MSRB Files Proposals to Provide for Additional Primary Market and Continuing Disclosure Information to Be Made Available Through the MSRB’s Electronic Municipal Market Access System (“EMMA”)

On July 14, 2009, the Municipal Securities Rulemaking Board (the “MSRB”)filed with the Securities and Exchange Commission (the “SEC”) two proposals relating to the MSRB’s Electronic Municipal Market Access system (“EMMA”).[1]  One proposal would require brokers, dealers and municipal securities dealers acting as underwriters, placement agents or remarketing agents for primary offerings of municipal securities (“underwriters”) to provide to EMMA information about whether the issuer or other obligated person has undertaken to provide continuing disclosures, the identity of any obligated person other than the issuer, and the timing by which such issuers or obligated persons have agreed to provide annual financial and operating data.[2]  The second proposal would permit issuers, on a voluntary basis, to submit to EMMA preliminary official statements and other related pre-sale documents, official statements and advance refunding documents (“primary market documents”), as well as information relating to the preparation and submission of audited financial statements and/or annual financial information and hyperlinks to other disclosure information available from the issuer’s website.[3]  Disclosures submitted under both proposals would be made available on the EMMA web portal at http://emma.msrb.org and through EMMA subscription services.

The MSRB has requested that the proposals be made effective no later than nine months after SEC approval of the proposals on a date or dates to be announced by the MSRB no later than sixty (60) days prior to the effective date.

BACKGROUND

Since June 1, 2009, underwriters have been required to submit official statements and certain other primary market documents to EMMA under Rule G-32, on disclosures in connection with primary offerings, together with related indexing information of Form G-32.  Since July 1, 2009, EMMA has also served as the central submission venue for continuing disclosure documents submitted by issuers and obligated persons pursuant to continuing disclosure undertakings entered into consistent with Exchange Act Rule 15c2-12, as well as for other continuing disclosures submitted by issuers and obligated persons on a voluntary basis.  These submissions are made available to the public on the EMMA web portal and through real-time subscription services.

DESCRIPTION OF THE PROPOSALS

Voluntary Issuer Submission of Preliminary Official Statements and Other Primary Market Documents

The proposals would amend the EMMA primary market disclosure service to permit issuers and their designated agents to make voluntary submissions to the primary market disclosure service of preliminary official statements, related pre-sale documents and other primary market documents.[4]  Pre-sale documents other than a preliminary official statement (including but not limited to notices of sale or supplemental disclosures) would be accepted only if accompanied or preceded by the preliminary official statement.[5]  An issuer seeking to make submissions of primary market documents to the EMMA primary market disclosure service would use the same accounts established with respect to submissions of continuing disclosure documents to the EMMA continuing disclosure service, subject to additional verification procedures to affirmatively establish the account holder’s authority to act on behalf of the issuer in connection with such primary market disclosure submissions.

Submissions of primary market documents by issuers and their designated agents will be accepted on a voluntary basis if, at the time of submission, they are accompanied by information necessary to accurately identify:  (i) the category of document being submitted; (ii) the issues or specific securities to which such document is related; and (iii) in the case of an advance refunding document, the specific securities being refunded pursuant thereto.  The primary market documents and related indexing information would be displayed on the EMMA web portal and also would be included in EMMA’s primary market disclosure subscription service.

Required Underwriter Submission of Information on Continuing Disclosure Undertakings Under Exchange Act Rule 15c2-12

The proposals would amend Rule G-32 and Form G-32 to require underwriters of primary offerings of municipal securities to submit to EMMA, as part of their primary offering submission obligation under Rule G-32(b), certain key items of information relating to continuing disclosure undertakings made by issuers and other obligated persons in connection with such primary offerings.[6]  These items of information would be made available to the public through the EMMA web portal and are intended to inform investors in advance whether continuing disclosures will be made available with respect to a particular municipal security, from and about whom such continuing disclosures are expected to be made, and the timing by which such disclosures should be made available.

The items of information regarding continuing disclosure undertakings to be provided by underwriters through Form G-32 would include:

• whether the issuer or other obligated persons have agreed to undertake to provide continuing disclosure information as contemplated by Exchange Act Rule 15c2-12;
• the name of any obligated person, other than the issuer of the municipal securities, that has or will undertake, or is otherwise expected to provide, continuing disclosure pursuant to the continuing disclosure undertaking;
• the date or dates identified in the continuing disclosure undertaking, pursuant to Exchange Act Rule 15c2-12(b)(5)(ii)(C) or otherwise, by which annual financial information is expected to be submitted each year by the issuer and/or any obligated persons to the EMMA system; and
• contact information for a representative of the issuer and/or any obligated persons for purposes of establishing continuing disclosure submission accounts for such issuer and/or obligated persons in connection with their submissions to the EMMA system.

