WASHINGTON - The Municipal Securities Rulemaking Board filed a proposed amendment to its Rule G-32 with the Securities and Exchange Commission Friday that under certain conditions would allow dealers to send just one official statement to investors who share the same address.
Rule G-32 requires an underwriter of a new issue of municipal securities to deliver the preliminary official statements to customers no later than the settlement of the transaction. The underwriter must send customers the final official statement no later than the business day after it receives the document from the issuer.
The MSRB is proposing to amend the rule to allow dealers to satisfy their official statement delivery requirements by complying with the SEC's Rule 154. That rule allows dealers to send a single offering document to two or more investors sharing the same address under certain conditions. This method of delivery is called "householding," the MSRB said.
Under Rule 154, the investors do not have to be related, the document can be addressed to investors as a group or to each of the investors individually, and the address may be residential, commercial, or an electronic address.
The conditions that dealers must meet to comply with the rule include that the dealer obtains the investors' written or implied consent for the delivery of a single document to a household.
The MSRB said that the investors' implied consent can be relied on only if the following conditions are met: the investors have the same last name or the dealer "reasonably believes" they are members of the same family; the dealer sends each investor written notice of its intent to send a single document at least 60 days before doing so and gives the investors a chance to opt out of this method of delivery; the investors do not opt out of this method of delivery; and the dealer delivers the document to a residential street address or post office box. An e-mail address may also be used if the dealer obtains the investors consent and it is a shared address.
In addition, dealers and mutual fund companies must explain to investors, at least annually, how they can revoke their consent for the delivery of a single offering document to one household.
The proposed rule change also would permit dealers to "household" offering documents in the case of college savings programs involving municipal fund securities, which are more like municipal funds than municipal securities, but fall under MSRB rules.
"Allowing for householding in the context of municipal fund securities would be particularly beneficial, especially where one family has accounts for multiple children," the MSRB said. College savings programs allow parents or others to save money for college expenses of their children or other beneficiaries by investing funds on a tax-deferred basis in trusts that are set up by states.
