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.
