Mr. W. David Holland

September 7, 2004

Mr. W. David Holland

Chairman, Texas MAC

P.O. Box 2177

600 West 8th Street

Austin, Texas 78701

Re:

Mr. John M. McNally

Hawkins Delafield & Wood LLP

601 Thirteenth Street, N.W.

Suite 800 South

Washington, DC 20005

www.DisclosureUSA.org - Texas MAC’s Central Post Office

Dear Messrs. Holland and McNally:

This responds to your letter of September 1, 2004 (the “Request”) in which

you request the concurrence of staff of the Division of Market Regulation with

your position that if the Municipal Advisory Council of Texas (“Texas MAC”)

performs the functions and undertakes the responsibilities described in the

Request, then (i) a Participating Underwriter (as defined in Rule 15c2-12 of the

Securities Exchange Act of 19341 [the “Rule”]) may reasonably determine that an

undertaking by an Issuer2 in a written agreement or contract to provide the

continuing disclosure filings specified by paragraph (b)(5)(i) of the Rule by

transmitting such filings, either directly or indirectly through an indenture trustee

or a designated agent, to DisclosureUSA for submission to the NRMSIRs and

any applicable SID (without also separately submitting such filings to the

NRMSIRs and any applicable SID by some other means) is an undertaking

described in such paragraph, and (ii) an Issuer that chooses to satisfy an existing

undertaking (that does not reference DisclosureUSA) by the method described in

clause (i) is acting in a manner consistent with the intent of the Rule.

Based upon your Request, subsequent discussions and our review of the web

site at www.DisclosureUSA.org, staff concurs with your position. In reaching this

conclusion, staff notes in particular the following:

1. There will be no charge to Issuers or their trustees or designated agents to

make electronic filings, obtain confirmation that their filings have been sent,

1

2

17 CFR §240.15c2-12

“Issuer” as used in this letter refers to the governmental issuer of a municipal security, the issuer of

any separate security, and any obligated person that has undertaken the contractual obligation in a

continuing disclosure agreement to provide the information specified in the Rule.

z Page 2

September 7, 2004

obtain confirmation of receipt of their filings by the NRMSIRs or SIDs, or

register in the DisclosureUSA tickler system for electronic reminder notices.

2. There will be no charge to NRMSIRs or SIDs for transmission of filings to their

respective FTP sites.

3. Filings will be transmitted to NRMSIRs and SIDs in a random order and as

close to simultaneously as possible. No preference or priority will be accorded

to any NRMSIR or SID over another.

4. We express no opinion regarding the optional scanning and filing services for

paper and facsimile documents to be provided by Texas MAC for a fee.

Texas MAC is one of many commercial businesses and others which may

provide such services.

This interpretation is expressly conditioned on the current and continuing

accuracy of the facts and representations contained in the Request; any different

facts or conditions might require a different response. This position is based on

current laws, rules, and regulations governing participants in, and the markets for,

municipal securities. Any changes in such laws, rules, or regulations may supersede

this interpretation or require staff to reevaluate its position. In addition, Texas MAC

shall advise the Division of any significant change in the operations, procedures or

functions of DisclosureUSA described in the Request, and, if possible, shall provide

such information 60 days prior to any contemplated change, to enable staff to

reevaluate this interpretation in light of such change.

This interpretation is subject to modification or revocation at any time staff

determines that such action is necessary or appropriate. Division staff may, from

time to time, request that Texas MAC provide it with information concerning

DisclosureUSA in addition to that referred to in the Request.

Sincerely,

Martha Mahan Haines

Chief, Office of Municipal Securities

Assistant Director, Division of Market

Regulation

Enclosure (1)

MMH;hs

:

Buddy Kempf

Morgan fiegan & Company, Inc.

Board of Directors, 2003-2004

W. David Holland, Chairman

Coastal Securities

Gary P Machak

RBC Dain Rawchq Inc.

Mark M. McLiney, Vice-Chairman

Southwest Securities

Larry McCormick

sAMC0 Capital Markets

David K. Medanich, Immediate Past Chairman

First Southwest Company

Mark A. Seal

M.E. Allison & Co., Inc.

Nora W. Chava

A. G. Edward & Sons, Inc.

Michele F. Vobach

Merrill Lynch

Jorge A. Garza

Citigroup Global Markets, Inc.

