Memo #
7813
OHIO PROPOSES AMENDMENTS TO RULE RELATING TO LIQUIDITY TREATMENT OF COMMERCIAL PAPER
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1 See Memorandum to SEC Rules Committee No. 5-96, State Securities Members No. 4-96, and Unit Investment Trusts Members No. 2-96 (January 19, 1996).
April 26, 1996
TO: SEC RULES COMMITTEE No. 28-96
STATE LIAISON COMMITTEE No. 10-96
UNIT INVESTMENT TRUST COMMITTEE No. 14-96
RE: OHIO PROPOSES AMENDMENTS TO RULE RELATING TO LIQUIDITY
TREATMENT OF COMMERCIAL PAPER
______________________________________________________________________________
As we previously informed you, in January of this year, the Ohio Division of Securities
(the "Division") enacted amendments to Rule 1301:6-3-09(12) relating to the liquidity treatment
of commercial paper.1 As adopted, the amendments provide in relevant part that commercial
paper that is rated in one of the two highest categories by an NRSRO would be considered
liquid if the funds board of directors determines "that the commercial paper is of equivalent
quality and is liquid." There was no indication in the rule as to what the phrase "of equivalent
quality" referred, nor was the Division able to provide guidance as to its meaning.
As a result of concerns raised by the Institute and others with the meaning of this
provision, the Division has proposed that this portion of the rule be deleted in its entirety. In
addition, the Division has proposed to amend the rule to provide that commercial paper may
be considered liquid if it is rated by at least one -- rather than the currently required two --
NRSRO provided the funds board of directors or trustees have determined the paper to be
liquid. The rule, however, still would not permit unrated commercial paper to be considered
liquid under any circumstances.
A copy of the Divisions proposal is attached. Comments are due on the proposal no
later than Friday, May 31 1996. Comments should be submitted to Commissioner Mark
Holderman, Ohio Division of Securities, 77 South High Street, 22nd Floor, Columbus, Ohio
43266-0548, with a copy to William Leber, Counsel to the Commissioner, at the same address.
Tamara K. Cain
Assistant Counsel
Attachment