
[Federal Register: August 7, 2008 (Volume 73, Number 153)]
[Notices]               
[Page 46161-46167]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au08-128]                         



[[Page 46161]]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58256; File No. SR-MSRB-2008-05]

 
Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Notice of Filing of Proposed Rule Change Relating to the 
Establishment of a Continuing Disclosure Service of the Electronic 
Municipal Market Access System (EMMA)

July 30, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 29, 2008, the Municipal Securities Rulemaking Board (``MSRB'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change as described in Items I, II, and III 
below, which Items have been prepared by the MSRB. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The MSRB is filing with the Commission a proposed rule change to 
establish a continuing disclosure service (the ``continuing disclosure 
service'') of the MSRB's Electronic Municipal Market Access system 
(``EMMA''). The continuing disclosure service would receive electronic 
submissions of, and would make publicly available on the Internet, 
continuing disclosure documents and related information from issuers, 
obligated persons and their agents pursuant to continuing disclosure 
undertakings entered into consistent with Exchange Act Rule 15c2-12. 
The MSRB requests approval of the continuing disclosure service to 
commence operation on the later of January 1, 2009 or the effective 
date of any provisions of Rule 15c2-12 providing for the MSRB to serve 
as the sole central repository for all electronic continuing disclosure 
information provided pursuant to Rule 15c2-12.
    The text of the proposed rule change is available on the MSRB's Web 
site at http://www.msrb.org/msrb1/sec.asp, at the MSRB's principal 
office, and at the Commission's Public Reference Room. If approved, the 
rule text for the continuing disclosure service of EMMA would be 
available on the MSRB's Web site at http://www.msrb.org/msrb1/
rulesandforms under the heading Information Facilities.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the MSRB included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The MSRB has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The proposed rule change would establish, as a component of EMMA, 
the continuing disclosure service for the receipt of, and for making 
available to the public of, continuing disclosure documents and related 
information to be submitted by issuers, obligated persons and their 
agents pursuant to continuing disclosure undertakings entered into 
consistent with Rule 15c2-12.\3\ As proposed, all continuing disclosure 
documents and related information would be submitted to the MSRB, free 
of charge, through an Internet-based electronic submitter interface or 
electronic computer-to-computer data connection, at the election of the 
submitter, and public access to the documents and information would be 
provided through the continuing disclosure service on the Internet (the 
``EMMA portal'') at no charge as well as through a paid real-time data 
stream subscription service.\4\
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    \3\ EMMA was originally established, and began operation on 
March 31, 2008, as a complementary pilot facility of the MSRB's 
existing Official Statement and Advance Refunding Document (OS/ARD) 
system of the Municipal Securities Information Library (MSIL) 
system. See Securities Exchange Act Release No. 57577 (March 28, 
2008), 73 FR 18022 (April 2, 2008) (File No. SR-MSRB-2007-06) 
(approving operation of the EMMA pilot to provide free public access 
to the MSIL system collection of official statements and advance 
refunding documents and to the MSRB's Real-Time Transaction 
Reporting System historical and real-time transaction price data) 
(the ``Pilot Filing'').
    \4\ The pilot EMMA portal currently is accessible at http://
emma.msrb.org.
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    Under Rule 15c2-12(b)(5), an underwriter for a primary offering of 
municipal securities subject to the rule currently is prohibited from 
underwriting the offering unless the underwriter has determined that 
the issuer or an obligated person \5\ for whom financial information or 
operating data is presented in the final official statement has 
undertaken in writing to provide certain items of information to the 
marketplace.\6\ Rule 15c2-12(b)(5) provides that such items include: 
(A) Annual financial information concerning obligated persons; \7\ (B) 
audited financial statements for obligated persons if available and if 
not included in the annual financial information; (C) notices of 
certain events, if material; \8\ and (D) notices of failures to provide 
annual financial information on or before the date specified in the 
written undertaking.\9\
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    \5\ Rule 15c2-12(f)(10) defines ``obligated person'' as any 
person, including an issuer of municipal securities, who is either 
generally or through an enterprise, fund, or account of such person 
committed by contract or other arrangement to support payment of all 
or part of the obligations on the municipal securities sold in a 
primary offering (other than providers of bond insurance, letters of 
credit, or other liquidity facilities).
    \6\ See also Rule 15c2-12(d)(2).
    \7\ Rule 15c2-12(f)(9) defines ``annual financial information'' 
as financial information or operating data, provided at least 
annually, of the type included in the final official statement with 
respect to an obligated person, or in the case where no financial 
information or operating data was provided in the final official 
statement with respect to such obligated person, of the type 
included in the final official statement with respect to those 
obligated persons that meet the objective criteria applied to select 
the persons for which financial information or operating data will 
be provided on an annual basis.
    \8\ Under Rule 15c2-12(b)(5)(C), such events currently consist 
of principal and interest payment delinquencies; non-payment related 
defaults; unscheduled draws on debt service reserves reflecting 
financial difficulties; unscheduled draws on credit enhancements 
reflecting financial difficulties; substitution of credit or 
liquidity providers, or their failure to perform; adverse tax 
opinions or events affecting the tax-exempt status of the security; 
modifications to rights of security holders; bond calls; 
defeasances; release, substitution, or sale of property securing 
repayment of the securities; and rating changes.
    \9\ Under Rule 15c2-12(b)(5)(i), annual filings are to be sent 
to all existing nationally recognized municipal securities 
information repositories (``NRMSIRs'') and any applicable state 
information depositories (``SIDs''), while material event notices 
may be sent to all existing NRMSIRs or to the MSRB, as well as to 
any SIDs. The MSRB, which currently operates CDINet to process and 
disseminate notices of material events submitted to the MSRB, 
previously petitioned the Commission to amend Rule 15c2-12 to remove 
the MSRB as a recipient of material event notices due to the very 
limited level of submissions received by the MSRB, constituting a 
negligible percentage of material event notices currently provided 
to the marketplace. See Letter from Diane G. Klinke, General 
Counsel, MSRB, to Jonathan G. Katz, Secretary, Commission, dated 
September 8, 2005. The Commission has published proposed amendments 
to Rule 15c2-12 to this effect. See Exchange Act Release No. 54863 
(December 4, 2006), 71 Fed. Reg. 71109 (December 8, 2006). In light 
of this proposed rule change, the MSRB is considering at this time 
whether to withdraw its petition. In addition, the MSRB intends, on 
a future date, to file a proposed rule change with the Commission 
for permission to discontinue CDINet in view of the establishment of 
EMMA's continuing disclosure service.

