(Volume 15, Number 3) October 1995
Route To: Manager, Muni Department Underwriting Public Finance Compliance
Proposed Rule Filed Proposed rule G-38 requires dealers (1) to have written agreements with certain individuals who are used by a dealer, directly or indirectly, to obtain or retain municipal securities business (consultants); and (2) to disclose such consulting arrangements directly to issuers and to the public through disclosure to the Board.
Questions concerning the proposed rule may be directed to Ronald W. Smith, Legal Associate.
On September 28, 1995, the Board filed with the Securities and Exchange Commission (Commission) proposed rule G-38, on consultants. The proposed rule requires dealers (1) to have written agreements with certain individuals who are used by a dealer, directly or indirectly, to obtain or retain municipal securities business (consultants); and (2) to disclose such consulting arrangements directly to issuers and to the public through disclosure to the Board. In order to consolidate dealers' disclosure requirements concerning consultants, the Board also is proposing to delete from rule G-37, on political contributions and prohibitions on municipal securities business, the current disclosure requirements concerning consultants. In addition, the Board is proposing to amend Form G-37 to merge the quarterly reporting requirements of rule G-37 and new rule G-38 into a single form Form G-37/G-38. Finally, the Board is proposing to amend rules G-8 and G-9, on recordkeeping and record retention, respectively. Proposed rule G-38 and the amendments to rules G-37, G-8 and G-9, as well as new Form G-37/G-38, will become effective 60 days after approval by the Commission. Persons wishing to comment on the proposed rule or the amendments should comment directly to the Commission.[1]
The Board is concerned about dealers' increasing use of consultants to obtain or retain municipal securities business.
While the Board believes that in many instances the use of consultants is appropriate, it believes that, in a number of instances, the use of consultants may be in response to limitations placed on dealer activities by rule G-37 and rule G-20, on gifts and gratuities. While both rules G-37 and G-20 prohibit dealers from doing indirectly what they are precluded from doing directly, indirect activities often are difficult to prove. Although rule G-37 currently requires that certain information about consultant arrangements be disclosed on Form G-37, the Board believes that additional information about such arrangements should be made available to issuers and the public in order to maintain the integrity of the market. Furthermore, the Board believes that requirements regarding consultants should be embodied in a separate rule in order to highlight the importance of this information and to facilitate its disclosure to, and accessibility by, the municipal securities market and the public.
In April 1995, the Board published for comment draft rule G-38 (April 1995 draft rule).[2] The April 1995 draft rule required dealers to have written agreements with consultants and to disclose such arrangements to issuers and to the public through disclosure to the Board. It defined the term "consultant" very broadly, and included, among others, persons that acted as "finders" for municipal securities business or that lobbied state and local government officials. The term also included persons who engaged in legal, accounting or financial advisory services if such persons were engaged, even in part, because they could assist a dealer in efforts to obtain or retain municipal securities business with an issuer, as well as persons engaged by a dealer at the request or direction of the issuer (e.g., underwriter's counsel).
While most of the commentators supported the Board's goal of making additional information on consultants available to the market, many expressed concern that the April 1995 draft rule's definition of consultant was too broad and included a number of categories of persons who did not perform "traditional" consulting roles or services. The Board carefully considered these and other concerns and suggestions expressed by the commentators, and adopted and filed with the Commission proposed rule G-38. The proposed rule differs in certain respects from the April 1995 draft rule, particularly with regard to the definition of consultant. By making such changes,the Board believes that the proposed rule effectively addresses concerns raised by the commentators without sacrificing the Board's goal of making information about consultants available to issuers and the public.
As noted above, many commentators were concerned that the April 1995 draft rule's definition of consultant was too broad.[3] Several commentators noted that the term should not apply to professional service providers, especially those who are not actively engaged in helping the dealer obtain or retain municipal securities business, such as attorneys, accountants and engineers. Certain of these commentators suggested that the definition should reflect the "essential elements" of consulting arrangements: direct or indirect communication with an issuer by the consultant on the dealer's behalf in exchange for compensation. In response to these concerns and recommendations, the Board modified its definition of consultant.
