The Municipal Securities Rulemaking
Board (“MSRB”) has filed with the Securities and Exchange Commission (“SEC”) an
amendment to a previously filed proposed rule change consisting of (i)
amendments to Rule G-21, on advertising, and Rule G-27, on supervision, and (ii)
an interpretation on general advertising disclosures, blind advertisements and
annual reports relating to municipal fund securities (the “proposed interpretive
notice”).[1]
The MSRB has filed this amendment after consultation with SEC staff.
Today’s filing amends and restates
the original rule filing to clarify various references in the explanatory
materials to the relationship among the provisions of Rule G-21, as amended,
and the rules of the SEC and NASD relating to investment company advertising. The
filing also makes the following minor non-substantive language changes to the
proposed amendments to Rule G-21:[2]
● The change to Rule
G-21(e)(i)(A)(3)(b) eliminates duplicative language, and the change to Rule
G-21(e)(i)(A)(4)(a)(iii) conforms to this language change, without changing the
operation of those provisions;
● The changes to
Rule G-21(e)(i)(A)(3)(c) and Rule G-21(e)(ii)(C) move language regarding the
currentness of the calculation of total annual fund operating expenses to the
appropriate provision of the rule to ensure clarity; and
● The deletion at
the beginning of Rule G-21(e)(i)(A)(4) and the additional language in Rule
G-21(e)(i)(B)(3) also are intended to clarify those provisions
Finally, today’s filing requests
that the proposed rule change be made effective on April 1, 2007.[3]
* * * * *
Questions
regarding the proposed rule change may be directed to Ernesto A. Lanza, Senior
Associate General Counsel, or Jill C. Finder, Associate General Counsel.
*
* * * *
CHANGES TO ORIGINAL PROPOSED
AMENDMENTS TO RULE G-21[4]
Rule G-21. Advertising
(a)-(d) No
additional changes.
(e) Municipal Fund Security Product
Advertisements. In addition to the requirements of section (c), all product
advertisements for municipal fund securities shall be subject to the following
requirements:
(i) Required Disclosures.
(A) Substance and Format of
Disclosure. Except as described in paragraph (B) of this subsection (i),
each product advertisement for municipal fund securities:
(1)-(2) No additional changes.
(3) additional disclosures
concerning performance – that includes performance data must include:
(a) No additional changes.
(b) if a sales load or any other
nonrecurring fee is charged, the maximum amount of the load or fee (including the maximum sales charge imposed on
purchases or the maximum deferred sales charge, to the extent applicable, current
as of the date such advertisement is submitted for publication or otherwise
disseminated) and, if the sales load or fee is not reflected in the performance
data included in the advertisement, a statement that the performance data does
not reflect the deduction of the sales load or fee and that the performance
data would be lower if such load or fee were included; and
(c) to
the extent that such performance data relates to municipal fund securities that
are not held out as having the characteristics of a money market fund and to
the extent applicable, the total annual operating expense ratio of such
municipal fund securities (calculated in the same manner as the total annual
fund operating expenses required to be included in the registration statement
for a registered investment company, subject to paragraph (e)(ii)(A) hereof),
gross of any fee waivers or expense reimbursements, current as of the
date of submission of such advertisement for publication.
(4) format of
disclosure – must meet the following legibility requirements:
(a) for a print
advertisement:
(i)-(ii) No
additional changes.
(iii) the maximum amount of the sales load sales charge or maximum deferred
sales charge required to be disclosed pursuant to clause (3)(b) and the
information required to be disclosed pursuant to clause (3)(c), along with the
standardized performance information mandated by Securities Act Rule 482 as
applicable by virtue of subsection (e)(ii) of this rule, must be presented in a
prominent text box that contains only such information but which may also
contain comparative performance and fee data and disclosures required under
this section (e).
(b) No additional
changes.
(B) Exceptions from Certain
Disclosure Requirements. Notwithstanding any other provision of this rule,
the following advertisements relating to municipal fund securities shall not be
subject to the provisions of subparagraphs (1) and (2) of paragraph (e)(i)(A):
(1)-(2) No additional changes.
(3) certain form letters to existing
customers – any form letter relating to municipal fund securities distributed solely to existing customers of the broker, dealer or municipal
securities dealer to whom the broker, dealer or municipal securities dealer has
previously sent or caused to be sent an official statement for:
(a)-(b) No additional changes.
(ii) Performance
Data. Each product advertisement that includes performance data relating
to municipal fund securities must present performance data in the format, and
calculated pursuant to the methods, prescribed in paragraph (d) of Securities
Act Rule 482 (or, in the case of a municipal fund security that the issuer
holds out as having the characteristics of a money market fund, paragraph (e)
of Securities Act Rule 482) and, to the extent applicable, subparagraph (e)(i)(A)(4)
of this rule, provided that:
(A)-(B) No additional changes.
(C) currentness of calculation –
performance data and total annual operating expense ratio shall
be calculated as of the most recent practicable date considering the type of
municipal fund securities and the media through which data will be conveyed,
except that any advertisement containing total return quotations will be
considered to have complied with this paragraph provided that:
(1)-(2) No additional changes.
(D)-(F) No additional changes.
(iii)-(vii) No
additional changes.
(f) No changes.
