msrb/bda municipal securities regulation seminar · • revised rule g-43 – definition of...

MSRB/BDAMUNICIPAL SECURITIES REGULATION SEMINAR The Four Seasons Hotel, Denver, CO

Thursday, October 6, 2011

Municipal Securities Rulemaking Board Initiatives

Panelists:

Kathleen MilesAssociate General Counsel, MSRB

Justin PicaDirector, Product Management – Market Transparency,MSRB

Lawrence P. SandorSenior Associate General Counsel, MSRB

1Municipal Securities Rulemaking Board

Dealer Rulemaking


MSRB Dealer Rulemaking –Recent Rulemaking Initiatives

• MSRB Rule G-17: Fair Dealing by Underwriters

• MSRB Rule G-23: Dealer Financial Advisors

• Draft MSRB Rule G-43: Broker’s Brokers

• Bank Loans and Private Placements

• Proposed MSRB Rule G-3: Series 7 and Municipal Securities Sales Limited Representative

• MSRB Rule G-17: Sales Practice Notice

• Draft MSRB Rule G-42: Political Contributions by Municipal Advisors (including Dealer Advisors)


MSRB Dealer Rulemaking –Fair Dealing• MSRB Rule G-17 – Fair Dealing by Underwriters

– Notice 2011-36 (August 2, 2011). The MSRB filed with the SEC a proposed rule change consisting of a proposed interpretive notice (the “Notice”) concerning the application of Rule G-17 (on conduct of municipal securities and municipal advisory activities) to underwriters of municipal securities.

– The MSRB proposed that the Notice be made effective 90 days after approval by the SEC.


MSRB Dealer Rulemaking –Fair Dealing (cont’d.)

– All representations to issuers must be truthful and accurate and may not misrepresent or omit material facts.

– An underwriter of a negotiated issue that recommends a complex municipal securities financing has an obligation under Rule G-17 to disclose all of its material risks and characteristics, as well as any incentives for the underwriter to recommend the financing and other associated conflicts of interest.



– Examples of complex municipal securities financings include:• VRDOs• financings involving derivatives (such as swaps)

– An underwriter is typically not required to make these disclosures in connection with routine financings, such as fixed rate issues. However, if the issuer personnel lack knowledge and experience with such structures, the underwriter must disclose the material aspects of the structures to them.



– Compensation• An underwriter’s compensation for a new issue

(including both direct compensation paid by the issuer and other separate payments received by the underwriter from the issuer or any other party in connection with the underwriting), in certain cases and depending upon the specific facts and circumstances of the offering, may be so disproportionate to the nature of the underwriting and related services performed as to constitute an unfair practice with regard to the issuer that is a violation of Rule G-17.



– Compensation (cont’d.)• Among the factors relevant to whether an underwriter’s

compensation is disproportionate to the nature of the underwriting and related services performed are:– credit quality of the issue – size of the issue – market conditions – length of time spent structuring the issue– whether the underwriter is paying the fee of the

underwriter’s counsel or any other relevant costs related to the financing



– The duty of fair dealing under Rule G-17 includes an implied representation that the price an underwriter pays to an issuer is fair and reasonable, taking into consideration all relevant factors, including the best judgment of the underwriter as to the fair market value of the issue at the time it is priced.


MSRB Dealer Rulemaking –Dealer Financial Advisors• MSRB Rule G-23 (on dealer financial advisors)

– Notice 2011-29 - On May 27, 2011, SEC approved amendments to Rule G-23, which would generally prohibit a dealer financial advisor from being the underwriter or placement agent on the same issue of municipal securities, and an interpretive notice on what it means for a dealer to “act as an underwriter” under Rule G-23. Advice given while the dealer is acting as an underwriter does not make the dealer a financial advisor.

– Under the notice, “acting as an underwriter” would include advice on the structure, timing, terms, and similar matters for a bond issue.

– Proposed rule change would be effective for new issues for which Time of Formal Award occurs after November 27, 2011.


MSRB Dealer Rulemaking –Dealer Financial Advisors (cont’d.)

