SIFMA sent comments to the MSRB on Rule G-23 on Activities of Dealers Acting as Financial Advisors. In connection with…
MSRB Proposed Rule Change to Amend and Restate the Application of Rule G-17
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
Re: File Number SR-MSRB-2019-10; MSRB Proposed Rule Change to Amend and Restate the MSRB’s August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities
Dear Ms. Countryman,
The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates this opportunity to provide input to the Securities and Exchange Commission (“SEC”) on the Proposed Rule Change to Amend and Restate the Municipal Securities Rulemaking Board’s (“MSRB”) August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities (the “Filing”).2 Although SIFMA recognizes the modifications that the MSRB has made to the rule based, in part, upon our comments to MSRB, SIFMA requests that the SEC disapproves of this Filing until such time that the MSRB amends the Filing to address our further comments described herein.
I. Tiered Disclosure Requirements Based on Issuer Characteristics
It is of utmost importance that the MSRB set clear and concise standards for the regulated broker-dealers, but also set rules that are workable. As noted in SIFMA’s comment letter (the “Prior Letter”)3 on the MSRB’s proposal to amend the Interpretive Notice4, we believe that tiered disclosure requirements may be beneficial to issuers and underwriters. As cited in the Filing, “the Florida Division of Bond Finance stated that a ‘one size fits all’ approach is not effective and that issuers could benefit from underwriters tailoring such disclosures based on issuer size and sophistication.” SIFMA agrees. A highly sophisticated frequent issuer may not need the same disclosures as a less sophisticated infrequent issuer. For example, it may not be necessary to send disclosures on variable rate demand obligations or floating rate notes to an issuer that frequently issues such securities. Such disclosures would, on the other hand, be useful for an issuer that had not previously accessed such markets. SIFMA requests that the MSRB, either in a revised Filing, or otherwise in a “frequently asked questions document” or other implementation guidance, provide examples of concrete hypotheticals in order to provide clarity to regulated dealers regarding how the content of these transaction-based disclosures may potentially vary by issuer sophistication and still survive regulatory scrutiny. Otherwise, in the absence of regulatory clarity, a onesize fits all approach in this instance is the most workable as evidenced by underwriter practices over the past eight years.