The proposed rule now defines consultant as any person used by a dealer to obtain or retain municipal securities business through direct or indirect communication by such person with an issuer on the dealer's behalf where the communication is undertaken by such person in exchange for, or with the understanding of receiving, payment from the dealer or any other person.[4] The definition specifically excludes "municipal finance professionals," as that term is defined in rule G-37(g)(iv), because such individuals are covered by the requirements of rule G-37. The definition also excludes any person whose sole basis of compensation from the dealer is the actual provision of legal advice, accounting or engineering assistance in connection with the municipal securities business that the dealer is seeking to obtain or retain. The exclusion would apply, for example, to a lawyer retained to conduct a legal analysis on a particular transaction contemplated by the dealer, or to review local regulations; an accountant retained to conduct a tax analysis or to scrutinize financial reports; or an engineer retained to perform a technical review or feasibility study. The exemption is intended to ensure that professionals who are engaged by the dealer to perform substantive work in connection with municipal securities business are not brought within the definition of consultant. However, any attorney or other professional used by the dealer as a "finder" for municipal securities business would be considered a consultant under the proposed rule.
Finally, a number of commentators were concerned about the inclusion in the April 1995 draft rule's definition of consultant of persons who are engaged by a dealer at the request or direction of the issuer (e.g., underwriter's counsel). These commentators stated that such persons are not,in fact, consultants because they are imposed on dealers and do not assist dealers in obtaining or retaining municipal securities business. The Board agrees with the commentators, and has deleted such persons from the proposed rule's definition of consultant. However, the Board continues to believe that the subject of issuer involvement in the underwriting process merits review, and will address this subject, including the question of requiring disclosure of issuer-designated persons, at a future time.
The requirement of a written agreement embodied in proposed rule G-38 is similar to the April 1995 draft rule's requirement. The proposed rule requires dealers who use consultants to evidence the consulting arrangement in writing (referred to as a "Consultant Agreement"), and that, at a minimum, the writing must include the name, company, role and compensation arrangement of each consultant used by the dealer. Such written agreements must be entered into before the consultant engages in any direct or indirect communication with an issuer on the dealer's behalf.
Certain commentators were opposed to the requirement of a written agreement. The Board, however, believes that this requirement is necessary to ensure that dealers are aware of arrangements that their branch offices or local personnel may have with consultants. The requirement also will assist dealers in developing mechanisms to monitor such arrangements and assist enforcement agencies to inspect for compliance with rule G-38.
A number of commentators also expressed concern over the timing of this requirement, as set forth in the April 1995 draft rule (i.e., a written agreement must be entered into before the consultant provides any services on behalf of the dealer). Certain commentators noted that this requirement could deprive dealers of substantive legal advice or interfere with a dealer's ability to conduct business. The Board believes that by limiting the scope of the definition of consultant and by revising the timing of the agreement (i.e., before any communication by the consultant with an issuer on the dealer's behalf), it has ameliorated many, if not all, of these concerns.
The April 1995 draft rule required dealers to disclose to issuers in writing all consultants with which they entered into a Consultant Agreement in connection with an effort to obtain or retain municipal securities business with that issuer. Such disclosure was required when the dealer became involved in the issuer's process for selecting a dealer for municipal securities business. Most commentators agreed that disclosure to issuers of consulting arrangements was appropriate. Some commentators noted, however, that tying this requirement only to the consultants with which the dealer has entered into a Consultant Agreement may present timing issues and the possibility of manipulation. Some commentators also were concerned that the timing of disclosures to issuers was unclear, and recommended that dealers be required to make such disclosures before business is awarded.
