Board has filed an amendment to rule G-36(c)(iii)

The Board has filed an amendment to rule G-36(c)(iii), on delivery of official statements, advance refunding documents and Forms G-36(OS) and G-36(ARD) to the Board, relating to commercial paper issues. The amendment becomes operative on April 9, 1998.

On March 10, 1998, the Board filed with the Securities and Exchange Commission ("SEC") an amendment to rule G-36, on delivery of official statements, advance refunding documents and Forms G-36(OS) and G-36(ARD) to the Board.⁽¹⁾ The amendment provides that once the official statement and Form G-36(OS) for a commercial paper issue has been sent to the Board under rule G-36, such official statement need not be resubmitted to the Board in connection with future roll-overs or issuances of new tranches of commercial paper so long as it has not been modified from the form previously submitted. The amendment becomes operative on April 9, 1998.

Rule G-36 requires that a broker, dealer or municipal securities dealer acting as underwriter in a primary offering of municipal securities (with certain limited exceptions) send to the Board copies of the official statement and completed Form G-36(OS). The rule was adopted by the Board for the purpose of creating a repository for official statements that would function much like a public library that stores, indexes and provides copies of official statements.⁽²⁾ This library⁽³⁾ was intended to serve as a central source for information regarding municipal securities trading in the primary and secondary markets. As originally adopted by the Board and approved by the SEC, rule G-36 did not apply to any primary offering that qualified for an exemption under current section (d)(1) of Securities Exchange Act Rule 15c2-12, including, among other things, commercial paper that qualified for the exemption set forth in paragraph (ii) thereof.⁽⁴⁾ In 1992, rule G-36 was amended to make commercial paper and certain other categories of municipal securities subject to the rule if an official statement in final form had been prepared by or on behalf of the issuer, thereby extending the reach of rule G-36 beyond the scope of Rule 15c2-12.⁽⁵⁾ The 1992 amendment was adopted because the Board believed that there existed an interest among market participants in obtaining official statements relating to such municipal securities. It was felt that, by expanding the scope of the rule to include such offerings, a more complete collection of disclosure documents would result and the overall integrity, efficiency and liquidity of the municipal securities market would be increased.

Rule G-36(c)(i) currently requires that the underwriter in a primary offering of commercial paper send to the Board a copy of the official statement, if any, prepared by or on behalf of the issuer within one business day of the bond closing.⁽⁶⁾ Some concern has been expressed that each roll-over under a commercial paper program may technically constitute a primary offering that might trigger the rule's official statement submission requirement if there exists an official statement in final form prepared by or on behalf of the issuer, even if such official statement has previously been submitted to the Board in connection with the initial sale of commercial paper under the commercial paper program. Such a conclusion is not consistent with the intent of the Board in adopting rule G-36. The Board had sought to build a library that included a substantially complete set of official statements rather than to impose, for reasons unrelated to the central purpose of building such library, a filing requirement in connection with each primary offering.⁽⁷⁾ No purpose is served under these circumstances by having the same official statement submitted to the Board repeatedly.⁽⁸⁾

The Board has adopted the proposed rule change to clarify that underwriters of commercial paper issues are required to submit the official statement in final form, if any, prepared by or on behalf of the issuer to the Board only once rather than each time outstanding commercial paper is rolled-over. Under the amendment, once the official statement for a commercial paper issue has been submitted to the Board, such official statement would not be required to be submitted in connection with future roll-overs or issuances of new tranches of commercial paper, even if it is used in connection with such offering, so long as the official statement has not been modified from the form previously submitted to the Board. If the official statement is revised or otherwise modified (e.g., a periodic revision or a modification due to the occurrence of a material event), then the revised or modified official statement would be subject to the rule's submission requirement the first time it is used in connection with a primary offering of the commercial paper, such as a roll-over or issuance of a new tranche. Such revised or modified official statement would thereafter qualify for the submission exemption until it is again revised or modified.

March 10, 1998

Text of Amendment to Rule G-36(c)(iii)⁽⁹⁾

Rule G-36. Delivery of Official Statements, Advance Refunding Documents and Forms G-36(OS) and G-36(ARD) to Board or its Designee

(a)-(b) No change.

(i)-(ii) No change.

(iii) This section shall not apply to a primary offering[s] of municipal securities, regardless of the amount of the issue, if:

(A) the issue qualifies for an exemption set forth in paragraph (1)(i) of section (d) of Securities Exchange Act rule 15c2-12; or

(B) the issue consists of commercial paper that qualifies for an exemption set forth in paragraph (1)(ii) of section (d) of Securities Exchange Act rule 15c2-12, but only if the official statement in final form, if any, used in connection with such offering: (1) has previously been properly submitted to the Board or its designee in connection with a prior primary offering and (2) has not been supplemented, amended or "stickered" subsequent to such prior submission.

(d)-(g) No changes.

ENDNOTES

1. File No. SR-MSRB-98-3. Comments submitted to the SEC should refer to this file number.

2. File No. SR-MSRB-89-9 (November 13, 1989).

3. Now known as the Municipal Securities Information Library^® (MSIL^®) system. Municipal Securities Information Library and MSIL are registered trademarks of the Board.

4. Section (c)(2) of Rule 15c2-12 as in effect prior to amendments adopted by the SEC on November 10, 1994.

5. File No. SR-MSRB-92-7 (September 3, 1992). Thus, only primary offerings that qualified for the limited placement exemption from Rule 15c2-12 under current paragraph (i) of section (d)(1) (former section (c)(1)) remained exempted from rule G-36.

6. The official statement for a commercial paper issue is often referred to as an offering memorandum.

7. Form G-36(OS) is also used to assist the Board in invoicing underwriters for underwriting assessments that are due under rule A-13 in connection with primary offerings. However, since commercial paper issues fall within the exemption from the underwriting assessment set forth in rule A-13(a)(ii), this function is not served by requiring that Form G-36(OS) be submitted in connection with each primary offering of commercial paper.

8. In contrast, in certain situations where different underwriters or syndicates have underwritten different portions of the securities offered in a single official statement, separate submissions of Form G-36(OS) and of the official statement (thereby causing multiple copies of the official statement to be filed with the Board) serve the purpose of ensuring that underwriting assessments are invoiced to the applicable underwriters in the appropriate amounts.

9. Underlining indicates additions; [brackets] denotes deletions.