Board has filed a further amendment to its previously filed proposed amendment to rule G-32

Amendment Filed

The Board has filed a further amendment to its previously filed proposed amendment to rule G-32, on disclosures in connection with new issues, relating to dissemination of official statements by dealers acting as financial advisors

On December 22, 1997, the Board filed with the Securities and Exchange Commission ("SEC") a proposed amendment to rule G-32, on disclosures in connection with new issues, to, among other things, strengthen the provisions relating to dissemination among brokers, dealers and municipal securities dealers ("dealers") of official statements for new issue municipal securities.⁽¹⁾ The proposed amendment would retain the existing responsibility of the managing or sole underwriter to provide, upon request, copies of the official statement to purchasing dealers but would add a requirement that the official statement be sent by the managing or sole underwriter to the purchasing dealer no later than the business day after the request or, if the official statement has not been received from the issuer or its agent, the business day after receipt. The managing or sole underwriter would be required to send official statements by first class mail or other equally prompt means unless the purchasing dealer arranges some other method of delivery at its own expense.

The Board believes that the proposed amendment to the dealer-to-dealer dissemination provisions will more effectively ensure rapid dissemination of official statements to customers and the marketplace generally than is occurring in many instances under the current version of the rule. In particular, the Board believes that the provisions of the proposed amendment and of The Bond Market Association's Standard Agreement Among Underwriters would effectively obligate the managing underwriter to send the official statement to syndicate members within one business day of its receipt from the issuer.⁽²⁾

Consistent with the position taken by the SEC in connection with its Rule 15c2-12, the Board recognizes that the official statement is the issuer's document. As a result, the proposed amendment in the original filing would have removed references in the existing rule to the preparation of official statements by dealers acting as financial advisors. After discussion with SEC staff, the Board has determined to amend its filing by retaining the existing requirement under rule G-32 that a dealer acting as financial advisor that prepares an official statement on behalf of an issuer must make that official statement available to the managing or sole underwriter, but changing the timing for such availability from promptly after the award is made, as provided in the current rule, to promptly after the issuer approves distribution of the official statement in final form.⁽³⁾ However, since the Board cannot prescribe the content, timing, quantity or manner of production of the official statement by the issuer or its agents, the portions of the existing rule that would regulate such production on behalf of an issuer by a dealer acting as financial advisor would be deleted. The Board is proposing this amendment to the original filing to ensure that, once the official statement is completed and approved by the issuer for distribution, dealers acting as financial advisors will be obligated to commence the dissemination process promptly.⁽⁴⁾ The Board urges issuers that utilize the services of non-dealer financial advisors to hold such financial advisors to the same standards for prompt delivery of official statements to the underwriters.

March 12, 1998

Text of Further Amendment to Proposed Amendment⁽⁵⁾

Rule G-32. Disclosures in Connection with New Issues

(a) No additional change.

(b) Responsibility of Managing Underwriters, and Sole Underwriters and Financial Advisors. (i) Managing Underwriters and Sole Underwriters. When an [a final] official statement in final form is prepared by or on behalf of an issuer, the managing underwriter or sole underwriter, upon request, shall send to all brokers, dealers and municipal securities dealers that purchase the new issue municipal securities an official statement in final form and other information required by paragraph (a)(ii) of this rule and not less than one additional official statement in final form per $100,000 par value of the new issue purchased by the broker, dealer or municipal securities dealer and sold to customers. Such items shall be sent no later than the business day following the request or, if an official statement in final form is being prepared but has not been received from the issuer or its agent, no later than the business day following such receipt. Such items shall be sent by first class mail or other equally prompt means, unless the purchasing broker, dealer or municipal securities dealer arranges some other method of delivery and pays or agrees to pay for such delivery. In addition, the managing underwriter or sole underwriter, upon request, shall provide all purchasing brokers, dealers and municipal securities dealers with instructions on how to order additional copies of the [final] official statement in final form directly from the printer.

(ii) Financial Advisors. A broker, dealer or municipal securities dealer that, acting as financial advisor, prepares an official statement in final form on behalf of an issuer, shall make that official statement in final form available to the managing underwriter or sole underwriter promptly after the issuer approves its distribution.

ENDNOTES

1. File No. SR-MSRB-97-14. Comments sent to the SEC should refer to the file number. See MSRB Reports, Vol. 18, No. 1 (February 1998) at 15-17.

2. The Bond Market Association's Standard Agreement Among Underwriters provides that syndicate members must place orders for the official statement by the business day following the date of execution of the purchase contract and states that any syndicate member that fails to place such an order will be assumed to have requested the quantity required under rule G-32(b)(i). See The Bond Market Association, Agreement Among Underwriters -- Instructions, Terms and Acceptance (Oct. 1, 1997) at ś 3. Thus, except in the rare instances where an official statement in final form is completed and available for distribution on the date of sale, syndicate members will have made or have been deemed to have made their requests for official statements by the time the managing underwriter receives the official statement from the issuer, thereby obligating the managing underwriter under the proposed amendment to send the official statement to syndicate members within one business day of receipt.

3. Amendment No. 1 to File No. SR-MSRB-97-14. Comments sent to the SEC should refer to the file and amendment numbers.

4. Of course, this amendment to the original filing would not relieve dealers acting as financial advisors of their obligations to comply with their contractual arrangements entered into with issuers and with all applicable state and federal statutes, regulations and common law. Thus, in particular, in instances where a dealer acting as financial advisor has a contractual or other legal duty to assist an issuer in complying with its contractual obligation to deliver final official statements within the time frame and in the quantities set forth in SEC Rule 15c2-12(b)(3), such obligation would not be diminished by operation of the revised amendment.

5. Underlining indicates additions to proposed amendment; strikethrough denotes deletions from proposed amendment.