Proposed rule G-38 requires each dealer to disclose to an issuer with which it is engaging or seeking to engage in municipal securities business, in writing, information on consulting arrangements relating to such issuer. The written disclosure must include, at a minimum, the name, company, role and compensation arrangement with the consultant or consultants. Dealers are required to make such written disclosures prior to the issuer's selection of any dealer in connection with the municipal securities business sought, regardless of whether the dealer making the disclosure ultimately is the one to obtain or retain that business. Thus, while dealers have an obligation to disclose their consulting arrangements to all issuers from which they are seeking municipal securities business, they have more leeway in the timing of their disclosures as long as the disclosure is made before the issuer selects a dealer for the municipal securities business sought. However, the Board cautions dealers that this timeframe represents the last possible opportunity to comply with the disclosure requirement, and therefore strongly recommends that dealers make such disclosures as early as possible. For example, a dealer seeking certain municipal securities business may not be aware of the issuer's selection of another dealer for that business. So too, an issuer may select a pool or group of dealers from which the issuer intends to choose underwriters for particular issues over the next few years. If a dealer has used a consultant to help secure any of this business, the Board believes that dealers should make their required disclosures to issuers as soon as possible to ensure that the disclosure is received by the issuer prior to the selection of any dealer for the municipal securities business.
Rule G-37 currently requires dealers to record and report information on consultants only in connection with particular municipal securities business obtained or retained, at least in part, by the consultant's activities. The April 1995 draft rule required dealers to report to the Board on all consultants, not just those connected with particular municipal securities business obtained by the dealer. Most commentators agreed with the requirement to disclose such information to the Board but suggested that, for ease of compliance, all consultant requirements be included in one rule -- either rule G-37 or new rule G-38.
The proposed rule's requirement concerning disclosure to the Board is similar to the April 1995 draft rule. The proposed rule requires dealers to submit to the Board, on a quarterly basis, reports of all consultants used by the dealer. For each consultant, dealers must report, in the prescribed format, the consultant's name, company, role and compensation arrangement, as well as the dollar amount of any payment made to the consultant during the quarterly reporting period. If any payment made during the reporting period is related to the consultant's efforts on behalf of the dealer which resulted in particular municipal securities business, whether the municipal securities business was completed during that or a prior reporting period, then the dealer must separately identify that business and the dollar amount of the payment. In addition, as long as the dealer continues to use the consultant to obtain or retain municipal securities business (i.e., has a continuing arrangement with the consultant), the dealer must report information concerning such consultant every quarter, whether or not compensation is paid to the consultant during the reporting period. The Board believes that the reporting of these continuing consulting arrangements each quarter will assist enforcement agencies and the public in their review of such arrangements.
For ease of compliance and reporting, the Board has determined to delete the current reporting requirements regarding consultants from rule G-37. It also has determined to merge the reporting requirements for both rules into a single form Form G-37/G-38. Dealers must submit two copies of such reports on new Form G-37/G-38.[5] The quarterly due dates are the same as the due dates currently required under rule G-37 (i.e., within 30 calendar days after the end of each calendar quarter, which corresponds to each January 31, April 30, July 31, and October 31). Finally, consistent with current rule G-37, dealers are required to submit these reports to the Board by certified or registered mail, or some other equally prompt means that provides a record of sending.[6] The Board will then make these documents available to the public for inspection and photocopying at its Public Access Facility in Alexandria, Virginia, and for review by agencies charged with enforcement of Board rules.
To facilitate compliance with, and enforcement of, proposed rule G-38, the Board also proposes to amend existing rules G-8 and G-9, concerning recordkeeping and record retention, respectively. The proposed amendments to rule G-8 require dealers to maintain: (i) a listing of the name, company, role and compensation arrangement with each consultant; (ii) a copy of each Consultant Agreement; (iii) a listing of the compensation paid in connection with each Consultant Agreement; (iv) where applicable, a listing of the municipal securities business obtained or retained through the activities of consultants; (v) a listing of the issuers and a record of disclosures made to such issuers concerning consultants used by the dealer to obtain or retain municipal securities business with each such issuer; and (vi) the date of termination of any consultant arrangement. The amendment to rule G-9 requires dealers to maintain these records for a six-year period.
