MSRB Proposes Limits On Underwriter Consents To Indenture Amendments

The MSRB has put out for comment a proposed interpretive notice http://www.msrb.org/Rules-and-Interpretations/Regulatory-Notices/2012/2012-04.aspx designed to eliminate or reduce instances in which underwriters of new bonds issued under a parity indenture or bond resolution consent to amendments to such instrument on the issuance date of the new bonds during the brief period in which the underwriter owns the bonds prior to their resale to the underwriter's customers.  According to the MSRB's request for comment: "While underwriters may technically be bondholders during the period between the time they purchase an issuer's bonds and the time they distribute the bonds to investors, they are still underwriters while they hold bonds with a view to distribution.  As such, they will not be negatively affected by the amendments to which they consent.  In fact, they may have a monetary incentive to consent to the amendments and, accordingly, a conflict of interest."