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[[Page 46162]]

    As proposed, the continuing disclosure service would accept 
submissions of (i) continuing disclosure documents as described in Rule 
15c2-12, and (ii) other disclosure documents specified in continuing 
disclosure undertakings entered into consistent with Rule 15c2-12 but 
not specifically described in Rule 15c2-12. In connection with 
documents submitted to the continuing disclosure service, the submitter 
would provide, at the time of submission, information necessary to 
accurately identify: (i) The category of information being provided; 
(ii) the period covered by any annual financial information, financial 
statements or other financial information or operating data; (iii) the 
issues or specific securities to which such document is related or 
otherwise material (including CUSIP number, issuer name, state, issue 
description/securities name, dated date, maturity date, and/or coupon 
rate); (iv) the name of any obligated person other than the issuer; (v) 
the name and date of the document; and (vi) contact information for the 
submitter. Submitters would be responsible for the accuracy and 
completeness of all documents and information submitted to EMMA.
    The MSRB proposes that submissions to the continuing disclosure 
service be made as portable document format (PDF) files configured to 
permit documents to be saved, viewed, printed and retransmitted by 
electronic means. If the submitted file is a reproduction of the 
original document, the submitted file must maintain the graphical and 
textual integrity of the original document. In addition, starting in 
the first calendar quarter beginning at least nine months after 
approval by the Commission of this filing, such PDF files must be word-
searchable (that is, allowing the user to search for specific terms 
used within the document through a search or find function available in 
most standard software packages), provided that diagrams, images and 
other non-textual elements would not be required to be word-searchable 
due to current technical hurdles to uniformly producing such elements 
in word-searchable form without incurring undue costs. Although the 
MSRB would strongly encourage submitters to immediately begin making 
submissions as word-searchable PDF files (preferably as native PDF or 
PDF normal files, which generally produce smaller and more easily 
downloadable files as compared to scanned PDF files), implementation of 
this requirement would be deferred as noted above to provide issuers, 
obligated persons and their agents with sufficient time to adapt their 
processes and systems to provide for the routine creation or conversion 
of continuing disclosure documents as word-searchable PDF files.
    All submissions to the continuing disclosure service pursuant to 
this proposal would be made through password protected accounts on EMMA 
by: (i) Issuers, which may submit any documents with respect to their 
municipal securities; (ii) obligated persons, which may submit any 
documents with respect to any municipal securities for which they are 
obligated; and (iii) designated agents, which may be designated by 
issuers or obligated persons to make submissions on their behalf. 
Issuers and obligated persons would be permitted under the proposal to 
designate agents to submit documents and information on their behalf, 
and would be able to revoke the designation of any such agents, through 
the EMMA on-line account management utility. Such designated agents 
would be required to register to obtain password-protected accounts on 
EMMA in order to make submissions on behalf of the designating issuers 
or obligated persons. Any party identified in a continuing disclosure 
undertaking as a dissemination agent or other party responsible for 
disseminating continuing disclosure documents on behalf of an issuer or 
obligated person would be permitted to act as a designated agent for 
such issuer or obligated person, without a designation being made by 
the issuer or obligated person as described above, if such party 
certifies through the EMMA on-line account management utility that it 
is authorized to disseminate continuing disclosure documents on behalf 
of the issuer or obligated person under the continuing disclosure 
undertaking. The issuer or obligated person, through the EMMA on-line 
account management utility, would be able to revoke the authority of 
such party to act as a designated agent.
    As proposed, electronic submissions of continuing disclosure 
documents through the continuing disclosure service would be made by 
issuers, obligated persons and their agents, at no charge, through 
secured, password-protected interfaces. Continuing disclosure 
submitters would have a choice of making submissions to the proposed 
continuing disclosure service either through a Web-based electronic 
submission interface or through electronic computer-to-computer data 
connections with EMMA designed to receive submissions on a bulk or 
continuous basis.
    All documents and information submitted through the continuing 
disclosure service pursuant to this proposed rule change would be 
available to the public for free through the EMMA portal on the 
Internet, with documents made available for the life of the securities 
as PDF files for viewing, printing and downloading.\10\ As proposed, 
the EMMA portal would provide on-line search functions to enable users 
to readily identify and access documents that relate to specific 
municipal securities based on a broad range of search parameters. In 
addition, the MSRB proposes that real-time data stream subscriptions to 
continuing disclosure documents submitted to EMMA would be made 
available for a fee.\11\ The MSRB would not be responsible for the 
content of the information or documents submitted by submitters 
displayed on the EMMA portal or distributed to subscribers through the 
continuing disclosure subscription service.
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    \10\ The MSRB understands that software currently is generally 
available for free that permits users to save, view and print PDF 
files, as well as to conduct word searches in word-searchable PDF 
documents. The MSRB would provide links for downloading such 
software on the EMMA portal.
    \11\ Fees for subscriptions to the continuing disclosure 
collection would be established in a separate filing to be submitted 
to the Commission pursuant to Section 19(b)(2) of the Exchange Act 
prior to the commencement of operation of the continuing disclosure 
service, if approved by the Commission.
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    The MSRB has designed EMMA, including the EMMA portal, as a 
scalable system with sufficient current capacity and the ability to add 
further capacity to meet foreseeable usage levels based on reasonable 
estimates of expected usage, and the MSRB would monitor usage levels in 
order to assure continued capacity in the future.
    The MSRB may restrict or terminate malicious, illegal or abusive 
usage for such periods as may be necessary and appropriate to ensure 
continuous and efficient access to the EMMA portal and to maintain the 
integrity of EMMA and its operational components. Such usage may 
include, without limitation, usage intended to cause the EMMA portal to 
become inaccessible by other users, to cause the EMMA database or 
operational components to become corrupted or otherwise unusable, to 
alter the appearance or functionality of the EMMA portal, or to 
hyperlink to or otherwise use the EMMA portal or the information 
provided through the EMMA portal in furtherance of fraudulent or other 
illegal activities

