SEC Approves Rule Changes to Require Underwriter Registration and Testing with DTCC'S NIIDS System
On June 25, 2008, the Securities and Exchange Commission approved a change to MSRB rules to require underwriters to register and conduct tests with Depository Trust and Clearing Corporation’s (“DTCC”) New Issue Information Dissemination System (“NIIDS”).[1] The “NIIDS Registration and Testing Requirements” consist of an amendment of Rule G-34, CUSIP Numbers and New Issue Requirements, that would help ensure that dealers are prepared for the September 30, 2008 effective date of other changes to MSRB rules to require underwriters to participate in NIIDS.[2] Accordingly, the NIIDS Registration and Testing Requirements require all dealers that have acted as underwriter[3] in the last year on a new issue of municipal securities with nine months or greater effective maturity to register to use NIIDS with DTCC and successfully test NIIDS prior to September 15, 2008.[4] On an ongoing basis the NIIDS Registration and Testing Requirements would require dealers to register to use NIIDS with DTCC and successfully test NIIDS prior to acting as underwriter on a new issue of municipal securities with nine months or greater effective maturity.
A summary and the complete text of the amendments is available in MSRB Notice 2008-23 (May 9, 2008) at the MSRB web site (www.msrb.org). The amendments became effective upon SEC approval.
Questions about this notice may be directed to Justin R. Pica, Uniform Practice Policy Advisor, at 703-797-6716, or Sara K. Pranio, Uniform Practice Assistant, at 703-797-6714
June 27, 2008
[1] SEC Release No. 34-58016 (June 25, 2008).
[2] See SEC Approves Rule Changes to Require Underwriter Participation with DTCC’s NIIDS System, MSRB Notice 2008-22 (May 2, 2008).
[3] Rule G-34 defines “underwriter” very broadly to include a dealer acting as a placement agent as well as any dealer purchasing new issue securities from the issuer as principal. If there is an underwriting syndicate, the lead manager is considered to be the “underwriter” for purposes of Rule G-34.
[4] Many underwriters have already registered with DTCC and initiated NIIDS testing. The rule change places a deadline on underwriters to register with DTCC and complete NIIDS testing. Underwriters that have already satisfied the requirements of the proposed rule change prior to SEC approval are not required to re-register or re-test.
