December 18, 2008
Wells Fargo Brokerage Services, LLC (WFBS) appreciates this opportunity to respond to the Securities and Exchange Commissions request for comments concerning the plans of the Municipal Securities Rulemaking Board (the "MSRB") to increase transparency for municipal auction rate securities (ARS) and variable rate demand obligations ("VRDO"), as described in MSRB Notice 2008-46 and in MSRB Notice 2008-48.
The MSRB proposes to implement an electronic system to collect and disseminate information about variable rate securities and provide free public access to information through the MSRBs EMMA portal. Brokers, dealers and municipal securities dealers would be required to report, or ensure the reporting of, interest rate and descriptive information about ARS and VRDO following an ARS auction or VRDO interest rate reset. The MSRBs proposed reporting mechanism is called the Short-term Obligation Rate Transparency (SHORT) System. The MSRB has proposed an effective date of January 30, 2009. It is only with respect to this proposed effective date that we wish to comment. Our concerns with the effective date are as follows:
1) WFBS is the remarketing agent for nearly 500 VRDOs, most of which reset weekly on Wednesday. We believe it is logical to use the automated transmission process given this volume and the proposed timeliness requirement.
2) WFBS relies on vendor provided systems to facilitate remarketing. Our vendors are in the process of identifying required application changes needed to support the SHORT proposal, including additional data elements and submission functionality. We do not yet have vendor estimates of the timeframe for this development effort.
In light of these constraints and unknowns, we are doubtful that an automated solution can be designed, thoroughly tested and implemented prior to the proposed implementation date, even if the rule changes contained in the proposal were finalized and adopted today.
We believe that WFBS could implement the alternative solution of manual submission through the MSRB Gateway as an interim solution. However, given the potential for errors inherent in high-volume manual processing and the burden it would place on our firm, we believe this would not be a desirable alternative.
We respectfully request that the implementation date of the proposal be extended to four months from the date of publication of the final rule. We appreciate this opportunity to comment on the proposal. Please contact me by phone at (612) 316-3171 or by email if you have any questions.