What MSRB is proposing for primary offering practices

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WASHINGTON – The Municipal Securities Rulemaking Board is seeking comments on a revised set of potential draft amendments to its rules on primary offering practices and related disclosures that it says would benefit the market for relatively limited costs to participants.

The draft amendments are a pared down version of the ideas included in a concept proposal released on Sept. 14, 2014. For example, the MSRB is no longer proposing to require underwriters to make a bona fide public offering.

The release describes each possible amendment, explains it, and then asks questions about it. The board has asked that comments on these be submitted to it by Sept. 17.

“Today’s proposed rule changes are grounded in input we received in response to a retrospective review of primary offering practices” in the fall of 2017, said MSRB President and Chief Executive Officer Lynnette Kelly. “In light of evolving market practices, the MSRB seeks feedback on how these proposed changes might improve the exchange of information among members of the syndicate, and increase transparency for issuers and investors.”

Kelly is referring to the concept proposal it published last September, to which it received 12 comment letters in response.

Several of the potential draft amendments in this latest release would be made to its Rule G-11 on primary offering practices.

One would standardize the process for issuing a “free-to-to-trade-wire” so that all syndicate members would know at the same time when they could begin trading a new issue.

Another would require senior syndicate managers to provide some of the information they give syndicate members, in particular the designations and allocations of securities, to issuers as well.

A third possible amendment would align the time frame for the payment of group net sales credits (sales credits for orders in which all syndicate members benefit according to their participation in the account) with the payment of net designation sales credits.

Currently, group net sales credits are paid out of the syndicate account when it settles, meaning some syndicate members must wait 30 days following the receipt of the securities before they receive the credits. In contrast, sales credits due a syndicate member as designated by a customer in connection with the purchase of securities (net designated orders) are supposed to be distributed within 10 calendar days following the date the issuer delivers the securities to the syndicate.

Other potential draft amendments would be made to the board’s Rule R-32 on Disclosures in Connection with Primary Offerings. They would collect additional information on Forms G-32 to support municipal market transparency efforts.

One would require the disclosure to all market participants at the same time of CUSIPs being refunded as well as the percentages of them being refunded.

Another would require non-dealer municipal advisors that prepare official statements to make them available to the underwriter after the issuer approves them for distribution.

A third would auto-populate into Form G-32 certain information that is currently submitted to the Depository Trust Company’s New Issue Dissemination Service (NIIDS) but required to be provided on Form G-32.

The board is also considering requesting additional information on Form G-32 that is currently not provided to NIIDS.

The MSRB said that it has assessed the impact of the proposals and “believes that the likely benefits should accrue and outweigh the likely costs over the long term.”

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