WASHINGTON - Municipal securities dealers are now allowed under certain conditions to send just one official statement to investors who share the same address under an amendment to the Municipal Securities Rulemaking Board's Rule G-32 that was approved by the Securities and Exchange Commission last week.
Under Rule G-32, underwriters of a new issue of municipal securities are required to deliver the preliminary officials statements to customers no later than the settlement of the transaction. The underwriter must send customers the final official statement no later than the business day after it receives the document from the issuer.
But the amendment, which went into effect upon the SEC's approval, now allows dealers to satisfy their official statement delivery requirements by complying with the SEC's Rule 154, which allows dealers to send a single offering document to two or more investors sharing the same address under certain conditions. This method of delivery is called "householding," according to the MSRB.
Under Rule 154, the investors do not have to be related, the document can be addressed to investors as a group or to each of the investors individually, and the address may be residential, commercial, or an electronic address.
To comply with the amended rule, which was originally filed with the SEC June 21, a dealer must obtain the investors' written or implied consent for the delivery of a single document to a household.
The MSRB said that the investors' implied consent can be relied on only if the following conditions are met: the investors have the same last name or the dealer "reasonably believes" they are members of the same family; the dealer sends each investor written notice of its intent to send a single document at least 60 days before doing so and gives the investors a chance to opt out of this method of delivery; the investors do not opt out of this method of delivery; and the dealer delivers the document to a residential street address or post office box. An e-mail address may also be used if the dealer obtains the investors' consent and it is a shared address.
In addition, dealers and mutual fund companies must explain to investors, at least annually, how they can revoke their consent for the delivery of a single-offering document to one household.
The amended rule also permits dealers to "household" documents in the case of college savings programs involving municipal fund securities, which are more like municipal funds than municipal securities but fall under the MSRB rules.
Householding of such college savings documents will be helpful, especially where one family has accounts for more than one child, the MSRB said when the amendment was first filed. College savings programs allow parents or others to save money for college expenses of their children or other beneficiaries by investing funds on a tax-deferred basis in trusts that are set up by the states.