[[Page 46163]]

(such as, for example, creating any inference of MSRB complicity with 
or approval of such fraudulent or illegal activities or creating a 
false impression that information used to further such fraudulent or 
illegal activities has been obtained from the MSRB or EMMA). Measures 
taken by the MSRB in response to such unacceptable usage shall be 
designed to minimize any potentially negative impact on the ability to 
access the EMMA portal.
2. Statutory Basis
    The MSRB believes that the proposed rule change is consistent with 
Section 15B(b)(2)(C) of the Act,\12\ which provides that the MSRB's 
rules shall:
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    \12\ 15 U.S.C. 78o-4(b)(2)(C).
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Be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in municipal securities, to remove 
impediments to and perfect the mechanism of a free and open market 
in municipal securities, and, in general, to protect investors and 
the public interest.

    The MSRB believes that the proposed rule change is consistent with 
the Act. The continuing disclosure service would serve as an additional 
mechanism by which the MSRB works toward removing impediments to and 
helping to perfect the mechanisms of a free and open market in 
municipal securities. The continuing disclosure service would help make 
information useful for making investment decisions more easily 
available to all participants in the municipal securities market on an 
equal basis throughout the life of the securities without charge 
through a centralized, searchable Internet-based repository, thereby 
removing potential barriers to obtaining such information. Broad access 
to continuing disclosure documents through the continuing disclosure 
service should assist in preventing fraudulent and manipulative acts 
and practices by improving the opportunity for public investors to 
access material information about issuers and their securities.
    Furthermore, the continuing disclosure service should reduce the 
effort necessary for issuers and obligated persons to comply with their 
continuing disclosure undertakings by making submissions to a single 
venue \13\ using an electronic submission process, which should result 
in lower costs to issuers and savings to their citizens. Similarly, a 
single centralized and searchable venue for free public access to 
disclosure information should promote a more fair and efficient 
municipal securities market in which transactions are effected on the 
basis of material information available to all parties to such 
transactions, which should allow for fairer pricing of transactions 
based on a more complete understanding of the terms of the securities 
and the potential investment risks. Free access to this information--
previously available in most cases only through paid subscription 
services or on a per-document fee basis--should reduce transaction 
costs for dealers and investors.
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    \13\ Some states may require issuers and/or obligated persons to 
submit disclosure information to state information depositories or 
other venues pursuant to state law.
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    All of these factors serve to promote the statutory mandate of the 
MSRB to protect investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The MSRB does not believe that the proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Documents and information 
provided through the continuing disclosure service would be available 
to all persons simultaneously. In addition to making the documents and 
information available for free on the EMMA portal to all members of the 
public, the MSRB would make such documents and information available by 
subscription on an equal and non-discriminatory basis without imposing 
restrictions on subscribers from, or imposing additional charges on 
subscribers for, re-disseminating such documents or otherwise offering 
value-added services and products based on such documents on terms 
determined by each subscriber.
    The MSRB has considered carefully a commentator's concern regarding 
the MSRB's plans to develop EMMA,\14\ as well as expressions of 
interest from private enterprises in entering this market.\15\ One 
commentator on the Pilot Filing \16\ stated that the MSRB's intention 
to combine continuing disclosures with primary market disclosures and 
trade price data ``breaks new ground among regulatory bodies in terms 
of value-added content available to the public at no charge,'' arguing 
that the MSRB would ``effectively take over the business of providing 
value-added content.'' \17\ Another commentator on the Pilot Filing 
argued in favor of the creation of a ``publicly accessible storage and 
dissemination system'' for all filings in the municipal securities 
market, stating that the current municipal securities disclosure model 
``severely limits innovation and access'' to disclosures and ``locks up 
public documents in private hands while the proposed portal run by a 
public entity will encourage transparency in the municipal securities 
market and create a healthy ecosystem of information that will 
ultimately benefit both the investment community and the municipalities 
that seek access to public markets.'' \18\
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    \14\ See comments from Peter J. Schmitt, CEO, DPC DATA Inc. 
(``DPC''), dated January 23, 2008.
    \15\ See letter from Philip C. Moyer, CEO, EDGAR Online, Inc. 
(``EDGAR Online''), to Ernesto A. Lanza, Senior Associate General 
Counsel, MSRB, dated December 17, 2007. In addition, the MSRB has 
received several inquiries through the pilot EMMA portal's feedback 
(http://emma.msrb.org/AboutEMMA/Feedback.aspx) and contact (http://
emma.msrb.org/AboutEMMA/ContactUs.aspx) Web forms from members of 
the public seeking information on using EMMA documents and data, 
through the EMMA portal or subscription services, for the purposes 
of re-dissemination to their customers.
    \16\ See footnote 3 supra.
    \17\ See comments of DPC. DPC further stated, ``There is 
precedent of other Self-Regulatory Organizations (SROs) offering 
such sophisticated value-added information to the market, but only 
on a fee basis.'' DPC also states that ``the MSRB's sample pilot 
portal at http://www.msrb.org/msrb1/accessportal/
SampleComprehensiveDisclosureDisplay.htm provides a glimpse of 
specific value-added features the MSRB intends to offer the public 
free of charge. Among these are nine-digit CUSIP searches, 
hyperlinks to bond issuers Web sites, an `alerts' service to users 
of the portal, sophisticated document viewing options, links to 
other related documents in the portals disclosure archive, and 
subsequent event notifications that equate to custom research. These 
features and capabilities are well in excess of the system that the 
MSRB has pointed to as its model, the SEC's own EDGAR.''
    \18\ See letter from EDGAR Online. EDGAR Online further stated, 
``In spite of a great deal of work by the Municipal Issuers on their 
disclosures--a small group of companies control access for the 
entire market to the documents that are supposed to be public. * * * 
The rigid control of public information dissuades other information 
providers from trying to enter or innovate for this market. This 
means that there are few people working on improving ease of use, 
depth of analysis, thoroughness of information or more effective 
means of delivery * * * The process of managing these documents 
consumes most of the resources of these few information providers 
and the time of investors. As a result, the information contained in 
these documents--risks and opportunities--are usually lost because 
there are few sources of good comparability and data.''
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    The MSRB believes that the availability of continuing disclosure 
documents through the EMMA portal and the continuing disclosure 
subscription service, without the imposition of limitations on or 
additional charges for redistribution of such documents to customers, 
clients or other end-users of the subscriber,\19\