– Dealer will be viewed as acting as an underwriter if:• clearly identifies itself in writing as underwriter from the

earliest stages of its relationship with the issuer • writing makes clear that relationship between the issuer

and the underwriter is arm’s length and that the underwriter has financial and other interests that differ from the issuer’s

• dealer does not engage in a course of conduct inconsistent with an arm’s length relationship

– In addition to underwriting services, a dealer could also provide advice on investments and derivatives.


MSRB Dealer Rulemaking –Broker’s Brokers

• Draft MSRB Rule G-43 (on broker’s brokers)– Notice 2011-50 (September 8, 2011). The MSRB

requested comment on revisions to draft Rule G-43 (on broker’s brokers) and revisions to draft amendments to Rule G-8 (on books and records) and Rule G-9 (on preservation of records). The MSRB also requested comment on a draft interpretive notice concerning the obligations of dealers that use the services of broker’s brokers.

– Comments are due November 3, 2011.


MSRB Dealer Rulemaking –Broker’s Brokers (cont’d.)

• Revised Rule G-43– Definition of broker’s broker

• A dealer, or a separately operated and supervised division or unit of a dealer, that principally effects transactions for other dealers or that holds itself out as a broker’s broker, whether a separate company or part of a larger company.

– Pricing Duty• Required to make a reasonable effort to obtain a

price for the dealer that is fair and reasonable in relation to prevailing market conditions.



– Safe Harbor• If a broker’s broker conducts a bid-wanted or offering

in accordance with the safe harbor, the broker’s broker will satisfy its pricing duty under Rule G-43(a)(i) for that bid-wanted or offering.

– Alternative to Safe Harbor• If a broker’s broker does not conduct bid-wanteds

and offerings under the safe harbor, it will need to adopt policies and procedures describing in detail the manner in which it will satisfy its pricing obligation under Revised Rule G-43(a)(i).



– More Detail on Safe Harbor• Predetermined Parameters

– Designed to identify possible off-market bids in the conduct of bid-wanteds.– Broker’s brokers would be required to test the predetermined parameters

periodically to see if they were achieving their designed purpose.

• Notification to Seller– Broker’s broker would be required to notify the seller if the highest bid

received in a bid-wanted was below the predetermined parameters and receive the seller’s oral or written consent before proceeding with the trade.

• Notification to Bidder Without Seller Consent– Broker’s broker is permitted to contact the high bidder in a bid-wanted

about its bid price prior to the deadline for bids without the seller’s consent, if the bid is outside of the predetermined parameters described above and the broker’s broker believes that the bid might have been submitted in error.



– More Detail on Safe Harbor (cont’d.)• Notification to Bidder With Seller Consent

– If the high bid is within the predetermined parameters, but the broker’s broker believes it might have been submitted in error, the broker’s broker would be required to obtain the seller’s consent before contacting the bidder.

– In all events, the broker’s broker would be required to notify the seller if a bid had been changed prior to execution and provide the seller with the original and changed bids.

• Deadline for Bids– Each bid-wanted or offering would be required to have a deadline for the

acceptance of bids, after which the broker’s broker would not be permitted to accept bids or changes to bids. That deadline could be either a precise (or “sharp”) deadline or an “around time” deadline that ends when the high bid has been provided (or “put up”) to the seller.



• Recordkeeping– Draft amendments to Rule G-8 would require

recordkeeping by broker’s brokers of:» certain communications with sellers and bidders» all bids» changed bids and offers» policies and procedures



– Duties of Sellers• High bid obtained in a bid-wanted or offering is not necessarily

a fair and reasonable price.• Dealers have an independent duty under Rule G-30 to

determine that the prices at which they purchase municipal securities as a principal from their customers are fair and reasonable.

– “Screening”• Selling dealers are cautioned that any direction provided to

broker’s brokers to “screen” other dealers from their bid-wanteds or offerings could affect whether the high bid represents a fair and reasonable price and should be limited to valid business reasons other than competition.



– “Price Discovery”• Use of bid-wanteds by selling dealers solely for price discovery

purposes, without any intention of selling the securities may violate Rule G-17.