The underwriter would be required to provide information regarding whether the issuer or other obligated persons have agreed to undertake to provide continuing disclosure information as contemplated by Exchange Act Rule 15c2-12 by no later than the date of first execution of transactions in municipal securities sold in the primary offering.  The remaining items of information would be required to be provided by the closing date of the primary offering.  The name or names of obligated persons to be provided would be of the entity acting as an obligated person, not an individual at such entity, unless the obligated person is in fact an individual.  The date by which the issuer or obligated person has undertaken to submit annual financial information would be submitted as a specific month and day, accurate as of the closing of the primary offering.[7]  If annual financial information is expected to be submitted by more than one entity and such information is expected to be submitted on different dates, each such date would be provided matched to the appropriate issuer and/or obligated person.  Underwriters currently are able to provide contact information for issuer or obligated person representatives with respect to current and past primary offerings through EMMA on a voluntary basis.  The proposals would require that such information be provided as part of the underwriter’s Form G-32 submission process for new primary offerings.

Until closing, the underwriter would be required to update promptly any information it has previously provided on Form G-32 which may have changed or to correct promptly any inaccuracies in such information, and would be responsible for ensuring that such information provided by it is accurate as of the closing date.  So long as the underwriter has provided such information accurately as of the closing date, it would not be obligated to update the information provided if there are any subsequent changes to such information, such as additions, deletions or modifications to the identities of obligated persons or changes in the timing for providing annual financial information.  Issuers and obligated persons will be able to make changes to such information through their submission accounts established in connection with EMMA’s continuing disclosure service.

Information regarding whether an offering is subject to a continuing disclosure undertaking, the names of obligated persons and the dates for providing annual financial information would be displayed on the EMMA web portal and also would be included in EMMA’s primary market disclosure subscription service.[8]  These items are intended to provide investors and others with information on the expected availability of disclosures following the initial issuance of the securities.  In particular, users of the EMMA web portal would be able to determine which obligated persons are expected to submit annual financial information, audited financial statements and material event notices on an on-going basis, as well as the date each year by which they should expect to have access to the annual financial information.

Voluntary Issuer Submission of Information Relating to Financial Statements and Annual Financial Information

The proposals would amend the EMMA continuing disclosure service to permit issuers, obligated persons and their agents to make voluntary submissions to the continuing disclosure service of additional categories of disclosures, as well as information about their continuing disclosure undertakings.  Such additional continuing disclosures and related indexing information would be displayed on the EMMA web portal and also would be included in EMMA’s continuing disclosure subscription service.  Such additional items would include:

• an issuer’s or obligated person’s undertaking to prepare audited financial statements pursuant to generally accepted accounting principles (“GAAP”) as established by the Governmental Accounting Standards Board (“GASB”), as described below (the “GASB-GAAP undertaking”);
• an issuer’s or obligated person’s undertaking to submit annual financial information to EMMA within 120 calendar days after the end of the fiscal year, as described below (the “annual filing undertaking”);
• Certificate of Achievement for Excellence in Financial Reporting awarded by the Government Finance Officers Association (“GFOA”) in connection with the preparation of a Comprehensive Annual Financial Report (“CAFR”) of an issuer (“GFOA-CAFR Certificate”);[9] and
• uniform resource locator (URL) of the issuer’s or obligated person’s Internet-based investor relations or other repository of financial/operating information.

The annual filing undertaking would consist of a voluntary undertaking by an issuer or obligated person, either at the time of a primary offering or at any time thereafter, that the issuer or obligated person, as appropriate, will submit to EMMA its annual financial information as contemplated under Exchange Act Rule 15c2-12 by no later than 120 calendar days after the end of such issuer’s or obligated person’s fiscal year.[10]  The annual filing undertaking would assist investors and other market participants in understanding when the annual financial information is expected to be available in the future.  The fact that an issuer or obligated person has entered into an annual filing undertaking would be prominently disclosed on the EMMA web portal as a distinctive characteristic of the securities to which such undertaking applies.  If an issuer or obligated person that has made an annual filing undertaking later rescinds such undertaking, the issuer or obligated person would be able to disclose such action through EMMA.  The MSRB would not review or confirm the compliance of an issuer or obligated person with its annual filing undertaking.

