The Municipal Securities Rulemaking Board is seeking input on draft amendments to an MSRB rule that would modernize dealer disclosure obligations in connection with primary offerings of municipal fund securities – including those associated with 529 savings plans – by ending a default physical delivery requirement.
The MSRB on Thursday published a request for comment notice concerning draft amendments to MSRB Rule G-32. The draft amendments would replace the current requirement for physical delivery by dealers of disclosure documents for municipal fund securities offerings with an electronic access standard.
Unlike traditional muni securities like bonds and notes that constitute debt securities of a municipal issuer, municipal fund securities typically represent units in pooled investment funds of a trust set up by state or local governmental entities. Examples of municipal fund securities include investments in certain 529 savings plans, ABLE programs and local government investment pools.
The draft amendments to Rule G-32 would extend to municipal fund securities the current standard for access to official statements for municipal debt securities through the MSRB's Electronic Municipal Market Access website, the RFC notice said.
"Updating and harmonizing the delivery method of disclosure documents for municipal fund securities with MSRB's current access equals delivery standard for bonds and other municipal debt securities aligns with our goal of ensuring MSRB rules are consistent with the evolution of the market and current practices," MSRB Chief Regulatory and Policy Officer Ernesto Lanza said in a Sept. 10 MSRB press release.
The MSRB regulates dealers acting as underwriters of municipal fund securities – often called "distributors" – as well as other dealers selling such securities, the RFC notice said. Dealers effecting municipal fund securities transactions are subject to Rule G-32, which aims to ensure investors receive material information available in what the RFC for simplicity's sake refers to as an official statement in connection with the offering of municipal fund securities.
To address marketplace developments, investor preferences and behavior, and the "unique aspects" of municipal fund securities transactions, the MSRB previously published a concept release asking for feedback regarding the potential modernization of the process via which official statements are distributed to customers, the RFC notice said.
Informed by comments received in response to the December 2024 concept release as well as additional information and regulatory developments arising since the concept release, the MSRB now seeks comment on the draft amendments to modernize the delivery method of disclosure documents relating to primary offerings of municipal fund securities "by harmonizing such method with MSRB's access equals delivery standard applicable to bonds, notes and other municipal debt securities since 2009," the RFC notice said.
In 2009, the official statement delivery requirements for municipal debt securities under Rule G-32 were changed from a paper delivery standard to an access equals delivery standard, the RFC notice said.
Under the access equals delivery standard, "dealers are deemed to have met their official statement delivery obligation when selling municipal debt securities due to the availability of official statements on the EMMA website submitted by underwriters, in lieu of dealers being required to deliver paper copies to customers," the RFC notice said.
"The MSRB expects that dealers and investors would benefit from the adoption of an access equals delivery standard, which would remove the burden of producing and delivering physical offering documents, along with supplements and amendments, unless investors specifically request them," the RFC notice regarding the draft amendments said.
The draft amendments would retain a requirement that a physical copy of the official statement would be provided by dealers upon request should customers wish to receive such physical copies, the RFC notice said.
The deadline for submitting comments regarding the draft amendments is Dec. 14, the RFC notice said.
"We look forward to receiving stakeholder comments, which will inform our proposal and next steps in modernizing this important segment of the municipal securities market," MSRB's Lanza said in the press release.
