GFOA Submits Second Comment Letter on MSRB Rule to Require CUSIPS for Private Placements

Thursday, July 6, 2017

On June 30, 2017, GFOA filed comments requested by the Municipal Securities Rulemaking Board (MSRB) on a second draft of its amendments to Rule G-34. The amendments are intended to clarify exceptions to the proposed rule on obtaining CUSIPs for securities sold in private placement transactions. In its comments, GFOA once again emphasized a major and overriding concern: “Without clear language on how this exception can be easily met, the proposed amendment will dampen demand for bank loan and direct purchase financings entered into by state and local governments and authorities and therefore raise borrowing costs.”

To help clarify the exception, GFOA referred the American Bankers Association’s suggestion to refine the language to “investor representation” of holding the securities to maturity. GFOA also directed the MSRB to the common practice of state and local government bonds purchased by other state and local governments with no intention to resell and urged the MSRB to add this to the exception. Finally, GFOA encouraged the MSRB to consider certain types of transactions such as competitive sales where obtaining CUSIPs could deter the potential bid of a private placement.

GFOA’s Federal Liaison Center will keep members up-to-date on next steps and potential advancement of this rule clarification in the coming weeks.