Disclosure of underwriting spread. As you know, Board rule G-32 provides that a dealer selling new issue municipal securities must furnish its customers with certain information at or prior to sending final money confirmations. Under subparagraph (a)(ii) of the rule, in the case of a negotiated sale, the dealer must furnish certain specified information about the underwriting arrangements, including the "underwriting spread." The Board has interpreted this provision to require that the gross spread (i.e., the difference between the initial reoffering prices and the amount paid to the issuer) be shown. The Board has also indicated that the gross spread may be expressed either in dollars or in points per bond.

The Board recently issued an interpretation of rule G-32(a)(ii) to the effect that the underwriting spread may be expressed either as a total amount or as a listing of the components of the gross spread. Thus, for example, the following disclosure would meet the requirements of the rule:

Application of Proceeds

Construction Costs .............................................................$120,000,000

Underwriter’s discount[1]...........................................................2,500,000

Legal expenses ..........................................................................200,000

Printing and Miscellaneous expenses......................................... ..300,000

Principal amount of bonds ....................................................123,000,000

 Should you have any questions concerning this interpretation, please call me. MSRB interpretation of March 9, 1981.

Note: The above letter refers to the text of rule G-32 as in effect prior to amendments effective on August 30, 1985.

[1] If a dealer expresses the underwriting spread as a listing of the components of the gross spread, that portion of the proceeds which represents compensation to the underwriters must, in the Board's view, be clearly identified as such. Thus, use of the terms "underwriter's discount" or "net to underwriters" would be acceptable; the term "bond discount," however, is confusing and is, therefore, inappropriate.