[[Page 46164]]

would promote competition among private data vendors and other 
enterprises engaged in or interested in becoming engaged in information 
services by eliminating existing barriers to new entrants into the 
market for municipal securities information services. Private 
enterprises would be able to obtain a complete collection of all 
continuing disclosure documents submitted by issuers, obligated persons 
and their agents as contemplated by Exchange Act Rule 15c2-12 from a 
single source using a single consistent indexing method since all such 
documents would be submitted to the continuing disclosure service and 
would be indexed as received using a single indexing logic. Currently, 
parties wishing to obtain a complete collection of continuing 
disclosure documents must consider whether continuing disclosure 
documents have been uniformly provided to all existing nationally 
recognized municipal securities information repositories as 
contemplated under Rule 15c2-12 and, if not, might need to undertake 
the effort and expense of obtaining continuing disclosure documents 
from two or more of the existing sources, which may have differing 
terms of use that may limit the ability to re-disseminate such 
documents.
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    \19\ The MSRB notes that subscribers may be subject to 
proprietary rights of third parties in information provided by such 
third parties that is made available through the subscription.
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    Furthermore, the availability of all continuing disclosure 
documents in a defined electronic format in one venue should make 
document handling, storage and dissemination more efficient than under 
the current situation in which documents may exist in paper form as 
well as in various different electronic formats. The existence of a 
single consistent indexing logic to be used by the continuing 
disclosure service, and the inclusion of key indexing information on 
the EMMA portal and in the continuing disclosure subscription service, 
would relieve the burden that private information vendors would 
otherwise have of creating such an index. The standardized continuing 
disclosure document collection and indexing information provided 
through the continuing disclosure service would be available equally to 
existing information vendors and parties seeking to enter the market, 
thereby promoting competition among all such private parties in a non-
discriminatory manner with respect to the value-added services they may 
wish to offer based on the continuing disclosure document collection. 
Such parties would likely bear some initial burden of ensuring that 
their infrastructure and facilities are capable of receiving and 
processing the information provided through the continuing disclosure 
service, but the MSRB believes that such parties would realize savings 
from the efficiencies described above.
    Thus, although the MSRB recognizes that the continuing disclosure 
service might require private enterprises to modify some aspects of the 
way they undertake their current business activities, the MSRB believes 
that the continuing disclosure service would promote, rather than 
hinder, further competition, growth and innovation in this area. The 
MSRB further believes that the operation by the MSRB of the continuing 
disclosure service would not result in the MSRB taking over the 
business of providing value-added content but instead serve as a basis 
on which private enterprises could themselves concentrate more of their 
resources on developing and marketing value-added services. The MSRB 
believes that much of the impact of the proposed rule change on 
commercial enterprises would result from the increased competition in 
the marketplace resulting from the entry of additional commercial 
enterprises in competition with such existing market participants with 
respect to value-added services, rather than from the operation of the 
continuing disclosure service as a source of the raw documents and 
related information to the public. The MSRB believes that the benefits 