The GFOA awards the GFOA-CAFR Certificate to a government if, based on a review process, its CAFR substantially complies with both GAAP and GFOA’s CAFR program policy.  According to current GFOA eligibility requirements, financial reports must include all funds and component units of the governmental entity, in accordance with GAAP, in order to be considered a CAFR.  The GFOA-CAFR Certificate would assist investors and other market participants in assessments of information provided in an issuer’s CAFR.   If an issuer submits a copy of the GFOA-CAFR Certificate to EMMA, the EMMA web portal would prominently disclose the issuer’s receipt of a GFOA-CAFR Certificate as a distinctive characteristic of the applicable securities.  The MSRB would not confirm the validity of a GFOA-CAFR Certificate submitted to EMMA.

Finally, a URL of an issuer’s or obligated person’s Internet-based investor relations or other repository of financial/operating information would provide investors with an additional avenue for obtaining further financial, operating or other investment-related information about such issuer or obligated person.

The GASB-GAAP undertaking and annual filing undertaking could be included within the continuing disclosure undertaking entered into consistent with Exchange Act Rule 15c2-12 or could be made in a separate agreement.  Issuers and obligated persons would indicate the existence of such an undertaking through a data input election on EMMA.  The URL of an issuer’s or obligated person’s investor relations or other repository of financial/operating information also could be entered through a text/data input field on EMMA.  No document would be required to be submitted to EMMA in connection with the GASB-GAAP undertaking, annual filing undertaking or the issuer/obligated person URL.  The MSRB would include an explanation of the GASB-GAAP undertaking, annual filing undertaking and GFOA-CAFR Certificate on the EMMA web portal.  The GASB-GAAP undertaking and annual filing undertaking were proposed after consultation between the MSRB and SEC staff.

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Questions on the proposals may be directed to Leslie Carey, Associate General Counsel, or Justin Pica, Director, Uniform Practice Policy, at (703) 797-6600.  Written comments on the proposals should be submitted to the SEC.

July 15, 2009

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TEXT OF PROPOSALS [11]

PROPOSED AMENDMENTS TO RULE G-32

Rule G-32.  Disclosures In Connection With Primary Offerings

(a) No change.

(b) Underwriter Submissions to EMMA.

(i)-(v) No change.

(vi) Procedures for Submitting Documents and Form G-32 Information.

(A)-(B) No change.

(C) The underwriter in any primary offering of municipal securities for which a document or information is required to be submitted to EMMA under this section (b) shall submit such information in a timely and accurate manner as follows:

(1) Form G-32 information submissions pursuant to paragraph
(b)(i)(A) hereof with respect to a primary offering shall be:

(a) initiated on or prior to the date of first execution with the submission of CUSIP numbers (except if such CUSIP numbers are not required under Rule G-34 and have not been assigned), initial offering prices or yields (including prices or yields for maturities designated as not reoffered), if applicable, and the expected closing date, and whether the issuer or other obligated persons have agreed to undertake to provide continuing disclosure information as contemplated by Securities Exchange Act Rule 15c2-12, together with such other items of information as set forth in Form G-32 and the EMMA Dataport Manual; and

(b) No change.

Specific items of information required by Form G-32 shall be submitted at such times and in such manners as set forth in the EMMA Dataport Manual.

(2)-(4) No change.

(D) No change.

(c) No change.

(d) Definitions. For purposes of this rule, the following terms have the following meanings:

(i)-(xii) No change.

(xiii) The term “obligated person” shall mean an obligated person defined in Securities Exchange Act Rule 15c2-12(f)(10) with respect to all or a portion of the municipal securities in a primary offering.

(e) No change.

PROPOSED AMENDMENTS TO EMMA PRIMARY MARKET DISCLOSURE SERVICE

EMMA PRIMARY MARKET DISCLOSURE SERVICE

The EMMA primary market disclosure service, established as a service of EMMA, receives submissions of official statements (“OSs”), preliminary official statements (“POSs”)and related pre-sale documents (“POS-related documents”), advance refunding documents (“ARDs”), and any amendments thereto (collectively, “primary market documents”), together with related indexing information to allow the public to readily identify and access such documents, from brokers, dealers and municipal securities dealers (“dealers”), acting as underwriters, placement agents or remarketing agents for primary offerings of municipal securities (“underwriters”), and their agents pursuant to MSRB rules, and from issuers and their designated agents, at no charge to the submitter.  Submissions may be made through a choice of an Internet-based electronic submission interface or electronic computer-to-computer streaming connections.  The EMMA primary market disclosure service makes primary market documents available to the public, at no charge, on the Internet through the EMMA portal.  The EMMA primary market disclosure service also makes primary market documents available by subscription for a fee.

