2011 Model Bond Purchase Agreement Exposure Draft:
2009 Model Bond Purchase Agreement Redlined:
New York, NY, October 12, 2011— SIFMA has released an exposure draft of its revised Model Bond Purchase Agreement (BPA) for municipal securities, comprised of the (i) BPA Terms and Acceptance, (ii) BPA General Provisions and Conditions and (iii) Instructions and Commentary. SIFMA is soliciting comments on this exposure draft. Comments were due by January 12, 2012.
As a trade organization, SIFMA works with its members to develop industry best practices and model documentation. These projects help to achieve the goals of educating industry members, aiding in regulatory compliance in transactions, and increasing standardization to reduce legal costs and legal certainty. SIFMA’s Model BPA for municipal bond securities was drafted with these goals in mind.
The revised BPA draft documents and a redlined comparison to the previous version released by SIFMA as an exposure draft in 2009 can be found above. The revised BPA includes the following changes:
(A) References to auction rate Securities have been deleted while several references to taxable Securities have been added where appropriate.
(B) The “no-fiduciary” language in Section 3 of the BPA Terms and Acceptance has been modified based generally on the SIFMA model clarifying statements (Dec. 2010). The related reference in the drafter’s notes and the Instructions and Commentary to MSRB Rule G-23 has been modified.
(C) Language has been added to the drafter’s note in Section 4 of the BPA Terms and Acceptance and to the Instructions and Commentary stating to the effect that applicable law or guidance in some states prohibits reimbursement by the Issuer of certain out-of-pocket expenses of the Underwriters.
(D) Language has been added relating to the delivery of Rule G-34 documents for variable rate securities. See BPA Terms and Acceptance, Schedule II, and Schedule V, Section (xviii).
(E) Language has been clarified to indicate that expenses identified as being paid by the Underwriters may be included as part of the expense component of the underwriting discount or commission or be separately reimbursed as out-of-pocket expenses. See BPA General Provisions and Conditions, Section 10(b).
(F) Language has been added to the drafter’s note in Schedule V of the BPA Terms and Acceptance and in the Instructions and Commentary indicating that the 10b-5 language in certain opinions and certificates may be expanded to address the POS as well as the final OS.
(G) Additional termination events have been added to Section 9 of the General Provisions and Conditions:
(1) new clause (a)(ii)(3):
“the sovereign debt rating of the United States is downgraded by any major credit rating agency or a payment default occurs on United States Treasury obligations”
(2) new clause (a)(ii)(4):
“a default with respect to the debt obligations of, or the institution of proceedings under any federal bankruptcy laws by or against, any state of the United States or any city, county or other political subdivision located in the United States having a population of over 500,000”
In each case, the new termination event is a “soft” out, subject to a determination that there has been a material adverse effect on market price or marketability or on the ability of the underwriters to enforce contracts for the sale of the Securities.
Where appropriate, the corresponding drafter’s notes and instructions also have been modified.
Any questions should be directed to Leslie Norwood.
