MSRB adds exceptions to draft limiting dealer consents; seeks comment

By Susanna Moon

Chicago, Nov. 21 - The Municipal Securities Rulemaking Board said it revised the draft proposal to limit dealers from consenting to amendments to bond authorizing documents for municipal securities, with added exceptions.

The new draft includes two more exceptions to a rule that would prohibit underwriters from agreeing to changes in documents that establish rights of and protections for municipal securities investors.

The draft proposal "carefully seeks to balance the rights of and protection of bondholders with the ability of issuers to make necessary and appropriate changes to bond authorizing documents," according to a press release.

The revised proposal seeks public comment on certain amendments to a July 5 draft proposal and further refines the original proposal issued in February.

"The multi-phase development of this proposal reflects the thoroughness with which the MSRB approaches changes to regulations," MSRB executive director Lynnette Kelly said in a statement. "We are committed to a rulemaking process that takes into consideration all relevant information and public comment."

The proposal seeks to ensure that investors are protected from situations in which an underwriter, which may hold the bonds momentarily during the initial distribution process but have no prior or future economic or investment interest in the bonds, could provide consent to changes in lieu of existing bondholders with a vested interest in assessing the potential impact of any amendment to the authorizing documents, the release noted.

At the same time, the exceptions in the proposed rule tries to balance those interests against the rights of issuers to make changes to the bond authorizing documents, the release added.

The final rule proposal, which will be filed with the Securities and Exchange Commission, will reflect comments received on the two new exceptions as well as other comments received during the earlier comment period, the MSRB said.

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