June 30, 2017
Ronald W. Smith
Corporate Secretary
Municipal Securities Rulemaking Board
1300 I Street NW
Suite 1000
Washington, DC 20005
Re: MSRB Notice 2017-11: Second Request for Comment on Draft
Amendments to and Clarifications of MSRB Rule G-34, on
Obtaining CUSIP Numbers
Dear Mr. Smith:
The Securities Industry and Financial Markets Association (“SIFMA”)1 greatly appreciates this opportunity to respond to Notice 2017-11 2 (the “Second Notice”) issued by the Municipal Securities Rulemaking Board (the “MSRB”) in which the MSRB is seeking comment on revised draft amendments to and clarifications of MSRB Rule G-34 (“Rule G-34”), relating to obtaining CUSIP numbers for municipal securities. SIFMA and its members applaud the MSRB for thoughtfully considering the comments it received with respect to its first request of comment on this issue, Notice 2017-05 (March 1, 2017) (the “First Notice”), and have some additional comments on the Second Notice as described below.
I. Agree Clarification or Rule Change Should Be Prospective Only
As a fairness matter, we appreciate that the MSRB has stated that the draft changes to Rule G-34 shall only be applied prospectively. It is important to have clarity on this point to avoid unintended consequences during a subsequent FINRA or SEC examination. The MSRB has recognized and understands the application of Rule G-34(a) to private placements, including direct purchase transactions has been uneven. 3 SIFMA and its members believed that Rule G-34, under a fair reading of the current language, exempts transactions that are not distributed.4 As such, we agree that prospective application is the appropriate and correct solution in connection with any changes to Rule G-34, and any changes to Rule G-34 should not affect outstanding transactions completed under the current language of Rule G34.
II. Clarification of Eligible Purchasers for the New Exemption for Certain Private Placements of Municipal Securities Would Be Beneficial
SIFMA and its members welcome the MSRB’s creation of an exemption from the requirements of Rule G-34 for dealers and municipal advisors in private placements, including direct purchases, of municipal securities to a bank, its affiliated banks or a consortium of banks. This exception largely addresses the discrete group of transactions for which SIFMA feels there is a clear rationale for an exemption and eliminates the need to determine for Rule G-34 purposes whether the transaction involves a security.
1 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 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 http://www.sifma.org.
2 MSRB Notice 2017-11 (June 11, 2017).
3 See the First Notice, at FN 12.
4 The language of current Rule G-34(a)(i) refers to a broker, dealer, or municipal securities dealer (“dealers”) and others who “acquire” a new issue of municipal securities as principal or agent, “for the purpose of a distribution.” In contrast, in a private placement, the instrument is typically acquired directly by the bank or other purchaser