Submissions to the EMMA Primary Market Disclosure Service

Designated Electronic Format for Documents.  No change.

Method of Submission.  No change.

Timing of Submissions.  Underwriters and their agents Submitters shall make submissions to EMMA of primary market documents OSs, POSs, ARDs and related information within the timeframes set forth in MSRB rules and related MSRB procedures.  The EMMA primary market disclosure service’s submission processes are available for submissions throughout the day, subject to the right of the MSRB to make such processes unavailable between the hours of 3:00 am and 6:00 am each day, Eastern time, for required maintenance, upgrades or other purposes, or at other times as needed to ensure the integrity of EMMA and its systems.  The MSRB shall provide advance notice on the EMMA portal of any planned periods of unavailability and shall endeavor to provide information on the EMMA portal as to the status of the submission interface during unanticipated periods of unavailability, to the extent technically feasible.

Document Types .  The EMMA primary market disclosure service accepts submissions of primary market documents, OSs, POSs and ARDs, including any amendments to the foregoing, submitted pursuant to MSRB rules or on a voluntary basis.  POS-related documents, including but not limited to notices of sale or supplemental disclosures, will be accepted only if accompanied or preceded by a POS.

Information to be Submitted.  Underwriters and their agents Submitters shall provide to EMMA related indexing information with respect to each document submitted.  Underwriters and their agents Submitters submitting primary market documents OSs, POSs or ARDs under MSRB rules, or providing information under MSRB rules regarding a primary offering where no such document is required to be submitted, shall provide such items of information as are required by MSRB rule or the EMMA Dataport Manual to be included on Form G-32.  Submissions of primary market documents by issuers and their designated agents will be accepted on a voluntary basis if, at the time of submission, they are accompanied by information necessary to accurately identify:  (i) the category of document being submitted (such as OS, POS, POS-related document, ARD); (ii) the issues or specific securities to which such document is related (including CUSIP number to the extent then available, issuer name, state, issue description/securities name, dated date, maturity date, and/or coupon rate); and (iii) in the case of an ARD, the specific securities being refunded pursuant to the ARD (including original CUSIP number and any newly assigned CUSIP number).

Submitters shall be responsible for the accuracy and completeness of all information submitted to EMMA.

Submitters .  Submissions to the EMMA primary market disclosure service may be made solely by authorized submitters using password-protected accounts in the MSRB’s user account management and authentication system known as MSRB Gateway.  Submissions may be made by the following classes of submitters:

● underwriter, which may submit primary market documents OSs, POSs, ARDs and related information, as well as such other documents or information as provided under MSRB rules, with respect to municipal securities which the underwriter has underwritten;

● issuer, which may submit primary market documents and related information with respect to such issuer’s municipal securities; and

● designated agent, which may submit the documents otherwise permitted to be submitted by the underwriter or issuer, as appropriate, which has designated such agent, as provided below.

Issuers wishing to make submissions of primary market documents and related indexing information to the EMMA primary market disclosure service would use the same accounts established with respect to submissions of continuing disclosure documents to the EMMA continuing disclosure service, subject to additional verification procedures.  Underwriters and issuers may designate agents to submit primary market documents and related indexing information on their behalf, and may revoke the designation of any such agents, through MSRB Gateway.  Such designated agents must register to obtain password-protected accounts on EMMA in order to make submissions on behalf of the designating party. underwriters.  All actions taken on EMMA by a designated agent on behalf of an underwriter that has designated such agent shall be the responsibility of the underwriter.  The MSRB considers an agent designated by an issuer to make submissions of primary market documents and related indexing information as being authorized by the issuer to take actions on EMMA on behalf of such issuer.

Public Availability of Primary Market Disclosure Documents

No change.

