Disclosures in Connection with New Issues

December 22, 1993

Disclosures in connection with new issues. This is in response to your November 30, 1993 letter requesting interpretive guidance regarding Board rule G-32(a)(ii)(C). That provision requires dealers in connection with a negotiated sale of new issue municipal securities to disclose "the initial offering price for each maturity in the issue that is offered or to be offered in whole or in part by the underwriters." You inquired as to whether the term "initial offering price" as used in this provision could be stated in terms of yield. The Board has reviewed your request and authorized this response.

Rule G-32 requires dealers selling new issue municipal securities to provide certain written information to customers. In connection with new negotiated issues, paragraph (a)(ii) of the rule requires that this written information include the underwriting spread, the amount of any fee received by a dealer as agent for the issuer in the distribution of the securities for each maturity in the issue that is offered or to be offered in whole or in part by the underwriters, and the initial offering price of each maturity.[1]

With respect to the "initial offering price," the Board has concluded that this price may be expressed either in terms of dollar price or yield. Since customer confirmations generally must show both dollar price and yield, the Board believes that either form of "initial offering price" would provide customers with the requisite comparative data about the relationship between the initial offering price and the price of the securities being purchased. MSRB Interpretation of December 22, 1993.

[1] If this information is stated in the official statement, compliance can be achieved by delivering the official statement to the customer, prior to settlement, as is required, in any case, by rule G-32(a)(i). However, if the information is not in the official statement, this information must be delivered no later than the settlement of the transaction.