WASHINGTON — Groups representing broker-dealers and issuers have sent a joint letter to the Securities and Exchange Commission complaining the Municipal Securities Rulemaking Board was seeking SEC approval for an amendment to proposed rule changes without public comment — a charge an MSRB spokesperson denied.
The Securities Industry and Financial Markets Association and the Government Finance Officers Association co-authored the Aug. 29 letter, which did not describe the alleged amendment to MSRB proposed changes to Rules G-8 on books and records, G-11 on primary offering practices, and G-32 on primary offering disclosure on retail order periods.
"It is our understanding that an amendment to the ... proposal has been sent to the SEC by the MSRB for your consideration, and we are concerned that this amended proposal may be currently under consideration for immediate effectiveness without public input," the letter states.
Under the Securities Act of 1934, the SEC is required to give stakeholders a chance to comment on proposed rule changes except in a few instances, such as when an amendment is truly technical and non-controversial. In those instances, as the SIFMA/GFOA letter points out, an amendment can be approved for immediate effectiveness and put out for comment after the fact. The SEC could choose to withdraw a proposal made immediately effective if it subsequently receives negative comment and agrees with those comments.
But MSRB communications director Jennifer Galloway said the board has not sent the SEC any amendment to those proposed rule changes.
Certain provisions of the MSRB's June proposal have been controversial. The proposal would impose specific obligations on a deal's senior syndicate manager to disseminate to the syndicate and selling group members detailed information about the term retail, and require dealers to capture certain additional information in connection with orders placed under a retail order period to ensure that such orders are from bona fide retail customers. The MSRB would let issuers decide what retail means under the proposed changes.
However, non-dealer financial advisors have urged the MSRB to define the term, warning that otherwise underwriters will tell the issuers how to define it.
SIFMA and GFOA are concerned an amendment to the proposal might be controversial as well.
"As you know from previous comment letters on this matter, there are aspects of the proposed rule that are controversial, and we believe those sections have undergone significant and material amendment by the MSRB that substantially impact numerous entities in the municipal securities market, including broker dealers and issuers," the letter states.
The MSRB said Friday that no amendment has been filed. But the groups say board staff could have talked with SEC officials about an amendment without filing it. Galloway said that the board will file an amendment in the coming days, but that it will be publicly available.
The MSRB declined to reveal the details of the amendment, but has filed for two extensions to allow for more time before the SEC takes action on the retail order proposal The current extension, filed Aug. 28, expires Sept. 6. Galloway said the extensions are procedural, and that the MSRB's amendment to the retail order period will be filed prior to Sept. 6.