September 28, 1995
*Rule G-38. Consultants*
*(a) Definitions* *(i) The term "consultant" means any person used by a broker, dealer or municipal securities dealer to obtain or retain municipal securities business through direct or indirect communication by such person with an issuer on behalf of such broker, dealer or municipal securities dealer where the communication is undertaken by such person in exchange for, or with the understanding of receiving, payment from the broker, dealer or municipal securities dealer or any other person; provided, however, that the following persons shall not be considered consultants for purposes of this rule: (A) a municipal finance professional of the broker, dealer or municipal securities dealer; and (B) any person whose sole basis of compensation from the broker, dealer or municipal securities dealer is the actual provision of legal, accounting or engineering advice, services or assistance in connection with the municipal securities business that the broker, dealer or municipal securities dealer is seeking to obtain or retain.*
*(ii) The term "issuer" shall have the same meaning as in rule G-37(g)(ii).*
*(iii) The term "municipal finance professional" shall have the same meaning as in rule G-37(g)(iv).*
*(iv) The term "municipal securities business" shall have the same meaning as in rule G-37(g)(vii).*
*(v) The term "payment" shall have the same meaning as in rule G-37(g)(viii).*
*(b) Written Agreement. Each broker, dealer or municipal securities dealer that uses a consultant shall evidence the consulting arrangement by a writing setting forth, at a minimum, the name, company, role and compensation arrangement of each such consultant ("Consultant Agreement"). Such Consultant Agreement must be entered into before the consultant engages in any direct or indirect communication with an issuer on behalf of the broker, dealer or municipal securities dealer.*
*(c) Disclosure to Issuers. Each broker, dealer or municipal securities dealer shall submit in writing to each issuer with which the broker, dealer or municipal securities dealer is engaging or is seeking to engage in municipal securities business, information on consulting arrangements relating to such issuer, which information shall include the name, company, role and compensation arrangement of any consultant used, directly or indirectly, by the broker, dealer or municipal securities dealer to attempt to obtain or retain municipal securities business with each such issuer. Such information shall be submitted to the issuer prior to the selection of any broker, dealer or municipal securities dealer in connection with such municipal securities business.*
*(d) Disclosure to Board. Each broker, dealer and municipal securities dealer shall submit to the Board by certified or registered mail, or some other equally prompt means that provides a record of sending, and the Board shall make public, reports of all consultants used by the broker, dealer or municipal securities dealer during each calendar quarter. Two copies of the reports must be submitted to the Board on Form G-37/G-38 within thirty (30) calendar days after the end of each calendar quarter (these dates correspond to January 31, April 30, July 31, and October 31). Such reports shall include, for each consultant, in the prescribed format, the consultant's name, company, role and compensation arrangement. In addition, such reports shall indicate the dollar amount of payments made to each consultant during the report period and, if any such payments are related to the consultant's efforts on behalf of the broker, dealer or municipal securities dealer which resulted in particular municipal securities business, then that business and the related dollar amount of the payment must be separately identified.*
Rule G-37. Political Contributions and Prohibitions on Municipal Securities Business
(a) through (d) No change.
(e)(i) Each broker, dealer or municipal securities dealer shall submit to the Board, by certified or registered mail, or some other equally prompt means that provides a record of sending, and the Board shall make public, reports on contributions to officials of issuers and on payments to political parties of states and political subdivisions that are required to be recorded pursuant to rule G-8(a)(xvi). Such reports shall include information concerning the amount of contributions to officials of issuers and payments to political parties of states and political subdivisions *and an indication of the contributor category of each contribution or payment* made by:
(A) - (D) No change.