realized by the investing public from the broader and easier 
availability of disclosure information about municipal securities that 
would be provided through the continuing disclosure service would 
justify any potentially negative impact on existing enterprises from 
the operation of EMMA.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    In a notice published by the MSRB on January 31, 2008, the MSRB 
described its plan for implementing a continuing disclosure service 
that would be integrated into other services to be offered through EMMA 
(the ``2008 Notice'').\20\ In particular, the MSRB stated its plan to 
institute the continuing disclosure service to accept submissions of 
continuing disclosure information in a designated electronic format 
directly from issuers, obligated persons and their designated agents 
acting on their behalf. EMMA's continuing disclosure service would be 
designed to accept such electronic submissions, including basic 
indexing information, either through a Web-based interface or by 
computer-to-computer upload or data stream. In addition to making 
continuing disclosures available through the EMMA portal, the MSRB 
would make such disclosures available through a paid real-time data 
stream subscription for re-dissemination or other use by subscribers. 
In publishing the 2008 Notice, the MSRB sought comment on certain basic 
elements relating to the incorporation into EMMA of continuing 
disclosure information provided by issuers and obligated persons under 
Rule 15c2-12, as discussed below. The 2008 Notice had been published by 
the MSRB following a series of other notices for comment (the ``Prior 
Notices'') \21\ and the filing with the Commission of the Pilot Filing 
in connection with the establishment of the MSRB's proposed centralized 
disclosure utility.
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    \20\ See MSRB Notice 2008-05 (January 31, 2008).
    \21\ See MSRB Notice 2006-19 (July 27, 2006); MSRB Notice 2007-5 
(January 25, 2007); MSRB Notice 2007-33 (November 15, 2007). Only 
those comments of the commentators on the Prior Notice and the Pilot 
Filing relating to the continuing disclosure service are discussed 
in this filing.
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    Several commentators on the Prior Notices discussed issues relating 
to continuing disclosure. These commentators stated that continuing 
disclosures should be made available on the same platform as other 
disclosures,\22\ with some commentators supporting the MSRB's 
willingness to establish a comprehensive disclosure system that 
included continuing disclosure.\23\ The MSRB's plan to establish the 
continuing disclosure service as a component of EMMA would ensure that 
continuing disclosure documents would be made available to the public 
through the EMMA portal.
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    \22\ See letters from Leslie Norwood, Vice President and 
Assistant General Counsel, Bond Market Association (now known as 
Securities Industry and Financial Markets Association, or 
``SIFMA''), to Mr. Lanza, dated September 15, 2006; Thomas Sargant, 
President, Regional Municipal Operations Association, to Mr. Lanza, 
dated September 27, 2006; Gary P. Machak, Chairman, Municipal 
Advisory Council of Texas, to Mr. Lanza, dated September 14, 2006; 
Elizabeth R. Krentzman, General Counsel, Investment Company 
Institute (``ICI''), to Mr. Lanza, dated September 14, 2006; Ruth 
Brod, Consultant, TRB Associates, to Mr. Lanza, dated September 14, 
2006; Terry L. Atkinson, Managing Director, UBS Securities LLC, to 
Mr. Lanza, dated September 15, 2006.
    \23\ See letters from Ms. Norwood, Managing Director and 
Associate General Counsel, SIFMA, to Mr. Lanza, dated December 14, 
2007; S. Lauren Heyne, Chief Compliance Officer, R.W. Smith & 
Associates, Inc., to Mr. Lanza, dated December 17, 2007.
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    A commentator on the Pilot Filing suggested that, if the Commission 
were to make the MSRB the sole secondary market disclosure filing venue 
for issuers and obligated persons, the Commission would move ``closer 
to the