– Duties of Bidders• Bidding dealers that submit bids to broker’s brokers that they

believe are below fair market value of the securities or that submit “throw-away” bids to broker’s brokers would violate Rule G-13.

• Rule G-13 does not permit bidders to make a profit by“picking off” other dealers at off-market prices.


Private Placement Activities and Placement Agents• Notice 2011-37 (August 3, 2011)

– Under principles in SEC No-Action Letters, financial advisors engaging in certain activities with respect to placements of municipal securities may be acting as “brokers” and “placement agents”.

– Considerations:• introduction of investors to issuers; • negotiations with investors; • transaction-based compensation

– As of November 27, 2011, Rule G-23 would generally preclude financial advisors that are broker-dealers from becoming underwriters or placement agents for issues for which they served as financial advisors.


Potential Applicability of MSRB Rules -Direct Purchases and Bank Loans

• Notice 2011-52 (September 12, 2011) – The MSRB published this notice to alert municipal

market participants that, under existing legal principles, certain financings that are called “bank loans” may, in fact, be municipal securities.

– If that is the case, and parties regulated by the MSRB play a role in such financings, those parties may inadvertently violate MSRB rules, as well as other federal securities laws.


MSRB Dealer Rulemaking – Municipal Securities Sales Limited Representative

• Notice 2011-54 (September 13, 2011)– MSRB filed with the SEC a proposed rule change to

require passage of the Series 52 examination in order for a municipal securities representative to engage in any municipal securities activities other than sales to, or purchases from customers (“sales activities”).

– Proposed rule change would be effective November 7, 2011.


MSRB Dealer Rulemaking – Municipal Securities Sales Limited Representative

– Individuals who passed the Series 7 examination prior to November 7, 2011, would not have their registration status affected by this proposed rule change as long as they have maintained this registration.


MSRB Dealer Rulemaking –Sales Practice

• Notice 2010-37 (September 20, 2010)– MSRB reminded firms of their sales practice obligations

when selling municipal securities in the secondary market.

– Under Rule G-17, dealer must, in connection with a municipal securities transaction, disclose to customer, at or prior to time of sale, all material facts about transaction known by dealer, as well as material facts about the security that are reasonably accessible to the market.


MSRB Municipal Advisor Rulemaking –Pay to Play

• SR-MSRB-2011-12 (August 19, 2011)*– Notice 2011-46 (August 19, 2011). The MSRB filed with

the SEC a proposed rule change to establish “pay to play” and related rules for municipal advisors and to make certain conforming changes to existing pay to play rules for brokers, dealers, and municipal securities dealers.

* Withdrawn. Upon the SEC’s adoption of a permanent definition of the term “municipal advisor” under the Securities Exchange Act of 1934, the MSRB plans to resubmit this rule proposal.


MSRB Municipal Advisor Rulemaking –Pay to Play (cont’d.)• MSRB Rule G-42 – Political Contributions by

Municipal Advisors (including Dealer Advisors)– Proposed Rule G-42 bans engaging in municipal advisory

business for compensation after certain political contributions• Two-year period beginning on date of contribution and ending

2 years after all municipal advisory business with the issuer isterminated

– Bans soliciting third-party business for compensation from a municipal entity after certain political contributions• Two-year period

– Indirect violations prohibited– Disclosure required


MSRB Municipal Advisor Rulemaking –Pay to Play (cont’d.)

– The proposed rule change consists of:i. proposed Rule G-42 (on political contributions and

prohibitions on municipal advisory activities)

ii. proposed amendments that would make conforming changes to Rules G-8 (on books and records), G-9 (on preservation of records), and G-37 (on political contributions and prohibitions on municipal securities business)

iii.proposed Form G-37/G-42 and Form G-37x/G-42x

iv.proposed restatement of a Rule G-37 interpretive notice issued by the MSRB in 1997


Municipal Advisor Rulemaking


MSRB Municipal Advisor Rulemaking –Applicable Rules• Current MSRB rules that apply to municipal advisors:

