There may not be a tax-exempt bond market after the end of this year, but under the MSRB’s latest proposal, bank direct placements will continue to be exempt from CUSIP registration requirements. This may sound like something only lawyers would care about, but it’s a very good development for hospitals and other muni borrowers.
A CUSIP is a 9-character alphanumeric code that helps track financial securities. A single, publicly-sold bond issue will generally has multiple CUSIP’s, one for each maturity. CUSIP’s are central to filing and looking up bonds on the MSRB’s EMMA disclosure portal.
Banks and many other muni market participants were not happy with the MSRB’s proposal earlier this year to amend Rule G-34 and require CUSIP’s for bank placements.
CUSIP’s raise the potential for loans to be deemed registered securities, which would mean increased reporting requirements, lower bank profitability, and in a worst case scenario, subject lenders to penalties.
The MSRB’s revised amendment exempts placements from CUSIP registration so long as there is a reasonable belief that the bank intends to hold the debt to maturity, earlier redemption, or mandatory tender date.
The MSRB suggests –but does not require– a written representation from the bank on its intentions.
This latest development ought to help keep bank placements as viable and cost-effective alternatives to traditional bonds.
Click here to view the filing on the MSRB website.