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MSRB gets SEC approval for rule change to prioritize customer orders
By Jennifer Chiou
New York, Aug. 16 - The Municipal Securities Rulemaking Board announced that the Securities and Exchange Commission approved its proposed rule change to require underwriters to give priority to customer orders in primary offerings over orders for their own accounts or orders for their related accounts.
According to an MSRB notice, the rule change consists of amendments to MSRB Rules G-8, G-9 and G-11 as well as an interpretive notice under Rule G-17.
The notice added that priority is to be given "to the extent feasible and consistent with the orderly distribution of securities in the offering or unless otherwise agreed to by the issuer."
The board said that syndicate managers are also permitted to deviate from this customer priority rule if it is in the best interests of the syndicate to do so.
The MSRB added that the term "related account" includes a municipal securities investment portfolio of an underwriter or an affiliate, an arbitrage account of an underwriter or an affiliate, a municipal securities investment trust sponsored by an underwriter or an affiliate or an accumulation account established in connection with such a municipal securities investment trust.
Syndicate managers and underwriters will have to keep records of whether there was a retail order period and whether they deviated from the customer-priority provisions and the reasons for doing so, the notice stated. Records will be retained for six years.
The rule change is effective for new issues of municipal securities after Oct. 12.
Questions about the rule change may be directed to Peg Henry, deputy general counsel, at 703 797-6625.
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