– MSRB Rule A-7: Assessments – MSRB Rule A-8: Rulemaking Procedures – MSRB Rule A-12: Initial Fee – MSRB Rule A-14: Annual Fee – MSRB Rule D-11: Associated Persons – MSRB Rule D-13: Municipal Advisory Activities – MSRB Rule D-14: Appropriate Regulatory Agency – MSRB Rule G-5: Disciplinary Actions; Remedial Notices – MSRB Rule G-17: Conduct of Municipal Securities and Municipal

Advisory Activities – MSRB Rule G-40: Electronic Mail Contacts


MSRB Municipal Advisor Rulemaking –Rule Proposals

• MSRB municipal advisor rulemaking proposals:– Draft MSRB Rule G-17: Fair Dealing Interpretive Notice

– Draft MSRB Rule G-20: Gifts and Gratuities

– Draft MSRB Rule G-36: Fiduciary Duty

– Draft MSRB Rule G-42: Pay to Play

– Draft MSRB Rule G-44: Supervision

– Draft MSRB Rule G-46: Activities of Municipal Advisors

– Draft MSRB Rule G-21: Advertising

– Draft MSRB Rule A-11: Interim Municipal Advisor Assessment


MSRB Municipal Advisor Rulemaking –Fiduciary Duty and Fair Dealing

• Draft MSRB Rule G-36 – Fiduciary Duty– Covers obligations of municipal advisors to municipal

entity clients– Does not apply to solicitors

• Draft MSRB Rule G-17 – Fair Dealing – Covers obligations of municipal advisors to obligated

persons– Applies to solicitors


MSRB Municipal Advisor Rulemaking –Fiduciary Duty• MSRB Rule G-36 – Fiduciary duty of municipal

advisors– Municipal advisors owe a fiduciary duty to their

municipal entity clients under the Dodd-Frank Act.

– Notice 2011-48 (August 23, 2011). The MSRB filed with the SEC a proposed rule change consisting of proposed Rule G-36 (on fiduciary duty of municipal advisors) and a proposed interpretive notice concerning the application of proposed Rule G-36 to municipal advisors.


MSRB Municipal Advisor Rulemaking –Fiduciary Duty (cont’d.)

– Under proposed Rule G-36, a municipal advisor’s fiduciary duty to its municipal entity client includes a duty of loyalty and a duty of care.

* Withdrawn SR-MSRB-2011-14 (August 23, 2011). Upon the SEC’s adoption of a permanent definition of the term “municipal advisor” under the Securities Exchange Act of 1934, the MSRB plans to resubmit this rule proposal.


MSRB Municipal Advisor Rulemaking –Draft Fiduciary Duty Rule (cont’d.)– Duty of loyalty

• Requires the municipal advisor to deal honestly and in good faith with the municipal entity and to act in the municipal entity’s best interests

• Requires clear, written disclosure of all conflicts of interest that might impair the ability to satisfy the duty of loyalty and receive written, informed consent to such conflicts by officials of the municipal entity with the authority to retain the municipal advisor

• Requires disclosure of conflicts associated with various forms of compensation


MSRB Municipal Advisor Rulemaking –Draft Fiduciary Duty Rule (cont’d.)– Duty of loyalty (cont’d.)

• A municipal advisor may not undertake an engagement if certain non-manageable conflicts exist, including: – kickbacks and certain fee-splitting arrangements with the

providers of investments or services to municipal entities– payments by municipal advisors made for the purpose of

obtaining or retaining municipal advisory business other than reasonable fees paid to a municipal advisor for solicitation activities regulated by the MSRB

– generally, acting as a principal in matters concerning the municipal advisory engagement with limited exceptions

– excessive compensation


MSRB Municipal Advisor Rulemaking –Draft Fiduciary Duty Rule (cont’d.)

– Duty of care• A municipal advisor’s duty of care requires the

municipal advisor to act competently and provide advice to the municipal entity after conducting due inquiry into the representations of the municipal entity’s counterparties, as well as reasonably feasible alternatives to the financings or products proposed (unless the engagement is of a limited nature).


