June 16, 2000

John M. Gardner/   
Helen C. Atkeson   
     303/899-7300 (Ph)  
303/899-7333 (Fax) 

Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

RE: Use of Electronic Media, File Number 57-11-00

Dear Mr. Katz:

On behalf of the National Association of Bond Lawyers ("NABL"), we file these comments regarding the Commission's Release Nos. 33-7856, 34-42728 and IC-24426 (the "Release") pertaining to the use of electronic media under the federal securities laws. NABL encourages such use and appreciates the opportunity to express the views of our Subcommittee with respect to this important change in practice in the municipal securities industry. This letter supplements the letter of Howard Zucker, President of NABL, filed on behalf of NABL's Board of Directors.

National Association of Bond Lawyers

NABL was organized in 1979 for the purposes of educating its members and others in the law relating to state and municipal bonds and other obligations, providing a forum for the exchange of ideas as to law and practice, improving the state of the art in the field, providing advice and comment at the federal, state and local levels with respect to legislation, regulations, rulings and other action, or proposals therefor, affecting state and municipal obligations, and providing advice and comment with regard to state and municipal obligations in proceedings before courts and administrative bodies through briefs and memoranda as a friend of the court or agency.

Over 3,000 attorneys and paralegals are members of NABL representing members from all 50 states, the District of Columbia, and Puerto Rico. NABL conducts an extensive series of seminars and workshops throughout the year and is active in the publication of materials on professional standards and conduct, in addition to coursebooks for its seminars.

The Subcommittee that prepared this letter is composed of members of NABL's Securities Law and Disclosure Committee. Members of the Subcommittee act as bond counsel, underwriter's counsel, issuer's counsel, trustee's counsel, purchaser's counsel, and counsel to other parties involved in municipal securities transactions. Subcommittee members are familiar with disclosure practices in a broad variety of transactions, among varied types of issuers, and in disparate geographic areas. Our comments, therefore, reflect these different perspectives.

This letter has received the general agreement of a majority of the Subcommittee, and its submission to the Commission has been authorized by the Board of Directors of the Association. However, this letter does not necessarily constitute the views of all NABL Officers and Directors or of all members of the Subcommittee.

Facilitation of Electronic Communications

We applaud the Commission's steps to facilitate electronic delivery of communications to investors. We agree that there are significant benefits that investors can gain from the increased use of electronic media, and we believe that such use can occur in a manner consistent with the federal securities laws. In particular, the Commission's clear statements in the Release regarding underwriters' reliance on municipal securities issuers' placement of official statements on web sites and identification of the documents comprising the preliminary, deemed final and final official statements for purposes of Exchange Act Rule 15c2-12,1 are welcome recognition that use of electronic media is authorized under such Rule.

As indicated in President Zucker's letter, we believe that one of the most important issues raised by the Release is how to facilitate communication of information by issuers on a web site in a manner consistent with the issuers' duties under the federal securities law. Our Subcommittee fully endorses NABL's position that electronic versions of official statements, annual financial information and other information available on an issuer's web site and intended for investors should be treated the same as that information in paper format.

The following comments are designed to provide more detail regarding facilitation of the use of electronic media in connection with the sale and delivery of municipal securities.

Clarification of Regulations

We note several additional points related to regulations dealing with municipal securities. In the Release the Commission clarified that underwriters may rely on an issuer's identification of electronic documents that comprise the preliminary, deemed final and final official statements for purposes of Rule 15c2-12. The Commission has also recognized that sending an official statement in electronic form to requesting customers complies with the "first class mail or other equally prompt means" requirement of section (b)(2) of the Rule.2 To clarify that delivery in electronic media will comply with other portions of the Rule, we note our belief that (i) an underwriter may "obtain and review" an official statement in electronic form under section (b)(1) of the Rule, (ii) issuers may deliver electronic versions of official statements to underwriters in response to section (b)(3) of the Rule, and (iii) an issuer may provide continuing disclosure information and notices of the 11 events under section (b)(5) of the Rule solely by electronic means.

