December 15, 2009
I realize that the intent of the Board in proposing this amendment is to restrict activity that many see as free riding in new issue municipal offerings. Unfortunately, the amendment as currently drafted, is little more than a "flipper protection rule." The Board has crafted a rule amendment with the potential to protect the free-est riders of all. This amendment should be re-drafted to allow underwriters the flexibility to identify flippers and treat those orders as dealer orders rather than affording flippers customer status as with the current language. The "best interests of the syndicate" quasi safe harbor would require unnecessary effort and not provide assurance that an underwriter could protect itself against allegations of rule violations in new issue allocations. Clear language should be drafted that allows an underwriter to identify flippers and prioritize flipper orders accordingly.