MSRB Municipal Advisor Rulemaking –Fair Dealing

• SR-MSRB-2011-15 (August 24, 2011)*– Notice 2011-49 (August 24, 2011). The MSRB filed with

the SEC a proposed rule change consisting of a proposed interpretive notice concerning the application of Rule G-17 to municipal advisors advising obligated persons or soliciting municipal entities on behalf of others.



MSRB Municipal Advisor Rulemaking –Fair Dealing (cont’d.)• MSRB Rule G-17 – Fair Dealing by Municipal Advisors

– MSRB Rule G-17 (on fair dealing) was extended to municipal advisors on December 22, 2010.

– Significant overlap with MSRB draft fiduciary duty rule.– MSRB Rule G-17 does not require acting in the “best

interests” of a client.– Instead, Rule G-17 requires that the advisor act in a fair and

non-fraudulent manner.– Recommended financing structures/products must be

suitable for obligated person clients.– Solicitors must make certain disclosures to municipal

entities they are soliciting.38Municipal Securities Rulemaking Board

MSRB Municipal Advisor Rulemaking –Gifts and Gratuities• SR-MSRB-2011-10 (August 16, 2011)*

– Notice 2011-38 (August 4, 2011). The MSRB filed with the SEC a proposed rule change consisting of:

i. proposed amendments to Rule G-20 (on gifts and gratuities) that would apply the rule to municipal advisors, along with related proposed amendments to Rule G-8 (on books and records) and Rule G-9 (on preservation of records)

ii. clarification that certain interpretations by FINRA of its gifts rule (FINRA Rule 3220) and its predecessor, NASD of its gift rule (NASD Rule 3060), would be applicable to municipal advisors



MSRB Municipal Advisor Rulemaking –Gifts and Gratuities (cont’d.)• MSRB Rule G-20 – Gifts and Gratuities

– MSRB seeks to reduce the potential for conflicts of interest in municipal advisory activities and ensure merit-based transactions.

– Prohibits municipal advisors from making direct or indirect gifts in excess of $100 per year if related to municipal advisory activities.


MSRB Municipal Advisor Rulemaking –Supervision

• SR-MSRB-2011-13 (August 22, 2011)– Notice 2011-47 (August 22, 2011). The MSRB filed with the

SEC a proposed rule change consisting of proposed Rule G-44 (on supervision of municipal advisory activities), along with related proposed amendments to Rule G-8 (on books and records) and Rule G-9 (or preservation of records).

– This proposed rule change was originally filed on August 22, 2011 and will be refiled upon the SEC’s adoption of a permanent definition of the term “municipal advisor” under the Securities Exchange Act of 1934.


MSRB Municipal Advisor Rulemaking –Supervision (cont’d.)

• MSRB Rule G-44 – Supervision of Municipal Advisory Activities– The establishment of a basic supervisory structure for

municipal advisors is important as the MSRB adopts municipal advisor rules.

– Municipal advisors would be obligated to supervise the municipal advisory activities of the municipal advisor and its associated persons to ensure compliance with applicable MSRB and SEC rules.


MSRB Municipal Advisor Rulemaking –Supervision (cont’d.)

– Requires establishing and maintaining a supervisory system

– Requires adopting, maintaining and enforcing written supervisory procedures

– Requires annual review of the municipal advisory activities of the firm

– Addresses requirements of municipal advisors with regard to the review and recordkeeping of correspondence


MSRB Municipal Advisor Rulemaking –Interim Municipal Advisor Assessment• SR-MSRB-2011-08 (July 26, 2011)*

– Notice 2011-34 (July 26, 2011). The MSRB filed with the SEC a proposed rule change to establish a new interim municipal advisor assessment under new Rule A-11, on municipal advisor assessments, and a new Form A-11-Interim to be used in connection with such interim municipal advisor assessment.

– The MSRB also requested comment on a draft survey seeking information from municipal advisors on the nature of the municipal advisory activities they undertake as well as the manner and level of compensation received by municipal advisors for such municipal advisory activities.