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PROPOSED AMENDMENTS TO EMMA CONTINUING DISCLOSURE SERVICE

EMMA CONTINUING DISCLOSURE SERVICE

The EMMA continuing disclosure service, established as a service of EMMA, receives submissions of continuing disclosure documents, together with related information about continuing disclosures and indexing information to allow the public to readily identify and access such documents, from issuers, obligated persons and their agents pursuant to continuing disclosure undertakings entered into consistent with Exchange Act Rule 15c2-12, as well as other continuing disclosure documents concerning municipal securities, at no charge to the submitter.  Submissions may be made through a choice of an Internet-based electronic submission interface or electronic computer-to-computer streaming connections.  The EMMA continuing disclosure service makes continuing disclosures available to the public, at no charge, on the Internet through the EMMA portal.  The EMMA continuing disclosure service also makes continuing disclosures available by subscription for a fee.

Submissions to the EMMA Continuing Disclosure Service

Designated Electronic Format for Documents .  No change.

Method of Submission .  No change.

Timing of Submissions .  No change.

Document Types .  The EMMA continuing disclosure service accepts submissions from issuers, obligated persons, and their agents of (i) the continuing disclosure documents described in Rule 15c2-12,
and (ii) other continuing disclosure documents concerning municipal securities not specifically described in Rule 15c2-12.

The continuing disclosure documents described in Rule 15c2-12 consist of the following categories of documents:

• annual financial information concerning issuers or other obligated persons as described in paragraph (b)(5)(i)(A) of Rule 15c2-12, or other financial information and operating data provided by issuers or other obligated persons as described in paragraph (d)(2)(ii)(A) of Rule 15c2-12;
• financial statements for issuers or other obligated persons if not included in the annual financial information as described in paragraph (b)(5)(i)(B) of Rule 15c2-12;
• notices of certain events, if material, as described in paragraph (b)(5)(i)(C) of Rule 15c2-12; and
• notices of failures to provide annual financial information on or before the date specified in the written undertaking as described in paragraph (b)(5)(i)(D) of Rule 15c2-12.

Categories of other disclosure documents concerning municipal securities not specifically described in Rule 15c2-12 include:

• other financial or operating data disclosures, including but not limited to quarterly or monthly financial information; interim or additional financial information or operating data; budget documents; investment, debt or financial policies; consultant reports; information provided to rating agencies, credit or liquidity providers or other third parties; changes in accounting standards, fiscal year or timing of annual disclosure; undertaking of an issuer or obligated person to prepare audited financial statements pursuant to generally accepted accounting principles as established by the Governmental Accounting Standards Board; undertaking of an issuer or obligated person to submit annual financial information to EMMA within 120 calendar days after the end of the applicable fiscal year; Certificate of Achievement for Excellence in Financial Reporting awarded by the Government Finance Officers Association; uniform resource locator (URL) of the issuer’s or obligated person’s Internet-based investor relations or other repository of financial/operating information; and other uncategorized financial or operating data; and
• other event-based disclosures, including but not limited to amendments to continuing disclosure undertakings; changes in obligated person; notices to investors pursuant to bond documents; communications from the Internal Revenue Service; tender offer or secondary market purchase notices; notices of bid for auction rate or other securities; capital or other financing plans; litigation or enforcement action documents; documents relating to mergers, consolidations, reorganizations, insolvency or bankruptcy; changes of trustee, tender agent, remarketing agent, or other on-going party; materials relating to derivative or other similar transactions; and other uncategorized event-based disclosures.

The MSRB may combine two or more categories, may divide any category into two or more new categories or subcategories, or may form additional categories for purposes of indexing documents submitted as uncategorized financial/operating data or event-based disclosures, as appropriate, based on the types of documents received.

In addition, for the categories of continuing disclosures listed below, a submitter may provide, in lieu of or in addition to a continuing disclosure document, a statement of the information indicated below by means of a text/data input field:  undertaking of an issuer or obligated person to prepare audited financial statements pursuant to generally accepted accounting principles as established by the Governmental Accounting Standards Board; undertaking of an issuer or obligated person to submit annual financial information to EMMA within 120 calendar days after the end of the applicable fiscal year; and uniform resource locator (URL) of the issuer’s or obligated person’s Internet-based investor relations or other repository of financial/operating information.

Information to be Submitted .  No change.

Submitters .  No change.

Public Availability of Continuing Disclosure Documents

No change.

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PROPOSED AMENDMENTS TO EMMA PRIMARY MARKET DISCLOSURE SUBSCRIPTION SERVICE

EMMA SUBSCRIPTION SERVICES

EMMA Primary Market Disclosure Subscription Service

No change.