The MSRB filed an amendment with the SEC to a previous filing of proposed changes to MSRB Rule G-34 ("CUSIP Numbers"). The proposed changes are intended to clearly establish that (i) brokers, dealers and municipal securities dealers are subject to CUSIP requirements when acting as placement agents in private placements of municipal securities, and (ii) both dealer municipal advisors and non-dealer municipal advisors are subject to CUSIP requirements. It also includes a "principles-based exception" to the CUSIP requirements. This exception would apply under certain circumstances when the buyer is a bank or bank affiliate that the seller reasonably believes is buying the bonds with an intent to hold the bonds until maturity.
In response to comments received to the initial rule proposal, the MSRB decided to make certain changes to the principles-based exception. Specifically, the MSRB is amending the requirement that dealers must have a "reasonable belief" that a purchaser intends to hold the new issue of municipal securities "to maturity." Instead, to better reflect the terms of direct purchase transactions that often include the potential for earlier redemption or mandatory tender, the MSRB is proposing to require firms relying on the principles-based exception to have a reasonable belief that the purchasing entity intends to hold the municipal securities to either maturity or "earlier redemption or mandatory tender."
The MSRB further elected to expand the principles-based exception to include situations where (i) a municipal entity purchases municipal securities with funds that are at least – in-part – proceeds from the purchasing entity's issue of other municipal obligations or (ii) municipal securities being purchased are used to secure or pay the entity's issue of other municipal obligations. Expanding the exception in these instances is intended to permit firms to take advantage of the exception with respect to purchases of municipal securities by entities that do not intend to trade the securities on the secondary market.
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