Such reports also shall include information on municipal securities business engaged in and certain other information specified in this section (e), as well as other identifying information as may be determined by the Board from time to time {in accordance with Board rule G-37 filing procedures.}
(ii) *Two copies of the* {R}*r*eports referred to in paragraph (i) of this section (e) must be submitted to the Board on Form G-37*/G-38* {in accordance with Board rule G-37 filing procedures, quarterly with due dates determined by the Board}, *within thirty (30) calendar days after the end of each calendar quarter (these dates correspond to January 31, April 30, July 31 and October 31),* and must include, in the prescribed format, by state, the following information on contributions to each official of an issuer and payments to each political party of a state or political subdivision made and municipal securities business engaged in during the reporting period: (A) name and title (including any city/county/state or political subdivision) of each official of an issuer and political party receiving contributions or payments; (B) {total number and dollar amount of contributions or payments made by} *contribution or payment amount made and the contributor category of* the persons and entities described in paragraph (i) of this section (e); and (C) such other identifying information required by Form G-37*/G-38*. Such reports also must include a list of issuers with which the broker, dealer or municipal securities dealer has engaged in municipal securities business, along with the type of municipal securities business {and the name, company, role and compensation arrangement of any person, other than a municipal finance professional, employed by the broker, dealer or municipal securities dealer to obtain or retain municipal securities business with such issuers.}
(f) The Board will accept additional information related to contributions made to officials of issuers and payments to political parties of states and political subdivisions voluntarily submitted by brokers, dealers, or municipal securities dealers or others provided that such information is submitted in accordance with {Board rule G-37 filing procedures} *section (e) of this rule*.
(g) through (i) No change
__________
{Rule G-37 Filing Procedures} {Each dealer is required to file two copies of Form G-37. Each dealer is required to file Form G-37 within thirty (30) calendar days after the end of each calendar quarter. (These dates correspond to January 31, April 30, July 31, and October 31).}
Rule G-8. Books and Records to be Made by Brokers, Dealers and Municipal Securities Dealers (a) Description of Books and Records Required to be Made. Except as otherwise specifically indicated in this rule, every broker, dealer and municipal securities dealer shall make and keep current the following books and records, to the extent applicable to the business of such broker, dealer or municipal securities dealer:
(i) through (xv) No change.
(xvi) Records Concerning Political Contributions and Prohibitions on Municipal Securities Business Pursuant to Rule G-37. Records reflecting:
(A) through (C) No change.
(D) a listing of the issuers with which the broker, dealer or municipal securities dealer has engaged in municipal securities business, along with the type of municipal securities business engaged in, during the current year and separate listings for each of the previous two calendar years {Where applicable, a listing of the name, company, role and compensation arrangement of any person employed by the broker, dealer or municipal securities dealer to obtain or retain municipal securities business with such issuers also shall be made};
(E) through (I) No change.
(xvii) No change.
(xviii) *Records Concerning Consultants Pursuant to Rule G-38. Each broker, dealer and municipal securities dealer shall maintain: (i) a listing of the name, company, role and compensation arrangement of each consultant, (ii) a copy of each Consultant Agreement referred to in rule G-38(b); (iii) a listing of the compensation paid in connection with each such Consultant Agreement; (iv) where applicable, a listing of the municipal securities business obtained or retained through the activities of consultants; (v) a listing of issuers and a record of disclosures made to such issuers, pursuant to rule G-38(c), concerning consultants used by the broker, dealer or municipal securities dealer to obtain or retain municipal securities business with each such issuer; and (vi) the date of termination of any consultant arrangement.*
(b) through (e) No change.
(f) Compliance with Rule 17a-3. Brokers, dealers and municipal securities dealers other than bank dealers which are in compliance with rule 17a-3 of the Commission will be deemed to be in compliance with the requirements of this rule, provided that the information required by subparagraph (a)(iv)(D) of this rule as it relates to uncompleted transactions involving customers; paragraph (a)(viii); paragraph (a)(xi); paragraph (a)(xii); paragraph (a)(xiii); paragraph (a)(xiv); paragraph (a)(xv); paragraph (a)(xvi); {and} paragraph (a)(xvii);*and paragraph (a)(xviii)* shall in any event be maintained.
