
[Federal Register: October 1, 2009 (Volume 74, Number 189)]
[Notices]               
[Page 50855-50856]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01oc09-128]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60725, File No. SR-MSRB-2009-12]

 
Self-Regulatory Organizations; Municipal Securities Rulemaking 
Board; Order Approving Proposed Rule Change Relating to Amendments to 
Rule G-11(i) (Settlement of Syndicate or Similar Account), Rule G-11(j) 
(Payment of Designations), and Rule G-12(i) (Settlement of Joint or 
Similar Account)

September 28, 2009.
    On August 6, 2009, the Municipal Securities Rulemaking Board 
(``MSRB''), filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934

[[Page 50856]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend Rule G-11(i) (settlement of syndicate or similar account), Rule 
G-11(j) (payment of designations), and Rule G-12(i) (settlement of 
joint or similar account). The proposed rule change was published for 
comment in the Federal Register on August 18, 2009.\3\ The Commission 
received one comment letter about the proposed rule change.\4\ On 
September 22, 2009, the MSRB filed a response to the comment letter.\5\ 
This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60487 (Aug. 12, 
2009), 74 FR 41771 (August 18, 2009) (``Commission's Notice'').
    \4\ See letter from Michael Decker and Mike Nicholas, Co-Chief 
Executive Officers, Regional Bond Dealers Association (``RBDA''), 
dated September 8, 2009.
    \5\ See letter from Margaret C. Henry, Associate General 
Counsel, MSRB, to Elizabeth M. Murphy, Secretary, SEC, dated 
September 22, 2009 (``Response Letter'').
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    The proposed rule change would accelerate the settlement of 
syndicate accounts and secondary market trading accounts, and the 
payment of designations, by shortening certain time periods within the 
rules. These proposals are designed to reduce the exposure of syndicate 
and secondary market trading account members to the risk of potential 
deterioration in the credit of the syndicate or account manager during 
the pendency of account settlements. For the proposed amendments to 
Rule G-11, the MSRB requested that the amendments become effective for 
new issues of municipal securities for which the Time of Formal Award 
(as defined in Rule G-34(a)(ii)(C)(1)(a)) is more than 30 calendar days 
after the date the amendments are approved by the SEC. For the proposed 
amendments to Rule G-12, the MSRB requested that the amendments become 
effective for secondary market trading accounts formed more than 30 
days after the date the amendments are approved by the SEC. A full 
description of the proposal is contained in the Commission's Notice.
    As previously noted, the Commission received one comment letter 
relating to the proposed rule change.\6\ The RBDA generally supported 
the spirit of the MSRB's proposal and applauded the MSRB for acting to 
reduce risks faced by syndicate members, but expressed concern about 
the proposed amendments to Rule G-11(j). The RBDA supported the 
proposal to amend Rule G-11(i) to reduce the time period for closing 
syndicate accounts to 30 calendar days following the date the issuer 
delivers the securities to the syndicate and also supported the 
proposed amendment to Rule G-12(i) to reduce the time to close joint or 
similar accounts--secondary market trading accounts--to 30 calendar 
days following the date all securities have been delivered by the 
account manager to the account members. However, the RBDA believes that 
the proposed amendments to Rule G-11(j) related to payments of 
designations imposing a deadline of two business days for submissions 
of designations and 10 calendar days for payments of designations is 
too short and would create undue burdens for both syndicate members and 
managers. The RBDA recommended that the MSRB maintain the current 30-
day deadline for the payments of designations.
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    \6\ See supra note 4.
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    The MSRB stated in its Response Letter that the proposed amendments 
to Rule G-11(j) are intended to reduce the exposure of co-managers to 
the credit risk of the senior manager. The MSRB noted that in most 
underwriting syndicates, a large percentage of the syndicate profits 
are distributed as payments for designations. The MSRB believes that 
the shorter time periods are reasonable and that any administrative 
burdens associated with the changes are more than outweighed by the 
significant reduction in credit risk to co-managers, especially in the 
case of smaller firms. Accordingly, the MSRB did not propose to modify 
the proposal.
    The Commission has carefully considered the proposed rule change, 
the comment letter received, and the MSRB's response to the comment 
letter and finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to the MSRB \7\ and, in particular, the requirements of 
Section 15B(b)(2)(C) of the Act \8\ and the rules and regulations 
thereunder. Section 15B(b)(2)(C) of the Act requires, among other 
things, that the MSRB's rules 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.\9\ In particular, the 
Commission finds that the proposed rule change is consistent with the 
Act because it will further the free and open market in municipal 
securities by reducing the exposure of dealers to the potential 
deterioration of the credit of syndicate managers during the period 
prior to settlement of syndicate accounts and by providing a comparable 
rule for the settlement of secondary market trading accounts. The 
proposed amendments will become effective on the dates requested by the 
MSRB.
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    \7\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78o-4(b)(2)(C).
    \9\ Id.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-MSRB-2009-12), be, and it 
hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-23701 Filed 9-30-09; 8:45 am]

BILLING CODE 8011-01-P
