Back to Submissions

Letters

MSRB Rule G- 34(a)(i) on the Use of CUSIPs

Summary

SIFMA provides comments to the Securities and Exchange Commission (SEC) regarding the recently proposed amendments to MSRB Rule G-34, on obtaining CUSIP numbers, which aim to clarify existing requirements and improve market consistency. If approved, the rule would codify the MSRB’s interpretation that municipal securities dealers are required to obtain CUSIP numbers for new issue securities sold in private placement transactions, including direct purchases. Additionally, if approved, non-dealer municipal advisors advising on competitive offerings would be required, like dealer municipal advisors under the current rule, to apply for CUSIP numbers. The MSRB’s proposal includes a principles-based exception from the requirement to obtain CUSIP numbers for direct purchases of municipal securities by banks – as well as their non-dealer control affiliates – that are intended to be held to maturity.

See also:
MSRB Filing

Federal Register

PDF

Submitted To

SEC

Submitted By

SIFMA

Related Committee(s)

  • Municipal Securities Committee

Date

10

October

2017

Excerpt

October 10, 2017

Brent J. Fields
Secretary
Securities and Exchange Commission
100 F Street NE.
Washington, DC 20549-1090

Re: File No. SR-MSRB-2017-06; Proposed Rule Change to Amend MSRB Rule G-34, on CUSIP Numbers, New Issue, and Market Information

Dear Mr. Fields:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates this opportunity to respond to the Municipal Securities Rulemaking Board’s (“MSRB’s”) proposed rule filing SR-MSRB-2017-06 (the “Proposal”),2 which would amend MSRB Rule G-34 (“Rule G-34”), on CUSIP numbers, new issue and market information. We appreciate the MSRB’s solicitations for comment and their revisions to the original proposal to date.3 For the reasons stated below, SIFMA urges the Securities and Exchange Commission (“SEC” or “Commission”) to institute disapproval proceedings regarding the Proposal in its current form, because the amendment as filed is unduly restrictive for market participants and lacks clarity in material respects.

I. Relevant Regulatory History

SIFMA questions the expressed rationale for the MSRB’s proposed rulemaking, as the sole purpose for the original proposal to adopt Rule G-34 was merely to facilitate clearance and settlement of municipal securities; not to define the term “underwriter.”

As originally adopted in 1983 and as it stands today, the scope of Rule G-34 has been read by the MSRB’s regulated community as follows: a broker, dealer or municipal securities dealer (collectively, “dealer”) who acquires, whether as principal or agent, a new issue of municipal securities from the issuer of such securities for the purpose of distributing such new issue is for purposes of the rule, an underwriter, as they would be under the Securities Act definition of underwriter for any non-exempt security, such as a taxable private activity bond not within the exemption provided by Rule 131(b), and is required to obtain CUSIPS, if the issue is CUSIP eligible.

In 1992, the MSRB requested comments on a suggested revision to Rule G-34’s CUSIP eligibility standards. At that time, if the MSRB had wanted or intended to use the same definition of underwriter as set forth in the 1989 proposal for SEC Rule 15c2-12, it could have done so. However, the MSRB chose not to so define the term in that manner. By its express terms, Rule G-34 does not require CUSIPs if a dealer does not acquire a new issue when acting as placement agent in a transaction that is not a distribution.

SIFMA and its members feel that this amendment is a clear expansion of the scope of Rule G-34, beyond what Rule G-34 originally intended, adding placement agents that do not “acquire” securities as do underwriters. Should the Commission agree with the MSRB that, after 29 years, the definition of underwriter in Rule G-34 be conformed to the definition adopted in Rule 15c2-12, we query whether the Commission should also include the exemption provided under Rule 15c2-12(d)(1) from the requirement to obtain a CUSIP. To do otherwise would not be a matter of conforming, but of removing the exemption from the CUSIP requirement clearly existing for transactions under a plain reading of the current Rule G-34 in which the securities are not acquired by a dealer.

Continue Reading >

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 $20 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 82 Fed. Reg. 43587 (Sept. 18, 2017) (File No. SR-MSRB-2017-06).

3 See, MSRB Notice 2017-05 (March 1, 2017) (the “First Notice”) and MSRB Notice 2017-11 (June 11, 2017) (the “Second Notice”). See also, letter from Leslie M. Norwood, Managing Director and Associate General Counsel, SIFMA, to Ron Smith, Secretary, MSRB, dated March 31, 2017 (“SIFMA Letter I”) and, letter from Leslie M. Norwood, Managing Director and Associate General Counsel, the SIFMA, to Ron Smith, Secretary, MSRB, dated June 30, 2017 (“SIFMA Letter II”).

More Submissions