Rule G-9. Preservation of Records
(a) Records to be Preserved for Six Years. Every broker, dealer and municipal securities dealer shall preserve the following records for a period of not less than six years:
(i) through (ix) No change.
*(x) the records required to be maintained pursuant to rule G-8(a)(xviii).*
(b) through (g) No change.
-DRAFT-
FORM G-37/G-38
Name of dealer: ______________________________________________
Report period: _______________________________________________
I.CONTRIBUTIONS made to issuer officials (list by state)
State Complete name, title Contribution by each (including any city/county/ contributor category state or other political (i.e., dealer, dealer subdivision) of issuer controlled PAC, muni- official cipal finance profes- sional controlled PAC, municipal finance professionals and executive offi- cers). For each con- tribution, list con- tribution amount and contributors category (For example, $500 contribution by exe- cutive officer)
II. PAYMENTS made to political parties of states or political subdivisions (list by state)
State Complete name (including Payments by each con- any city/county/state or tributor category other political subdivi- (i.e., dealer, dealer sion ) of political party controlled PAC, muni- cipal finance profes- sional controlled PAC, municipal finance professionals and executive offi- cers). For each pay- ment, list payment amount and contribu- tor category (For example, $500 pay- ment by executive officer)
FORM G-37/38
III. ISSUERS with which dealer has engaged in municipal securities business (list by state)
State Complete name of issuer Type of municipal and city/county securities business (negotiated under- writing, private placement, financial advisor, or remar- keting agent)
_________________________________________________________________
FORM G-37/G-38
IV. CONSULTANTS (specific information for each consultant must be attached)
NAME OF CONSULTANT: CONSULTANT COMPANY NAME:
________________________________ ______________________________
________________________________ ______________________________
________________________________ ______________________________
________________________________ ______________________________
________________________________ ______________________________
________________________________ ______________________________
________________________________ ______________________________
________________________________ ______________________________
________________________________ ______________________________
Signature: ________________________________ Date:______________ (must be officer of dealer)
Name: ___________________________________________________________
Address: ________________________________________________________
_________________________________________________________________
_________________________________________________________________
Phone: __________________________________________________________
Submit two completed forms quarterly by due date (specified by the MSRB) to:
MUNICIPAL SECURITIES RULEMAKING BOARD 1640 King Street Suite 300 Alexandria, Virginia 22314 _________________________________________________________________
ATTACHMENT TO FORM G-37/G-38 (submit a separate attachment sheet for each consultant listed under IV)
Name of Consultant: _____________________________________________
Consultant Company Name: ________________________________________
Role to be Performed by Consultant: _____________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Compensation Arrangement: _______________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Total Dollar Amount Paid to Consultant during Reporting Period:
_________________________________________________________________
Dollar Amounts Paid to Consultant Connected with Particular Municipal Securities Business (Each such business and amount paid must be separately identified):__________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
-DRAFT-
The purpose of these instructions is to assist dealers in submitting a complete and correct Form G-37/G-38. Rule G-37 requires dealers to submit to the Board certain summary information on their municipal securities business, as well as contributions to issuer officials and payments to political parties by the dealer, municipal finance professionals, executive officers, and PACs controlled by dealers and municipal finance professionals. "Municipal securities business" is defined in rule G-37 to mean: (1) negotiated underwriting (if the dealer was a manager or syndicate member); (2) private placement; (3) financial advisor to an issuer (on a negotiated bid basis); and (4) remarketing agent (on a negotiated bid basis). Rule G-38 requires dealers to submit to the Board information on all consultants, defined in rule G-38(a) as any person used by a dealer to obtain or retain municipal securities business through direct or indirect communication by such person with an issuer on behalf of such dealer where such communication is undertaken by such person in exchange for, or with the understanding of receiving, payment from such dealer or any other person; provided, however, that the following persons shall not be considered consultants for the purposes of rule G-38: (A) a municipal finance professional of the dealer; and (B) any person whose sole basis of compensation from the dealer is the actual provision of legal, accounting or engineering advice, services or assistance in connection with the municipal securities business that the dealer is seeking to obtain or retain.
