requiring the Dealer or Broker-Dealer to indemnify the Underwriters in the event the Underwriters are liable to make any payment to the Issuer as a result of the Dealer’s Broker-Dealer’s failure to comply with its obligations relating to establishment of issue price.
• In the first NOS, extraneous language relating to compliance with HTOP was deleted since that NOS assumes that HTOP will not apply.

The model documents are available at the following link: http://www.sifma.org/issuepricedocs

 

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SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly one million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit www.sifma.org.