[Filed March 19, 2019, 4:00 p.m.]
Preproposal statement of inquiry was filed as WSR 17-17-029.
Title of Rule and Other Identifying Information: The securities division is proposing to amend WAC 460-42A-030, which provides that certain municipal securities are exempt from registration under RCW 21.20.310
(1) if they receive requisite ratings from designated ratings agencies. Specifically, the securities division proposes to amend WAC 460-42A-030 to correct an inadvertent drafting error.
Hearing Location(s): On May 7, 2019, at 9:00 a.m., at 150 Israel Road S.W., Room 319, Tumwater, WA 98501.
Date of Intended Adoption: May 8, 2019.
Submit Written Comments to: Michelle Webster, 150 Israel Road S.W., Tumwater, WA 98501, email firstname.lastname@example.org, fax 360-902-0524, by May 6, 2019.
Assistance for Persons with Disabilities: Contact Carolyn Hawkey, phone 360-902-8760, fax 360-902-0524, TTY 360-664-8126, email Carolyn.Hawkey@dfi.wa.gov, by May 6, 2019.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: In 2014, the securities division amended WAC 460-10A-160 to update references to securities manuals for the purpose of the "manual exemption." As part of this update, Moody's Investors Service was replaced with a reference to Mergent's Investor Service to reflect current publishers of securities manuals. In an early 2017 update to our rules to remove references to discontinued securities manuals, the securities division inadvertently replaced a reference to Moody's Investors Service with a reference to Mergent, Inc. in WAC 460-42A-030, the exemption for municipal securities that receive requisite ratings from designated ratings agencies. However, Mergent, Inc. does not publish such municipal securities ratings, while Moody's Investors Service, Inc. is a well-known ratings organization.
The securities division had no intent to disqualify offerings with the requisite rating from Moody's Investors Service, Inc. from relying on the municipal securities exemption in WAC 460-42A-030. Accordingly, the securities division proposes to amend WAC 460-42A-030 to replace references to Mergent, Inc. with references to Moody's Investors Service, Inc.
Beyond the 2017 drafting error, WAC 460-42A-030 has not been significantly amended since 1989. Accordingly, the securities division also proposes to amend WAC 460-42A-030 to recognize equivalent ratings by Fitch Ratings, a nationally recognized statistical rating organization that also issues credit ratings to municipal securities.
Reasons Supporting Proposal: As WAC 460-42A-030 implements the exemption contained in RCW 2.20.310
(1) [21.20.310(1)], and the prior amendments were made in error, the Division proposes to amend these rules to rectify its prior inadvertent drafting error, and to promote capital formation.
Statute Being Implemented: Chapter 21.20
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Department of financial institutions, securities division, governmental.
Name of Agency Personnel Responsible for Drafting: Michelle Webster, Esq., 150 Israel Road S.W., Tumwater, WA 98501, 360-902-8736; Implementation: Faith Anderson, Program Manager, 150 Israel Road S.W., Tumwater, WA 98501, 360-902-8760; and Enforcement: William Beatty, Securities Administrator, 150 Israel Road S.W., Tumwater, WA 98501, 360-902-8760.
A school district fiscal impact statement is not required under RCW 28A.305.135
A cost-benefit analysis is not required under RCW 34.05.328
. The department of financial institutions is not an agency identified in RCW 34.05.328
This rule proposal, or portions of the proposal, is exempt from requirements of the Regulatory Fairness Act because the proposal:
Is exempt under RCW 19.85.025
(3) as the rules only correct typographical errors, make address or name changes, or clarify language of a rule without changing its effect.
Explanation of exemptions: A portion of the proposal seeks to correct an inadvertent drafting error that was made in 2017.
March 14, 2019
AMENDATORY SECTION(Amending WSR 17-05-002, filed 2/1/17, effective 3/4/17)
WAC 460-42A-030Exemption of securities pursuant to RCW 21.20.310(1).
Any security which would otherwise be exempt from registration under RCW 21.20.310
(1) except that it is payable from a nongovernmental industrial or commercial enterprise shall be exempt from registration if it meets the requirements of either subsection (1) or (2) of this section:
(1) The security receives a rating of "AA" or better from Standard and Poor's Corporation or an equivalent rating from ((Mergent))Moody's Investors Service, Inc. or Fitch Ratings, Inc.; or
(2)(a) The security is issued to fund a single-family mortgage loan program established and operated by a state housing finance agency; and
(b) The security receives a rating of at least "A+" from Standard and Poor's Corporation or an equivalent rating from ((Mergent))Moody's Investors Service, Inc. or Fitch Ratings, Inc.