[[Page 46165]]

Tower Amendment danger zone.'' \24\ As noted in section 3(b) of this 
filing, the MSRB believes that the continuing disclosure service is 
consistent with the MSRB's statutory mandate under Section 15B of the 
Act. In particular, the MSRB believes that the operation of the 
continuing disclosure service would in no way violate the restrictions 
placed on the MSRB's activities by the so-called Tower Amendment.\25\ 
The MSRB believes that the proposed continuing disclosure service is 
consistent with the MSRB's mandate under the Act to adopt rules that, 
among other things, protect investors and the public interest by 
providing a free centralized source of information for retail 
investors.
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    \24\ See comments of DPC. See also footnote 14 supra.
    \25\ See Exchange Act Section 15B(d).
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    As discussed in greater detail in section 4 of this filing, this 
commentator also stated that the MSRB's intention to combine continuing 
disclosures with primary market disclosures and trade price data 
``breaks new ground among regulatory bodies in terms of value-added 
content available to the public at no charge,'' expressing the view 
that the MSRB would ``effectively take over the business of providing 
value-added content.''\26\ Another commentator on the Pilot Filing 
argued in favor of the creation of a ``publicly accessible storage and 
dissemination system'' for all filings in the municipal securities 
market, stating that the current municipal securities disclosure model 
``severely limits innovation and access'' to disclosures and ``locks up 
public documents in private hands while the proposed portal run by a 
public entity will encourage transparency in the municipal securities 
market and create a healthy ecosystem of information that will 
ultimately benefit both the investment community and the municipalities 
that seek access to public markets.'' \27\
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    \26\ See comments of DPC.
    \27\ See letter from EDGAR Online. See also footnote 15 supra.
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    As discussed in greater detail in section 4 of this filing, the 
MSRB believes that the operation by the MSRB of the continuing 
disclosure service would not result in the MSRB taking over the 
business of providing value-added content but instead serve as a basis 
on which private enterprises could themselves concentrate more of their 
resources on developing and marketing value-added services. The MSRB 
believes that much of the impact of the proposed rule change on 
commercial enterprises would result from the increased competition in 
the marketplace resulting from the entry of additional commercial 
enterprises in competition with such existing market participants with 
respect to value-added services, rather than from the operation of 
continuing disclosure service as a source of the raw documents and 
related information to the public. Although the MSRB recognizes that 
the continuing disclosure service might require private enterprises to 
modify some aspects of the way they undertake their current business 
activities, the MSRB believes that the continuing disclosure service 
would promote, rather than hinder, further competition, growth and 
innovation in this area.
    Most commentators on the 2008 Notice were supportive of the MSRB's 
decision to begin planning for the continuing disclosure service,\28\ 
although some commentators would not commit fully to support this 
process until reviewing possible Commission amendments to Rule 15c2-12 
necessary for the development of the MSRB's continuing disclosure 
service, as well as specific details relating to the implementation by 
the MSRB of the proposed continuing disclosure service.\29\ 
Commentators representative of issuers encouraged the MSRB to work with 
the issuer community in developing the submission process.\30\ The MSRB 
has participated in a series of meetings and demonstrations with issuer 
organizations to discuss the development of EMMA, including the 
continuing disclosure service. The MSRB would continue to work with the 
issuer community, as well as with the other relevant segments of the 
municipal securities marketplace, as development of the continuing 