Executive Director

Dan A. Black

September,1,2004

Martha Mahan Haines, Chief

Ofice of Municipal Securities

Division of Market Regulation

U.S. Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

Re:

www.DisclosureUSA.org - Texas MAC'S Central Post Office

Dear Ms. Haines:

The Municipal Advisory Council of Texas ("Texas MAC") has established the Internetbased electronic filing system described below (hereinafter, the "CPO" or "DisclosureUSA") for

purposes of facilitating 1ssuer1compliance with continuing disclosure agreements entered into to

satisfy underwriters' obligations under Rule 15c2-12 (the "Rule") of the Securities Exchange Act

of 1934 (17 CFR $240.15c2-12). DisclosureUSA h c t i o n s as a conduit to receive filings from

Issuers and to submit such filings electronically to the nationally recognized municipal securities

information repositories ("NRMSIRs") and state information depositories ("SIDs") as required

by continuing disclosure agreements. Texas MAC is seeking staff interpretative guidance that if

it performs the functions and undertakes the responsibilities outlined below, then (i) a

Participating Underwriter (as defined in the Rule) may reasonably determine that an undertaking

by an Issuer in a written agreement or contract to provide the continuing disclosure filings

specified by-paragraph (b)(5)(i) of the Rule by transmitting such filings, either directly or

indirectly through an indenture kustee or a designated agent, to DisclosureUSA for submission

to the NRMSIRs and any applicable SID (without also separately submitting such filings to the

NRMSIRs and any applicable SID by some other means) is an undertaking described in such

paragraph, and (ii) an Issuer that chooses to satisfy an existing undertaking (that does not

'

"Issuer" as used in this letter refers to the governmental issuer of a municipal security, the issuer of any separate

security, and any obligated person that has undertaken the contractual obligation in a continuing disclosure

agreement to provide the information specified in the Rule.

MUNICIPAL

ADVISORY

COUNCIL

of TEXAS

PO. Box 2177 78768-2177 600 West 8th Street, Austin, Texas 78701 (512) 476-6947 FAX (512) 476-6403

www.mactexas.com mac@mactexas.com

Martha Mahan Haines, Chief

September 1,2004

Page 2

reference DisclosureUSA) by the method described in clause (i) is acting in a manner consistent

with the intent of the Rule.

Background

Texas MAC established DisclosureUSA in response to a Request for Proposals issued by

the Muni Council. The Muni Council is an informal working group composed of representatives

of approximately 20 municipal securities industry groups,2 which meets periodically to discuss

potential improvements to the municipal securities markets and continuing disclosure system. In

these discussions, Muni Council participants have expressed concerns regarding the

effectiveness and efficiency of the current NRMSIR system. Observations have included the

following:

1.

The same documents are not consistently available fiom each NRMSIR.

2.

The number of documents in the collections of the NRMSIRs vary significantly.

3.

Document retrieval requests to NRMSIRs yield inconsistent and sometimes

inaccurate results.

Although the reasons for these problems with the NRMSIRs' document collections have

not been confirmed and quantified, they may be due to a number of factors. For example, the

number and identity of the NRMSIRs have changed over time. These changes may have resulted

in documents not being filed with all current NRMSIRs. In addition, there is no requirement that

CUSIP numbers3 or other information necessary to create accurate indices be included with each

2

The following groups are members of the Muni Council: American Bankers Association; American Bar

Association - Section of State and Local Government Law; American Institute for Certified Public

Accountants; Association of Investment Management and Research; Council of Infrastructure Financing

Authorities; Government Finance Officers Association; Healthcare Financial Management Association;

Investment Counsel Association of America; Investment Company Institute; National Association of Bond

Lawyers; National Association of Independent Public Finance Advisors; National Association of State

Auditors, Comptrollers and Treasurers; National Association of State Treasurers; National Council of Health

Facilities Finance Authorities; National Council of State Housing Agencies; National Federation of Municipal

Analysts; Regional Municipal Operations Association; and The Bond Market Association. The Municipal

Securities Rulemaking Board is a member of the Muni Council, but did not participate in the CPO proposal.

Representatives &om the Securities and Exchange Commission's Office of Municipal Securities participated in

these meetings as well. Representatives of the Muni Council have reviewed this letter, and have asked us to

advise that this letter should not be viewed as a request by municipal issuers that the Securities and Exchange

Commission regulate directly or indirectly the issuance of municipal securities.

The CUSIP (Committee on Uniform Security Identification Procedures) Service Bureau is operated by Standard

& Poor's for the American Bankers Association. The CUSIP number consists of nine characters: a base number

of six digits that identifies all related securities of a particular bond issuer (e.g., all general obligation bonds)

and a three digit suffix that identifies each particular maturity of each bond issue.

