MSRB Seeks Primary Disclosure Start

WASHINGTON - The Municipal Securities Rulemaking Board yesterday asked the Securities and Exchange Commission to approve rule changes that would allow it to begin fully operating primary market disclosure and trade price transparency systems on its EMMA site around May 11, culminating years of work to move to an all-electronic system for the primary market.

If approved, the Electronic Municipal Market Access site, which has been operating as a pilot since last March, would become the "official public distribution channel" for preliminary and final official statements, advance refunding and escrow documents, and other information such as price data, the board said. Individual submissions would be available on the site for free or in a real-time subscription stream for $20,000 a year.

"This is really the moment we have been waiting for," Ronald Stack, chairman of the MSRB and managing director and head of public finance at Barclays Capital, said in a statement. "To say that we are prepared to provide a complete, all-electronic system for investors to obtain disclosure documents and price information on municipal bonds, for free, demonstrates how committed we are to our investor protection mandate."

Under the proposal - which has been in the works since at least July 2006 - the MSRB would amend and consolidate its Rules G-32 on disclosure for new issues and G-36 on official statements by moving some of G-36's submission requirements into G-32 and then eliminate the remaining portions of G-36.

It also would provide transitional submission requirements and amend certain record-keeping requirements to establish an "access-equals-delivery" standard for electronic OS dissemination. Under an access-equals-delivery standard, dealers would be able to post OS' in electronic format in lieu of sending them to investors in paper form.

Market participants, including the Securities Industry and Financial Markets Association, welcomed the filing and indicated that they would probably soon send the SEC comments on it.

In an interview, Leslie Norwood, managing director and associate general counsel at SIFMA, noted that as part of the proposal, the board will require dealers to submit basic information about each primary market transaction under a revised Form G-32.

But she said SIFMA hopes that the MSRB will coordinate "straight-through processing" of that information with the Depository Trust & Clearing Corp. - which is operating the New Issue Information Dissemination System - to ensure that dealers do not have to submit the information twice, in both the Form G-32 sent to the board and in NIIDS submissions sent to DTCC.

NIIDS is designed to improve the timeliness and accuracy of information about new muni securities that is submitted to market participants.

"The more the systems talk and pass electronic information in a straight-through manner, the more efficiency there is in the system and the less errors there are," Norwood said.

In its nearly 500-page filing with the SEC, the board notes briefly that straight-through processing is one of its long-term goals.

Under the revised Rule G-32, underwriters generally would be required to submit OS' within one business day after receipt from the issuer but by no later than the closing date for the bond offering. Currently, the timing of submissions does not always ensure that OS' are available by the closing date.

If no OS is prepared for an offering that is exempt from the SEC's Rule 15c2-12 on disclosure, such as small issues or private placements, the underwriter would be required to make note of that on EMMA, along with any preliminary OS, by the closing date.

Underwriters would be required under the revised G-32 to submit amendments to official statements and advance refunding documents during the "primary offering disclosure period" within one business day of receipt from the issuer. In addition, they would be required to submit "prompt notice" of any cancellation of an offering for which a document or information has already been submitted to EMMA. If only a portion of an offering is cancelled, the underwriter's submission would have to be corrected by the closing date.

The rule changes would require that all submissions be made in PDF (portable document file) format. Beginning Jan. 1, 2010, all submissions must be word-searchable PDFs. The board encourages all underwriters to submit OS' and other documents as a single file, but permits submissions as multiple files "as an accommodation for those situations where technical or other difficulties preclude or substantially impair the production and submission" of the file.

The MSRB first floated the idea of establishing access equals delivery as an extension of its Municipal Securities Information Library system in 2006. Though it has been made moot by the EMMA pilot, MSIL continues to collect official statements and advance refunding documents in paper and electronic form from underwriters. About two-thirds of the documents the board receives are already in electronic form, a spokeswoman said.

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