disclosure service proceeds. In addition, the MSRB intends to work with 
issuer organizations to assist issuers in adapting to the process for 
submitting continuing disclosure documents to EMMA, including 
coordinated efforts targeted at issuers making submissions under 
continuing disclosure undertakings entered into prior to the continuing 
disclosure service becoming operational, with a view to ensuring that 
means for making submissions of continuing disclosure documents through 
EMMA are available for issuers that have not yet fully adapted to 
EMMA's all-electronic submission process.
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    \28\ See letters from Rob Yolland, Chairman, National Federation 
of Municipal Analysts, to Mr. Lanza, dated March 10, 2008; Kathleen 
A. Aho, President, National Association of Independent Public 
Finance Advisors (``NAIPFA''), to Lynnette Hotchkiss, Executive 
Director, MSRB, dated March 10, 2008; Robert Donovan, Executive 
Director, Rhode Island Health and Educational Building Corporation, 
Stephen M. Fillebrown, Director of Research, Investor Relations and 
Compliance, NJ Health Care Facilities Financing Authority, and 
Charles A. Samuels and Meghan B. Burke, Mintz Levin Cohn Ferris 
Glovsky and Popeo PC, on behalf of National Association of Health 
and Educational Facilities Finance Authorities (``NAHEFFA''), to Mr. 
Lanza, dated March 3, 2008; Cristeena G. Naser, Senior Counsel, 
American Bankers Association, to Mr. Lanza, dated February 28, 2008; 
Rick Farrell, Executive Director, Council of Infrastructure 
Financing Authorities (``CIFA''), to Mr. Lanza, dated February 25, 
2008; Jack Addams, Managing Director, First Southwest Company 
(``First Southwest''), to Mr. Lanza, dated February 25, 2008; 
Jeffrey L. Esser, Executive Director and CEO, Government Finance 
Officers Association (``GFOA''), Vernon L. Larson, President, 
National Association of State Auditors, Comptrollers and Treasurers 
(``NASACT''), & South Dakota State Treasurer, and Lynn Jenkins, 
President, National Association of State Treasurers (``NAST''), & 
Kansas State Treasurer, jointly, to Mr. Lanza, dated February 25, 
2008; Heather Traeger, Assistant Counsel, ICI, to Mr. Lanza, dated 
February 25, 2008; Ms. Norwood, SIFMA, to Mr. Lanza, dated February 
25, 2008.
    \29\ See letters from CIFA; GFOA, NASACT and NAST; NAHEFFA; 
NAIPFA. GFOA, NASACT and NAST also stated, and NAHEFFA agreed, that 
``Rule 15c2-12 should only be changed to allow for electronic 
submission of disclosure documents to one central location, and that 
no other changes to the Rule should be made.''
    \30\ See letters from CIFA; GFOA, NASACT and NAST; NAHEFFA.
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    One commentator asked whether periodic filings other than 
submissions of annual financial information, such as quarterly or 
monthly financial results, would be accepted.\31\ A second commentator 
sought clarification on whether continuing disclosure information for 
offerings sold prior to the launch of the continuing disclosure service 
would be accepted and made publicly available.\32\ Another commentator 
asked whether historical documents would be included.\33\
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    \31\ See letter from NAHEFFA.
    \32\ See letter from J. Foster Clark, President, National 
Association of Bond Lawyers (``NABL''), to Mr. Lanza, dated February 
25, 2008.
    \33\ See letter from First Southwest.
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    The MSRB understands that issuers and obligated persons have often 
sought to disseminate to the marketplace items of continuing disclosure 
that are in addition to the specific items of continuing disclosure 
described in Rule 15c2-12. Such additional items may include, but are 
not limited to, quarterly or monthly financial information and notices 
of other events. In some cases such additional items of disclosure may 
be specified under a continuing disclosure undertaking entered into 
consistent with Rule 15c2-12. The continuing disclosure documents to be 
made publicly available through the EMMA portal would consist of the 
specific items of continuing disclosure described in Rule 15c2-12 and 
any additional disclosure items as specifically set forth in a 
continuing

