February 10, 1989
TO: SEC RULES MEMBERS NO. 10-89
UNIT INVESTMENT TRUST MEMBERS NO. 13-89
CLOSED-END FUND MEMBERS NO. 9-89
RE: SEC NO ACTION LETTER REGARDING STRIPPED
COUPON MUNICIPAL SECURITIES
__________________________________________________________
The Municipal Securities Rulemaking Board (MSRB) has filed
with the SEC's Division of Market Regulation a letter asking
whether the Division would take the position that certain
instruments representing ownership of interest and principal
payments on municipal securities ("stripped coupon municipal
securities") are municipal securities under Section 3(a)(29) of
the Securities Exchange Act of 1934 (19354 Act) and therefore
subject to the MSRB's rules under Section 15B of the 1934 Act.
The MSRB states that it is making this inquiry because although
the stripped coupons were generally being treated as municipal
securities, there was not total uniformity in this respect.
The Division of Market Regulation responded that it would
view stripped coupon municipal securities as municipal securities
for purposes of Section 15B of the 1934 Act. Their position is
based, in part, on the representation that the owners of the
stripped coupon securities will have all the rights and
privileges of owners of the underlying municipal securities. The
MSRB's letter and the Division of Market Regulations response are
attached.
This position, that stripped coupon municipal securities
will be treated as municipal securities, may have implications,
for example, with respect to diversification, concentration and
fund name, for investment companies which invest in these
instruments.
Susan P. Hart
Assistant General Counsel
Attachment