United States: MSRB Proposes Amending Rules On Primary Offering Practices

The MSRB proposed to amend MSRB Rule G-11 (Primary Offering Practices) and Rule G-32 (Disclosures in Connection with Primary Offerings). According to the MSRB, the proposal is intended to improve the general practices that underwriters undertake in a primary offering of municipal securities.

The proposed amendments to Rule G-11 would:

• improve the information dissemination requirements to obligate the senior syndicate manager to release "free-to-trade" information to all syndicate and selling group members simultaneously;
• mandate that the syndicate manager provides the issuer with information with respect to (i) designations, (ii) group net sales credit and (iii) allocations of the securities in a primary offering; and
• codify the requirement for a selling group member to follow the issuer terms and conditions in a primary offering.

The proposed amendments to Rule G-32 would:

• make sure that available information regarding "CUSIP numbers advance refunded" is given to all market participants; and
• eliminate the mandate that a dealer, in its capacity as a financial advisor, must provide the prepared official statement to the underwriter "promptly" following approval by the issuer.

The MSRB proposal would also amend Form G-32 to capture data that an underwriter is obligated to input into the New Issue Information Dissemination System ("NIIDS") for NIIDS-eligible offerings.

The MSRB plans to make the amended Form G-32 available to underwriters before the compliance dates to help them complete the form.

Commentary / Steven Lofchie

A number of MSRB proposals would benefit corporate offerings as well, and FINRA should consider their imposition. In particular, the requirement that the syndicate manager inform all distributor participants when a security is "free-to-trade" (or that the offering is all sold) would benefit small and medium-sized firms participating in an offering.

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