It is important to note that Form G-37/G-38 must be submitted to the Board if ANY one of the following occurred: - reportable political contributions or payments to political parties were made during the reporting period; - the dealer engaged in municipal securities business during the reporting period; - the dealer used consultants during the reporting period (i.e., new or continuing relationships with consultants).
Dealers are not required to submit a Form G-37/G-38 only if the dealer had no reportable political contributions or payments to political parties, the dealer did not engage in municipal securities business during the reporting period, and the dealer did not use consultants during the reporting period.
Rules G-37 and G-38 require dealers to file two copies of Form G-37/G-38, and to submit such forms within 30 calendar days after the end of each calendar quarter. These filing dates are January 31, April 30, July 31 and October 31. The forms must be submitted by certified or registered mail or some other equally prompt means that provides the dealer with a record of sending. Submissions by fax will not be accepted.
It is also important to note that two copies of Form G-37/G-38 must be submitted to the Board and at least one of those copies must contain an original signature.
Indicate the name of the dealer. - Rule A-15(c), on notification of name or address change, requires dealers to notify the Board promptly of any name or address change.
Indicate the quarterly period for the form being submitted. - Dealers must use the calendar quarters for the reporting period; it is not acceptable to create a different time period and submit information only pertaining to that time.
Contributions required to be reported pursuant to rule G-37 must be listed by state.
Each official receiving the contribution must be listed separately, by state.
For each contribution, the contribution amount and contributor category must be listed. The contributor categories are: dealer, dealer controlled PAC, municipal finance professional controlled PAC, municipal finance professionals and executive officers. A sample listing would be:
VA MARY JONES, CANDIDATE $500 CONTRIBUTION BY FOR GOVERNOR EXECUTIVE OFFICER
- Rule G-37 does not require that dealers list the names of municipal finance professionals and executive officers on Form G-37/G-38.
- "Contribution" is a defined term in rule G-37(g)(i). Rule G-37 does not require dealers to list other gifts or gratuities on Form G-37/G-38.
If there were no contributions required to be reported pursuant to rule G-37 during the reporting period, please indicate "none."
II. PAYMENTS MADE TO POLITICAL PARTIES OF STATES OR POLITICAL SUBDIVISIONS
Payments required to be reported pursuant to rule G-37 must be listed by state.
Each state or local political party receiving the payment must be listed separately, by state. - Indicate the complete name of the political party, including any city/county/state or other political subdivision.
For each payment, the payment amount and contributor category must be listed. A sample listing would be:
VA STATE REPUBLICAN $500 PAYMENT BY EXECUTIVE PARTY OFFICER
III. ISSUERS WITH WHICH THE DEALER HAS ENGAGED IN MUNICIPAL SECURITIES BUSINESS
List, by state, the complete name of the issuer and include the city and county of the issuer in which the dealer engaged in municipal securities business.
List the type of municipal securities business engaged in with that issuer. "Municipal securities business" is defined in rule G-37(g)(vii) to mean: (1) negotiated underwriting (if the dealer was a manager or syndicate member); (2) private placement; (3) financial advisor to an issuer (on a negotiated bid basis);, and (4) remarketing agent (on a negotiated bid basis).
A sample listing would be:
VA SMITH COUNTY NEGOTIATED UNDERWRITING HOUSING AUTHORITY
In determining when to list municipal securities business, a guideline is:
- for negotiated underwritings, indicate the business at least by the settlement date if within the reporting period;
- for remarketing agent activities, indicate the business when there is an initial agreement do not continue to list the remarketings;
- for financial advisory services, indicate the business when an agreement is reached to provide the services (rule G-23, on activities of financial advisors, requires dealers to have a written agreement with issuers); do not continue to list an on-going financial advisory arrangement with an issuer unless the settlement date for a new issue on which the dealer acted as financial advisor was during the reporting period;
- for private placements, indicate the business at least by the settlement date if within the reporting period.
