MSRB Proposes Changes to "Time of Trade" Disclosure Requirements

The MSRB proposed changes to Rule G-47 ("Time of Trade Disclosure"), which requires dealers to disclose to customers at or prior to the time of trade all material information known or available publicly through established industry sources. The amendments would (i) add three new disclosure scenarios, (ii) change the rule's definition of materiality and (iii) make technical clarifications.

MSRB Rule G-47 requires dealers selling a municipal security to a customer, or purchasing a municipal security from a customer, to disclose to the customer, orally or in writing, at or prior to the time of trade, all material information known about the transaction, as well as information about the municipal security that is reasonably accessible.

The proposal would amend MSRB Rule G-47 to:

• provide that a dealer is not obligated to disclose material information in violation of insider trading rules.
• amend the definition of material information. Rule G-47 currently defines the term "material information" as "information [that] would be considered important or significant by a reasonable investor in making an investment decision." The amendments would delete the words "or significant".
• codify into Supplementary Material .03 existing interpretive guidance pertaining to market discount and to zero coupon or stepped coupon securities.
• add a clarifying example of factor bonds as bonds that prepay principal in Supplementary Material .03(i).
• add the following three new disclosure scenarios to Supplementary Material .03.: (i) yield to worst, (ii) the unavailability of the official statement; and (iii) the fact that continuing disclosures are not available.

The proposed rule change would also (i) retire interpretive guidance on conversion costs and secondary market insurance and (ii) consolidate existing inter-dealer time of trade disclosure guidance into a single piece of interpretive guidance.