[[Page 46166]]

disclosure undertaking.\34\ Continuing disclosure documents would be 
made available for any issue for which such documents have been 
submitted to EMMA, regardless of whether the continuing disclosure 
undertaking was entered into before or after the establishment of the 
continuing disclosure service. EMMA would make available only those 
continuing disclosures submitted to EMMA on or after the launch of the 
continuing disclosure service.\35\
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    \34\ The MSRB supports the dissemination of additional 
continuing disclosures beyond the baseline established by Rule 15c2-
12 and may consider in the future the possible expansion of the 
continuing disclosure service to include additional voluntary 
secondary market disclosures, which would be the subject of future 
filings with the Commission.
    \35\ While EMMA would not include historical documents, the 
continuing disclosure documents that would be received by EMMA 
through the continuing disclosure service would constitute the most 
up-to-date disclosures made by or on behalf of submitting issuers 
and obligated persons applicable to their securities.
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    One commentator asked whether all continuing disclosure documents 
and information would be available for free on the EMMA portal or 
whether some portions would only be available to paid subscribers.\36\ 
Other commentators sought clarification on the timing of information 
that would be provided through a subscription as compared to the time 
of posting the information on the EMMA portal.\37\ As noted in this 
filing, all continuing disclosures received by the MSRB would be 
accessible for free on the EMMA portal and would also be available, 
simultaneously with posting on the EMMA portal, through a data-stream 
subscription for a fee. The subscription would not provide any 
documents or information in addition to what is made public through the 
EMMA Web site.
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    \36\ See letter from NABL.
    \37\ See letters from NAHEFFA; First Southwest.
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    A commentator asked whether special software or other arrangements 
would be necessary for issuers, obligated persons and their agents to 
make submissions of continuing disclosure documents. This commentator 
also asked whether submitters would be provided with electronic 
confirmation that disclosure materials were received by the continuing 
disclosure service.\38\ Continuing disclosure documents may be 
converted from other electronic formats to PDF using various free or 
commercially available software programs or plug-ins. In those cases 
where the original continuing disclosure document exists solely in 
paper format (which the MSRB believes is not common and should become 
increasingly rare), submitters may use the services of widely available 
commercial copying and document handling enterprises or may use 
existing or newly acquired scanning hardware. The Web-based data-entry 
process that would be established for on-line submissions to the 
continuing disclosure service would require no special software other 
than a Web browser. Similarly, on-line uploads of data files in 
extensible markup language (XML) do not require any special software 
but would require programming to create XML files and to provide a 
process for accurately populating the XML files with necessary data. 
Computer-to-computer connections, an optional means for submitting 
continuing disclosures expected to be used primarily by agents acting 
on behalf of multiple issuers and/or obligated persons, would require 
submitters to use commercially available products or to undertake 
programming (at the election of the submitter) to interface with an 
EMMA Web service. All submission methods would provide appropriate 
feedback to submitters for error correction and submission confirmation 
purposes, which may require some programming by submitters to ensure 
they realize the full benefit of such feedback.
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    \38\See letters from NAHEFFA.
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    The 2008 Notice sought comment on whether the continuing disclosure 
service should accept continuing disclosure submissions from a third 
party with respect to an issuer's securities only if the issuer has 
affirmatively designated that such third party is authorized to act as 
its agent, or whether submissions from any registered EMMA user should 
be accepted on behalf of an issuer unless the issuer has affirmatively 
indicated that it wishes to take control over which parties can submit 
on its behalf.
    Three commentators jointly stated that ``third parties should be 
able to submit on behalf of an issuer if and only if the issuer has 
affirmatively designated the third party agent to do so [emphasis in 
original].'' \39\ Two other commentators agreed,\40\ while another 
disagreed,\41\ stating that it was ``concerned that if EMMA does not 
accept continuing disclosure from a third party, unless an issuer 
specifically authorizes the third party to EMMA, there will be cases of 
issuer inaction preventing timely disclosure.'' This commentator stated 
that, to avoid potential delays in the dissemination of disclosure to 
the marketplace caused by a requirement that the issuer authorize an 
agent to act on its behalf, it believed that ``the current practice set 
forth in the standard Municipal Secondary Market Disclosure Information 
Cover Sheet should be continued, which requires the person/entity 
submitting information to represent affirmatively that the person is 
authorized to submit the information.'' \42\
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    \39\ See letter from GFOA, NASACT and NAST.
    \40\ See letters from NAHEFFA; First Southwest.
    \41\ See second letter from SIFMA.
    \42\ See second letter from SIFMA. The Cover Sheet referenced in 
the comment is a voluntary form created by industry participants for 
use in connection with submissions of continuing disclosures.
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    The MSRB believes that the ultimate authority to determine who may 
submit documents on behalf of the issuer or obligated person should lie 
with such issuer or obligated person and, as a result, the MSRB is 
proposing to provide that issuers and obligated persons may designate 
agents to submit documents and information on their behalf, and may 
revoke such designation, through the EMMA on-line account management 
utility, and such designated agents must register to obtain password-
protected accounts on EMMA in order to make submissions on behalf of 
the designating issuers or obligated persons. Any party identified in a 
continuing disclosure undertaking as a dissemination agent or other 
party responsible for disseminating continuing disclosure documents or 
other disclosure documents specified pursuant to such continuing 
disclosure undertaking may also act as a designated agent for such 
issuer or obligated person, without the necessity of the issuer or 
obligated person making a designation through the EMMA on-line account 
management utility, upon such party certifying through the EMMA on-line 
account management utility as to its authority to make submissions on 
behalf of the issuer or obligated person under the continuing 
disclosure undertaking. The issuer or obligated person, through the 
EMMA on-line account management utility, may revoke such authority to 
act as a designated agent.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:

[[Page 46167]]

    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The MSRB has consented to an extension of the time period specified 
in Section 19(b)(2) of the Exchange Act to 120 days after the date of 
publication of notice of filing of this proposed rule change.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-MSRB-2008-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-MSRB-2008-05. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the MSRB. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-MSRB-2008-05 and should be 
submitted on or before September 22, 2008.

    By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-17857 Filed 8-4-08; 8:45 am]

BILLING CODE 8010-01-P