- Rule G-37 does not require dealers to indicate on Form G-37/G-38 the competitive business in which they engaged.
Rule G-37 does not require dealers to indicate those negotiated underwritings in which they were selling group members.
If the dealer did not engage in any municipal securities business during the reporting period, please indicate "none."
List the name of each consultant along with the consultant company name. - "Consultant" is a defined term in rule G-38. Do not list municipal finance professionals employed by the dealer.
Specific information about EACH consultant listed must be described in separate attachment sheets to Form G-37/G-38. - If a dealer has a continuing relationship with a consultant, that consultant must be listed each quarter even if the consultant received no compensation from the dealer.
If the dealer did not use, or have a continuing relationship with, a consultant during the reporting period, please indicate "none."
ATTACHMENT TO FORM G-37/G-38 List the name of the consultant.
List the consultant company name.
Describe the role to be performed by the consultant. - Include the state or geographic area in which the consultant is working on behalf of the dealer.
Describe the compensation arrangement with the consultant.
Indicate the total dollar amount paid to the consultant during the reporting period. - Indicate the dollar amounts paid to the consultant connected with particular municipal securities business. - Each such business and amount paid must be separately identified.
SIGNATURE, DATE, NAME, ADDRESS, PHONE An officer of the dealer must sign and date Form G-37/G-38. - An officer of the dealer refers to a corporate officer. The fact that someone is a compliance officer does not necessarily mean that person is a corporate officer. - One of the two forms submitted to the Board must contain an original signature. Until at least one form with an original signature is received, the Board's records will not indicate that the dealer has complied with the filing requirements.
Indicate the date the form was signed.
Indicate on the Name line the name of the officer who signed the form.
Include the dealer's address and phone number.
[1] Comments sent to the Commission should refer to SEC File No. SR-MSRB-95-15.
[2] MSRB Reports, Vol. 15, No. 1 (April 1995) at 3-10.
[3] The April 1995 draft rule defined the term consultant as "any person who is used by a broker, dealer or municipal securities dealer for the purpose of seeking to obtain or retain municipal securities business, including any person performing services for such broker, dealer or municipal securities dealer at the request or direction of an issuer; provided, however, that no employee or partner of such broker, dealer or municipal securities dealer shall be considered a consultant for purpose of this rule."
[4] "Person" is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 as "a natural person, company, government, or political subdivision, agency, or instrumentality of a government."
"Municipal securities business" has the same meaning as in rule G-37(g)(vii), i.e., (A) the purchase of a primary offering (as defined in rule A-13(d) of municipal securities from the issuer on other than a competitive bid basis (i.e., negotiated underwriting); or (B) the offer or sale of a primary offering of municipal securities on behalf of any issuer (i.e., private placement); (C) the provision of financial advisory or consultant services to or on behalf of an issuer with respect to a primary offering of municipal securities on other than a competative bid basis; or (D) the provision of remarketing agent services to or on behalf of an issuer with respect to a primary offering of municipal securities on other than a competitive bid basis.
"Payment" has the same meaning as in rule G-37(g)(viii), i.e., any gift , subscription, loan, advance, or deposit of money or anything of value.
[5] The new Form G-37/G-38 is reprinted after this notice, along with instructions for filing the Form. In addition to the new rule G-38 consultants reporting requirements, Form G-37/G-38 includes revisions to the rule G-37 political contribution reporting requirements. Such revisions include, for each contribution, a required notation of the catagory of the contributor (e.g., municipal finance professional or executive officer) and the amount of the contribution, as well as a seperate section for the reporting of "payments" to political parties distinct from "contributions" to issuer officials.
[6] For ease of compliance, the Board has included the Rule G-37 Filing Procedures within the language of rule G-37, and has included the Rule G-38 Filing Procedures within the language of the new rule G-38.
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