MSRB Municipal Advisor Rulemaking –Activities of Municipal Advisors

• Notice 2011-42 (August 10, 2011)– MSRB requested comment on draft MSRB Rule G-46 on

activities of municipal advisors– Written evidence of a municipal advisory relationship

required– Required Disclosures

• Basis of compensation• Amount of direct and indirect compensation, scope of

services, conflicts of interest• Certain affiliate relationships• Registration status


MSRB Municipal Advisor Rulemaking –Advertising

• Notice 2011-41 (August 10, 2011)– MSRB requested comment on draft amendments to

Rule G-21 (on advertising) and a draft interpretive notice concerning the application of Rule G-17 to certain communications.

– Advertisements definition largely unchanged

– Directed to the general public and customers• Used or published electronically, in public media or in writing

• Extended to cover municipal advisory activities and certain third party services


MSRB Municipal Advisor Rulemaking –Advertising (cont’d.)

– Content standards for advertisements (unchanged)

– Must not publish advertisements that dealer/municipal advisor knows or has reason to know are materially false or misleading

– Professional advertisements (facilities, skills and services) subject to a stricter standard

– Pre-use review of advertisements is required (unchanged)• Must be approved in writing by a principal


MSRB Municipal Advisor Rulemaking –Advertising (cont’d.)

• Draft Interpretive Notice directed towards communications that are not advertisements– Covers sales and marketing communications (including

“sales literature”) and correspondence

– Under Rule G-17, must not be materially false or misleading

– Communications not subject to pre-use review


MSRB Municipal Advisor Rulemaking –Latest News

• To view the latest municipal advisor news, access the MSRB’s municipal advisor news page at: http://www.msrb.org/MSRB-For/Municipal-Advisors/Municipal-Advisor-News.aspx

• Sign up to receive MSRB updates by following the link at the top of www.msrb.org


EMMAand

Transparency Initiatives

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Municipal Disclosure Update• EMMA is the official repository for municipal market

disclosure documents• Over the last 18 months, the MSRB has made a number

of enhancements to EMMA to facilitate investor access to information and allow issuers to communicate information to the municipal market

• In May, MSRB added new voluntary disclosure options for issuers and improved disclosure for Auction Rate and Variable Rate Demand securities

• All of these changes build on the consolidated display of data and documents associated with individual municipal securities

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EMMA Overview • What is Available on EMMA?

– Official Statements – Advance Refunding Documents – Continuing Disclosure Documents– 529 Plan Disclosure Documents– Municipal Trade Data – Interest Rate Resets, Data Elements

and Key Documents for ARS and VRDOs– Market Statistics– Educational Resources

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www.emma.msrb.org

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Email Alerts Dashboard

Recent EMMA Enhancements

• As of Feb. 2011 Rule G-32 requires underwriters to report:– Existence of continuing disclosure agreement– Identities of Obligated Persons– Contractual timeframe for filing annual financials

• Improved continuing disclosure display highlighting:

NEW Confirmation of continuing disclosure agreement

NEW Visual display of timing for annual financials

NEW Easy-to-use layout

NEW Most recent submission

Recent EMMA Enhancements

• Since May 2011, EMMA has provided issuers and obligated persons with new voluntary submission categories:– Preliminary official statements and pre-sale documents– Information about the timing and accounting standard used to

prepare annual financials – Link to web-based financial resources– 529 College Savings Plans documents– Official Statements and Advance Refunding documents– Data corrections for issuer name and issue descriptions

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NEW Market Activity Tab

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NEW Issuer-provided timeframe for filing annual financials and accounting standard used in preparation of financials

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NEW Issuer-provided link to additional information on the internet

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Changes to Rule G-34(c)ARS and VRDO Transparency

• Since 2009 MSRB has provided centralized access to current interest rates and key information for Auction Rate Securities and Variable Rate Demand Obligations

• In May 2011, MSRB increased the information available for these securities:– New data elements

• ARS “bidding information”• Additional VRDO information

– New documents • ARS auction procedures and rate setting mechanisms• VRDO liquidity facilities