Because municipal securities dealers are governed by the rules of the Municipal Securities Rulemaking Board ("MSRB"), issuers of municipal securities will be prevented from fully developing their use of electronic media in connection with securities offerings unless those rules recognize such form of documents and clearly permit filings made with the MSRB to be in electronic form.

Although the MSRB has indicated that electronic delivery of material can comply with most of its rules,3 such rules are written in language and concepts that assume the use of paper documents. Some of the rules may be read to support use of electronic disclosure, others will not. For example, MSRB rule G-32 contemplates the delivery to customers of a "copy" of a final official statement or a "written notice" that such a document is not being prepared by the issuer, and MSRB rule G-36 now requires that the dealers send two copies of the official statement to the Board in paper form.

Issuer Responsibility for Hyperlinked Information

In parts A-4 and B-1 of the Release, the Commission indicates that hyperlinked information will be considered part of an official statement for purposes of Rule 15c2-12 and discusses theories under which third-party information can be attributable to, and therefore becomes the responsibility of, an issuer of securities. While the Commission's discussion of the factors relevant in determining whether an issuer has adopted such information will provide very useful guidance to issuers in their use of, and cross reference to, third party information, we wish to address a concern about inclusion in a state or local government's web page of links to off-site information.

Official statements relating to municipal securities offerings often contain (or include by cross reference) information coming from official and other sources that are not impossible to verify in any independent fashion. Examples of such information include state and regional demographic, assessed valuation and tax information compiled by governmental and other entities. This information is often vital to understanding the nature of the security and credit behind the securities being offered. However, it is not information that the issuer of the securities necessarily completes or can verify. In electronic format, the best way to make some of this information available may be by providing a hyperlink for the convenience of the investor.

Where it is clear that the information is not provided by the governmental body, or even by those in the government responsible for matters concerning its financings, there should be no basis for considering that the government has securities law duties for the linked information. The analogy would be the continuing disclosure requirements of Rule 15c2-12, where information contained in an official statement, but not supplied by an obligated person, is not required to be updated.

We, therefore, respectfully disagree with the Commission's conclusions that hyperlinked information in an official statement should "always be deemed" to be adopted by the issuer. Rather, other factors such as the risk of investor confusion and the manner of how the hyperlinked information is presented should be among the factors used in determining whether the information has, in fact, been adopted. We recognize the Commission's views on disclaimers as set forth in footnote 61 to the Release. However, to automatically treat hyperlinked information as adopted by the issuer would be to treat a document in electronic form differently than one in paper form. We see no justification for this difference, which would discourage the use of electronic media.

Electronic-Only Offerings

As indicated in part D-4 of the Release, issuers are not prevented from structuring their offerings to be effected entirely through electronic means. We believe that offerings of municipal securities may be particularly adaptable to electronic-only formats, so long as issuers can be assured that the offering will reach enough potential investors to reflect true market pricing.

Municipal securities are often offered to relatively small groups of investors. Reasons for this aspect of the municipal market include (i) the size of the offerings, (ii) particular interest from institutions, and (iii) particular interest from a limited group of investors, such as local investors who can use the state as well as federal tax exemption of interest period on the obligations. There has never been a suggestion that limiting the scope of the offering violates any federal law.

We, therefore, suggest that where participation in an offering is conditioned upon investor consent to electronic-only delivery by e-mail, paper forms of the offering documents should not be needed if the MSRB rules are revised to accept electronic filings.

Other Issues

In addition to the questions raised by the Commission in the Release, we wish to point out that an assumption underlying much of the Release may be that the electronic version of a document is the "same" as the paper version. For example, in part A-4 of the Release, the Commission discusses what documents may comprise an official statement for purposes of Rule 15c2-12 and states that "the paper and electronic versions of each . . . official statement must be the same."

