Effective February 3, 2014, the Municipal Securities Rulemaking Board (MSRB) will amend one of its rules to help protect municipal bond investors from unexpected changes in bond authorizing documents. The amendments prohibit broker-dealers from agreeing to changes to authorizing documents when acting as an underwriter or remarketing agent, or acting as an agent for bondholders.
The rule allows for exceptions in certain situations. These situations include:
- the authorizing document explicitly permits an underwriter to provide bond owner consent, and this was disclosed in the offering documents;
- the broker-dealer owns the securities outside of its capacity as an underwriter or remarketing agent;
- the securities are held by the remarketing agent due to a mandatory tender of the securities;
- the bond owners have provided written consent; or
- the underwriter provides consent on behalf of prospective purchasers, if the changes will not become effective until all current bondholders have provided consent.
The “authorizing document” refers to the trust indenture, resolution, ordinance, or other document under which the securities are issued.
This alert applies to the Series 7, Series 52, and Series 53.