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Changes to MSRB Rule G-34(c)

• Enhances the interest rate and descriptive information currently collected by the SHORT System by adding:– Data elements –

• ARS “bidding information”• Additional VRDO information

– Documents –• ARS auction procedures and interest rate setting mechanisms• VRDO liquidity facilities

• Changes effective: Monday May 16, 2011

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Newly Required ARS-Specific Data Elements

• Deletion of Par Amount Auctioned data element

• Addition of details about competitive orders submitted for inclusion in an auction, including:– Type – Buy, Sell or “Hold at Rate”– Submitter Entity – Investor, Issuer/Conduit Borrower or Program

Dealer for its own account– Interest Rate for Buy and “Hold at Rate” Orders– Par Amount Submitted– Par Amount Filled

Note, order information may be aggregated provided that type, submitter and interest rate are identical

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Newly Required VRDO-Specific Data Elements

• Interest rate effective date• Identity of Tender Agent• Identity of Liquidity Provider(s), including the ability to

identify “self liquidity” provisions• Current par amount of the VRDO held by liquidity

providers (“Bank Bond” par amount)• Current par amount of the VRDO held by parties other

than a liquidity provider, composed of the aggregate of the par amounts held by the VRDO Remarketing Agent and by investors

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Newly Required ARS and VRDO Document Submission

• “Transition Period” Documents – current documents in effect prior to May 16, 2011– Deadline: Ninety business days from May 16, 2011 for submission

of current documents– Format: PDF, not required to be word searchable

• Post Transition Period Documents – new documents or amended versions of transition period documents created on or after May 16, 2011 – Deadline: Five business days after receipt– Format: PDF, word searchable

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Newly Required ARS and VRDO Document Submission

• Indexing Information – CUSIP number(s), transition period indicator or date document received, VRDO liquidity facility type

• Multiple PDF Files – If more than one PDF comprise a ARS or VRDO document submission requirement, all PDFs must be submitted as a single submission so that it is clear that the PDFs represent a collection of related documents

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Newly Required ARS Document Submission

• Applies to ARS Program Dealers

• Requires submission of documents defining current auction procedures and interest rate setting mechanisms

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Newly Required VRDO Document Submission• Applies to VRDO Remarketing Agents• Requires submission of documents detailing liquidity

facility provisions, including:– Stand-By Bond Purchase Agreements– Letter of Credit Agreements – any other documents establishing a liquidity obligation

• Best Efforts Provision – undertake best efforts to obtain current documents; failure to obtain documents must be reported to SHORT System and records of best efforts undertaken retained

• See MSRB NOTICE 2011-17 (February 23, 2011) for responses to questions about this requirement

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NEW Calculated bid-to-cover ratio computed using order information

NEW Reports of all orders submitted by a Program Dealer to an Auction Agent

NEW Documents detailing auction procedures

NEW Documents detailing liquidity facility provisions

NEW Type, provider and expiration date for each liquidity provision

NEW Identity of tender Agent

NEW Information on current holders of VRDO

Upcoming EMMA and Transparency System Initiatives • Publication of “holiday calendar” to clarify system

operating hours and those days on which submissions to MSRB transparency programs are not required

• Enhancements to transaction reporting:– Requirement for including dollar price on inter-dealer trade reports– Changes to price/yield calculation error code logic– Addition of inter-dealer yield on EMMA

• Incorporation of DTCC’s NIIDS data into MSRB systems– Form G-32 pre-population and consistent timeframes across rules

• Fall 2011, current credit ratings will be displayed on EMMA from at least one Nationally Recognized Statistical Rating Organization

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Municipal Market Compliance and Enforcement Priorities

Panelists:

Malcolm NorthamDirector, Fixed Income Securities, FINRA

Steven ChamberlinManager, Tax Exempt Bonds, Internal Revenue Service

Moderator:Lawrence P. SandorSenior Associate General Counsel, MSRB


MSRB/BDAMUNICIPAL SECURITIES REGULATION SEMINAR The Four Seasons Hotel, Denver, CO

Thursday, October 6, 2011