Because of inherent differences in software and printer capabilities and design, paper and electronic versions of documents will always be subject to some differences in font, print size, pagination, etc. In order to accommodate these technical differences, we interpret the Commission's advice to mean that paper and electronic versions must be substantially equivalent, meaning that the content is the same while permitting minor variations in formatting.4 To conclude otherwise would severely hamper issuer efforts to make documents available in electronic form, putting them at risk for differences that may be the result of the user's software.


We hope these comments are helpful. Because of the growing desire of issuers to provide more information through electronic media, coupled with the already clear preference of the investment community for electronic availability of such information,5 we stand ready to serve as a resource in addressing the legal concerns that accompany the rapid evolution of these investor communications. We urge the Commission to continue its efforts to facilitate the use of electronic media in connection with the sale of municipal securities.

We appreciate the opportunity to comment on the Release, and we look forward to further discussion of these important issues with the Commission and Staff.

Respectfully submitted,

Helen C. Atkeson, Co-Chair
National Association of Bond Lawyers
Electronic Disclosure Subcommittee

John M. Gardner, Co-Chair
National Association of Bond Lawyers
Electronic Disclosure Subcommittee

C. Richard Johnson, Co-Chair
Chicago, Illinois
William L. Larsen
Chicago, Illinois
Walter St. Onge, III, Chair
Securities Law and Disclosure Committee
Boston, Massachusetts
Daniel M. McRae
Atlanta, Georgia
John McNally, Vice Chair
Securities Law and Disclosure Committee
Washington, D.C.
John S. Overdorff
Phoenix, Arizona
Stephen J. Adnopoz
New York, New York
Bradley D. Patterson
Salt Lake City, Utah
Patrick K. Arey
Baltimore, Maryland
Kenneth B. Pollock
Atlanta, Georgia
Michelle F. Blain
Baltimore, Maryland
Carol Polumbo
Austin, Texas
David Y. Bannard
Boston, MA
Margaret H. Purcell
Jacksonville, Florida
Doron Bar-Levav
New York, New York
Linda Port
Boston, Massachusetts
James E. Dinerstein
St. Paul, Minnesota
Lynn Reynolds
Birmingham, Alabama
Parker W. Eads
Louisville, Kentucky
R. Patrick Riley
Cincinnati, Ohio
Colleen E. Hicks
Philadelphia, Pennsylvania
John M. Rumin
Pittsburgh, Pennsylvania
Andrew R. Kintzinger
Seattle, Washington
Dee P. Wisor
Denver, Colorado
Thomas E. Klancnik
Madison, Wisconsin
Howard Zucker
New York, New York

1 17 C.F.R. 240.15c2-12
2 See, Release No. 33-7288 (May 1996), footnote 47.
3 See, "Electronic Delivery and Receipt of Information by Brokers, Dealers, and Municipal Securities Dealers." MSRB Reports, Vol. 19, No. 1, Feb. 1999.
4 In Release No. 33-7288 (May 1996), the Commission stated that, "Regardless of whether information is delivered in paper form or by electronic means, it should convey all material and required information. If a paper document is required to present information in a certain order, for instance, then the information delivered electronically should be in substantially the same order."
5 See, for example, the prepared remarks at the MSRB Forum on Disclosure, November 11-12, 1998, of Gerry Lian, Vice President, Morgan Stanley Dean Witter Advisors: "NFMA vigorously endorses greater use of electronic disclosure;" Raymond Kubiak, Chairman, National Federal of Municipal Analysts: "Electronic dissemination will enhance timeliness and may reduce costs;" and Thomas F. Walsh, Franklin Templeton: "The internet seems to be a logical delivery system for disclosure." See also "NFMA Recommended Best Practices in Housing Transactions," draft dated May 18, 1999, which states in Part I that " . . . we strongly encourage the dissemination of data through the issuers' websites."