HTML Preview Formal Comments on Proposed Rule page number 1.
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E x e c u t i v e D i r e c t o r
February 13, 2012
Office of the Comptroller of the
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Release No. 34-65545
File No. S7-41-11
RIN 3235-AL07
To whom it may concern:
We are writing on the behalf of the National Conference of State Legislatures (NCSL) in response to
proposed rulemaking related to Section 619 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Pub. L. No. 111-203). The proposed rule, known as the “Volcker Rule,” would create an
imbalance in the use and treatment of municipal securities.
As the proposed rulemaking states, the Volcker rule would “generally prohibit any banking entity from
engaging in proprietary trading…, subject to certain exemptions.” However, while the rule attempts to
exempt municipal securities, it fails to provide an all-encompassing definition of „municipal obligations‟
for state and local governments. By not using the well-established definition of municipal securities in
the Securities Act of 1934, the Volcker rule threatens to create a two-tiered securities market that may
raise costs for state and local governments and create market preferences for municipal bonds.
Therefore, we ask that instead of using the definition as “obligations of states and political subdivisions
thereof,” to please define securities as “obligations guaranteed as to principal or interest by, a state or any
political subdivision thereof, or any agency or instrumentality of a state or any political subdivisions
thereof, or any municipal corporate instrumentality of one or more states, or any security which is an
industrial development bond.” This definition has been used for almost 80 years and has shown state and
local securities to be a safe asset in U.S. capital markets. Conversely, the definition as used in the
proposed rulemaking would leave up to 40 percent of the municipal securities market exposed to the
Volcker Rule.
We appreciate the opportunity to provide comments on the proposed rule. For additional information,
[email protected]). Thank you for consideration of this request.