SEC approves MSRB’s amendments to time of trade disclosure

The Securities and Exchange Commission has approved the Municipal Securities Rulemaking Board’s amendments to Rule G-47 on time of trade disclosure, adding three disclosure scenarios, retiring some existing guidance and clarifying some supplemental information.

The amendments were filed with the Commission in April and the amendments themselves were discussed and approved at the MSRB’s quarterly board meeting in October, following its request for comment in Feb. 2023.

“The MSRB continues to believe that the proposed rule change is reasonable and is necessary to protect investors and the public interest by ensuring that retail and other customers receive material information at or prior to the time of trade that would allow them to make an informed investment decision,” wrote Ernesto Lanza, MSRB chief regulatory and policy officer, in a June 14 letter responding to comments.

Changes to the rule would add three disclosure scenarios: yield to worst, the unavailability of the official statement and the continuing disclosures not being available. Between the amendments and the final rule, disclosing a customer’s time of trade when there’s no official statement available was brought down in scope to only apply to new-issue customers.

The proposal’s only commenter, Leslie Norwood, managing director, associate general counsel and head of municipal securities at the Securities Industry and Financial Markets Association, requested clarity on a few points related to the new disclosures, and the MSRB responded following the filing of the amendments with the Commission.

“If an underwriter is expected to produce a final official statement, but it is not yet available at the time of trade or it is still in production, a dealer selling a new-issue security constituting an offered municipal security within the meaning of Rule G-32 would not be required to disclose that there is no official statement available for the municipal security in question,” Lanza wrote in the MSRB’s response.

The adding of yield to worst as a disclosure scenario would require a dealer to disclose if the computed yield required by the MSRB is different than the yield at which the transaction was executed. The MSRB feels this may be material as it “could impact a decision to purchase a municipal security at the current price or yield and therefore may be required to be disclosed at or prior to the time of trade in addition to being disclosed on a customer’s confirmation,” the MSRB filing said.

The amendments also include a slight change to the MSRB’s definition of material information. Currently the definition is: “information is considered to be material if there is a substantial likelihood that the information would be considered important or significant by a reasonable investor in making an investment decision,” the MSRB said. The amendments knock out the words “or significant” and add another conforming amendment in its supplementary material that would change the word “significant” to “important”.

The rule change would also retire interpretive guidance on conversion costs and secondary market insurance and consolidate existing inter-dealer time of trade disclosure guidance into a single piece of interpretive guidance, the SEC said.

The MSRB will announce within 30 days the effective date of the proposed rule change in a regulatory notice.