What MSRB De­cided at First Meeting of Fis­cal ‘19

The Bond Buyer - - Front Page - By Kyle Glazier

WASH­ING­TON – The Mu­nic­i­pal Se­cu­ri­ties Rule­mak­ing Board has agreed to col­lect new data from muni is­suances and to seek fur­ther com­ment aimed at pro­duc­ing new guid­ance on un­der­writ­ers’ dis­clo­sures to is­suers un­der the board’s fair-deal­ing rule.

The MSRB an­nounced those de­ci­sions Mon­day fol­low­ing its quar­terly board meeting at its of­fices here last week. The meeting was the first for new Chair­man Gary Hall and the first of the board’s 2019 fis­cal year. The board made no ma­jor or con­tro­ver­sial de­ci­sions, but made clear that ad­di­tional ac­tions re­gard­ing pri­mary of­fer­ing

prac­tices are likely to come in the fu­ture.

The board de­cided to col­lect new data from muni is­sues on its Form G-32, which will be au­to­mat­i­cally pop­u­lated from data un­der­writ­ers al­ready have to sub­mit to the New Is­sue Dis­sem­i­na­tion Ser­vice. Form G-32 is sub­mit­ted to the MSRB by un­der­writ­ers and pro­vides in­for­ma­tion about a new is­suance, such as the un­der­writ­ing spread, ma­tu­rity date, ini­tial of­fer­ing price, min­i­mum de­nom­i­na­tion, and more.

The NIIDS sys­tem, de­vel­oped by the De­pos­i­tory Trust Com­pany, col­lects in­for­ma­tion about a new muni is­sue from un­der­writ­ers or their rep­re­sen­ta­tives in an elec­tronic for­mat and then makes that data im­me­di­ately avail­able to ven­dors that pro­vide such in­for­ma­tion to mar­ket par­tic­i­pants.

The board had asked ear­lier this year whether to auto-pop­u­late that data as well as whether to re­quire new data deal­ers would have to en­ter man­u­ally. Dealer groups op­posed re­quir­ing ad­di­tional man­ual en­try of data on Form G-32, but didn’t raise ob­jec­tions to sim­ply fill­ing it with NIIDS data.

MSRB Pres­i­dent and Ex­ec­u­tive Di­rec­tor Lyn­nette Kelly said the board may not im­me­di­ately file for that change with the Se­cu­ri­ties and Ex­change Com­mis­sion be­cause the board is con­tin­u­ing to con­sider other po­ten­tial re­vi­sions to its new of­fer­ing rules. The SEC would have to ap­prove any new re­quire­ments or other rule changes.

The board also dis­cussed com­ments it re­ceived from a June re­quest for com­ment on a ret­ro­spec­tive re­view of its 2012 in­ter­pre­tive guid­ance on du­ties owed by un­der­writ­ers to their is­suer clients. That guid­ance es­tab­lished obli­ga­tions for un­der­writ­ers to dis­close in­for­ma­tion to is­suers such as the na­ture of their re­la­tion­ship, the risks of trans­ac­tions rec­om­mended by the un­der­writ­ers, and con­flicts of in­ter­est.

These “G-17 dis­clo­sures,” so-called be­cause the guid­ance arose out of an in­ter­pre­ta­tion of Rule G-17 on fair deal­ing, have be­come vo­lu­mi­nous and boil­er­plate ac­cord­ing to a near con­sen­sus of both is­suers and deal­ers. Deal­ers told the MSRB that the dis­clo­sures could be sim­pli­fied by re­quir­ing the dis­clo­sure only of ac­tual, rather than po­ten­tial con­flicts of in­ter­est. Is­suers said that the MSRB should hold deal­ers to the ex­ist­ing re­quire­ment that such dis­clo­sures be made with clar­ity.

The board de­cided to di­rect staff to pre­pare a sec­ond re­quest for com­ment on pro­posed amend­ments to the G-17 guid­ance, which could be out in the next few weeks.

The board dis­cussed data col­lected un­der MSRB Rule G-45, on the re­port­ing of in­for­ma­tion on mu­nic­i­pal fund se­cu­ri­ties, and de­cided not to seek pub­lic com­ment at this time re­gard­ing the pos­si­bil­ity of mak­ing such in­for­ma­tion pub­licly avail­able in the fu­ture.

“We feel like the pub­lic avail­abil­ity of that in­for­ma­tion is al­ready served,” Kelly said.

The MSRB plans to make the Se­cu­ri­ties In­dus­try and Fi­nan­cial Mar­kets As­so­ci­a­tion Swap Index and the U.S. Trea­sury Yield Curve avail­able on its EMMA web­site, but it may take some months.

The board dis­cussed the MSRB’s data strat­egy and data plan and re­ceived a staff up­date on a demon­stra­tion project re­gard­ing data an­a­lyt­ics, as well as a staff overview of the sources and lim­i­ta­tions of third-party data used by the MSRB.

The board also met with SEC Chair­man Jay Clay­ton and Re­becca Olsen, di­rec­tor of the SEC’s Of­fice of Mu­nic­i­pal Se­cu­ri­ties. It also met sep­a­rately with Fi­nan­cial In­dus­try Reg­u­la­tory Au­thor­ity Pres­i­dent and Chief Ex­ec­u­tive Of­fi­cer Robert Cook and Se­nior Di­rec­tor of Fixed In­come Reg­u­la­tion Cyn­thia Friedlander. The reg­u­la­tors dis­cussed over­sight of the mu­nic­i­pal se­cu­ri­ties mar­ket and co­or­di­na­tion on cross-mar­ket ini­tia­tives.

The board also met with mem­bers of Bond Deal­ers of Amer­ica to dis­cuss cur­rent MSRB ini­tia­tives. ◽

The board de­cided to col­lect new data from muni is­suers on its Form G-32, which will be au­to­mat­i­cally pop­u­lated from data un­der­writ­ers al­ready have to sub­mit.

The MSRB is con­sid­er­ing ad­di­tional po­ten­tial re­vi­sions to its new of­fer­ing rules, said Pres­i­dent and Chief Ex­ec­u­tive Of­fi­cer Lyn­nette Kelly.

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