(Volume 16, Number 2) JUNE 1996
Route To: Manager, Muni Department Sales Operations Compliance
Amendment Filed The proposed amendment makes two technical changes to the text of rule G-15(a), which was completely revised in 1995, and updates references to that rule in rules G-15(c) and G-33.
On May 28, 1996, the Board filed with the Securities and Exchange Commission (Commission) a proposed amendment to rule G-15, on confirmation, clearance and settlement of transactions with customers, and to rule G-33 on calculations.[1] The proposed amendment makes two technical changes to the text of rule G-15(a), which was completely revised in 1995, and updates references to that rule in rules G-15(c) and G-33. The proposed amendment will be effective thirty days after filing, or on June 27, 1996.
On July 11, 1995, the Commission approved the Board's recent amendment to rule G-15(a), on customer confirmations, which became effective on November 15, 1995. This amendment reorganized the rule and incorporated many interpretations that had been published over the years. A limited set of technical amendments to clarify certain provisions of the rule became effective February 26, 1996.
The Board has identified a need for two additional technical amendments to clarify certain provisions of the rule. First, revised rule G-15(a)(i)(C)(2)(a) requires dealers to disclose on the confirmation the date and price of the "next pricing call," defined as an in-whole call. That provision also requires dealers to print a legend on the confirmation regarding additional call features if there are any call features in addition to the "first pricing call." The proposed technical amendment changes the reference from the "first" pricing call to the "next" pricing call to maintain consistency of terms and avoid confusion. Since a municipal security traded in the secondary market may be traded after the first pricing call, the term "next" pricing call more clearly identifies the call to be disclosed on the confirmation.
The second proposed technical amendment concerns the requirement in rule G-15(a)(i)(D)(1) to provide a three-part disclosure statement for zero coupon bonds. The rule currently states that the confirmation for zero coupon bonds shall include a statement that there are "no periodic payments" and that the bond is "callable below maturity value without notice by mail to the holder unless registered." The proposed amendment makes clear that the last part of the disclosure statement regarding call provisions for bearer bonds is necessary on confirmations only if the bonds are both callable and available in bearer form.
The proposed amendment also updates references to revised rule G-15(a) that are contained in rules G-15(c), on deliveries to customers, and G-33, on calculations.
Rule G-15. Confirmation, Clearance and Settlement of Transactions with Customers (a) Customer Confirmations. (i) (A) - (B) No change. (C) Securities descriptive information. The confirmation shall include descriptive information about the securities which includes, at a minimum: (1) No change. (2) Features of the securities. The following information, if applicable, regarding features of the securities: (a) Callable securities. If the securities are subject to call prior to maturity through any means, a notation of "callable" shall be included. This shall not be required if the only call feature applicable to the securities is a "catastrophe" or "calamity" call feature, such as one relating to an event such as an act of God or eminent domain, and which event is beyond the control of the issuer of the securities. The date and price of the next pricing call shall be included and so designated. Other specific call features are not required to be listed unless required by subparagraph (A)(5)(c)(ii) of this paragraph on computation and display of price and yield. If any specific call feature is listed even though not required by this rule, it shall be identified. If there are any call features in addition to the {first} *next* pricing call, disclosure must be made on the confirmation that "additional call features exist that may affect yield; complete information will be provided upon request;" (b) - (e) No change. (3) - (4) No change. (D) Disclosure statements: (1) The confirmation for zero coupon securities shall include a statement to the effect that "No periodic payments," and, if applicable, "callable below maturity value*," and, if callable and available in bearer form, "callable* without notice by mail to holder unless registered." (2) No change. (E) No change. (ii) - (vi) No change.
(b) No change. (c) Deliveries to Customers. Except as provided in section (d) below, a delivery of securities by a broker, dealer, or municipal securities dealer to a customer or to another person acting as agent for the customer shall, unless otherwise agreed by the parties or otherwise specified by the customer, be made in accordance with the following provisions: (i) Securities Delivered. (A) All securities delivered on a transaction shall be identical as to the *applicable* information set forth in {subparagraph (E) of} paragraph (a){(i) and, to the extent applicable, the information set forth in subparagraphs (A) and (E)of paragraph (a)(iii)} *of this rule*. All securities delivered shall also be identical as to the call provisions and the dated date of such securities. (B) CUSIP Numbers. (1) The securities delivered on a transaction shall have the same CUSIP number as that set forth on the confirmation of such transaction pursuant to the requirements of {subparagraph} *paragraph* (a) {(i)(F)} of this rule; provided, however, that for purposes of this item (1), a security shall be deemed to have the same CUSIP number as that specified on the confirmation (a) if the number assigned to the security and the number specified on the confirmation differ only as a result of a transportation or other transcription error, or (b) if the number specified on the confirmation been assigned as a substitute or alternative number for the number reflected on the security. (2) No change. (ii) Delivery Ticket. A delivery ticket shall accompany the delivery of securities. Such ticket shall contain the information set forth in {subparagraphs (A), (B), (D) (except in the case of transactions in zero coupon, compound interest and multiplier securities, in which case the maturity value shall be shown), (E) through (H), (L) and subparagraphs (A) through (E) and (G) through (J) of} paragraph (a){(iii)} * of this rule*. (iii) Units of Delivery. Delivery of bonds shall be made in the following denominations: (A) - (B) No change. Delivery of other municipal securities shall be made in the denominations specified on the confirmation as required pursuant to paragraph (a){(iii)} of this rule. (iv) - (xii) No change. (d) - (e) No change.
Rule G-33. Calculations (a) - (c) No change. (d) Standards of Accuracy; Truncation. (i) No change. (ii) Results of Computations. Results of computations shall be presented in accordance with the following: (A) - (B) No change. (C) Yields shall be truncated to four decimal places, and rounded to three decimal places, provided, however, that for purposes of confirmation display as required under rule G-15(a){(viii)(B)} yields accurate to the nearest .05 percentage points shall be deemed satisfactory. Numbers shall be rounded, where required, in the following manner: if the last digit after truncation is five or above, the preceding digit shall be increased to the next highest number, and the last digit shall be discarded. (e) No change.
May 28, 1996
[1] File No. SR-MSRB-96-3. Comments submitted to the Commission should refer to this file number.
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