Amendment Approved Concerning Disclosure of Designation Information to Syndicate Members

Amendment Approved Concerning Disclosure of Designation Information to Syndicate Members: Rule G-11(g)(iii)

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Amendment Approved

The amendment makes clear that all information about designations paid to syndicate and non-syndicate members is to be provided to each syndicate member and that the designation information must be expressed in total dollar amounts.

Questions about the amendment may be directed to Ronald W. Smith, Senior Legal Associate.

On April 28, 1999, the Securities and Exchange Commission approved an amendment to rule G-11, on sales of new issue municipal securities during the underwriting period.¹ The amendment makes clear that all information about designations paid to syndicate and non-syndicate members is to be provided to each syndicate member and that the designation information must be expressed in total dollar amounts. The amendment became effective upon approval.

On November 27, 1998, the Commission approved certain amendments to the Board’s syndicate practices rules.² The amendments revised several areas involving syndicate practices, including: issuer syndicate requirements, allocation of securities, designation information, take-down information and payment of designations.

After the amendments were approved, the Board received several inquiries from dealers concerning the amendment to rule G-11(g)(iii) that requires the managing underwriter to disclose to syndicate members, in writing, all available designation information to members within 10 business days following the date of sale and all information with the sending of the designation checks pursuant to rule G-12(k). Most of the inquiries concerned whether the requirement was to disclose to each syndicate member its own designation information or whether all members were to receive information about all the designations. On December 11, 1998, the Board published a notice on its Web site to clarify that the requirement is that all designation information be disclosed to each syndicate member.

There also were a number of questions raised about the kind of designation information that managers are required to disclose. Callers asked whether managers should disclose designations by total dollar amounts, bond amounts or both total dollar amounts and bond amounts. The Board believes the designation information that will be most useful to syndicate members is the total dollar amounts of the designations.

Another question raised by some callers was whether the disclosure of designation information to syndicate members would require disclosure of designations made to anyone other than syndicate members, e.g., selling group members, since it is not uncommon for selling group members to receive designations. These callers were concerned that, without disclosure to syndicate members of the designations made to non-syndicate members, it is obvious when the dollar amounts designated are totaled that the information is not complete. Since the intent of the Board in adopting the amendment to rule G-11(g)(iii) was to increase the disclosure of designation information, the Board believes the information disclosed should include all designations.

The amendment to rule G-11(g)(iii) addresses the questions that have been raised by amending the rule language to make clear that all information about designations paid to syndicate and non-syndicate members is to be provided to each syndicate member and that the designation information must be expressed in total dollar amounts.

(g) Designations and Allocations of Securities. The senior syndicate manager shall:

1. See Securities Exchange Act Release No. 41338 (April 28, 1999), 64 FR 23886 (May 4, 1999).

2. See Securities Exchange Act Release No. 40717 (November 27, 1998), 63 FR 67157 (December 4, 1998).