309349.19 027150 MEM

Martha Mahan Haines, Chief

September 1,2004

Page 3

filing. Issuers have noted that they are unable to confirm that their submissions have been

received and indexed properly, and have expressed concern that inadequate filing or indexing of

reports may result in the impression that an Issuer did not file its reports, when, in fact, it did file

them. This makes it difficult for Issuers to document their compliance with their respective

continuing disclosure agreements.4

DisclosureUSA has been designed to address these problems and concerns, and is

expected to significantly improve the efficiency and effectiveness of NRMSIRs and SIDs,

thereby enhancing the availability of continuing disclosure information to investors, brokers,

dealers, issuers, and other municipal market participants. On November 12, 2003, the Muni

Council unanimously recommended that the Securities and Exchange Commission (the "SEC")

take appropriate action to make filings at DisclosureUSA created by Texas MAC satisfy the

Rule.

Texas MAC

Texas MAC was created in 1954 and currently operates as a non-profit trade association

comprised of 86 regional and national broker-dealer member firms. Texas MAC is governed by

a ten member Board of Trustees. Texas MAC is a SID for purposes of the Rule that maintains

financial disclosure and other information on more than 3,600 issuers in the State of Texas. That

information is available on-line at the Texas MAC website, www.mactexas.com. In addition,

Texas MAC publishes (i) Texas Municipal Reports, credit reports on Texas issuers with

outstanding debt, (ii) Texas Bond Reporter, a weekly publication that reports the activities of the

Texas municipal securities industry, and (iii) MAC Insights, a quarterly newsletter with articles

pertinent to public finance.

The mission of Texas MAC is to promote effective and efficient investment banking,

underwriting, trading and sales of municipal securities by collecting, maintaining and

distributing information pertaining to municipal securities issuers.

The creation of

DisclosureUSA is in furtherance of that mission, and at a meeting on October 17, 2003, the

Texas MAC Board unanimously approved the proposal that was submitted to the Muni Council

for the operation of DisclosureUSA. The proposal approved and submitted was for the operation

of DisclosureUSA without charge to Issuers, NRMSIRs or SIDs. The expectation is that the fees

received from the optional scanning and filing services described below during the first three

4

Documentation of compliance is critical for two principal reasons. First, paragraph (b)(5)(i) of the Rule

requires an underwriter to have "reasonably determined" that an issuer or obligated person has entered into a

continuing disclosure agreement that meets the requirements of the Rule. Such a reasonable determination

requires an investigation of an issuer's or obligated person's prior undertakings. See SEC Rel. No. 34-34961,

text accompanying h.23. Second, the definition of "final official statement" in the Rule requires the inclusion

of any failures to comply in the previous five years, in all material respects, with prior continuing disclosure

undertakings.

309349.19 027150 MEM

Martha Mahan Haines, Chief

September 1,2004

Page 4

years of operation will cover the costs incurred by Texas MAC of operating DisclosureUSA for

the initial five-year period. In the event the costs of operation exceed such scanning fees, Texas

MAC will invest its own reserves to cover any shortfall.

Disclosure USA Features

DisclosureUSA includes the following features:

Electronic Filings

9 Issuers may electronically submit filings (annual financial information,

audited financial statements, material event notices, failure to file notices,

and other documents) free of charge for delivery to each NRMSIR and any

applicable SID by uploading them to www.DisclosureUSA.org.

> Filings are immediately transmitted electronically to the FTP (File

Transfer Protocol) sites of each NRMSIR and any applicable SID.

> Texas MAC will not charge a fee to the NRMSIRs or SIDs to which

filings are electronically transmitted.

Filing Transmittals and Return Receipts

9 Any person registered to file information on behalf of an issuer must

certify that he or she is an authorized representative. Each person so

registered will be able to view at the DisclosureUSA website the names

and contact information for other persons so registered for a particular

issuer.

> Filings will be transmitted to NRMSIRs and SIDs in a random order and

as close to simultaneously as possible. No preference or priority will be

accorded to any NRMSIR or SID over another.

A fee will be charged to Issuers who do not directly upload their filings but use Texas MAC'S scanning and

filing services described below.

309349.19 027150 MEM

Martha Mahan Haines, Chief

September 1,2004

Page 5

9 DisclosureUSA provides the date and time a filing was transmitted to each

NRMSIR and SID on a confirmation supplied to the person making an

electronic filing.

9 The FTP sites of each NRMSIR and SID notify DisclosureUSA of the

time and date that each filing is received.

P The date and time that each filing is transmitted to and received by each

NRMSIR and SID is available to the general public through an index of

filings on www.DisclosureUSA.org However, the documents that have

been filed may not be viewed or downloaded from the DisclosureUSA

website.

Indexing Information

P Filings with DisclosureUSA require filers to supply certain information,

such as the name of the issuer, the identity of the securities to which the

filing relates (including CUSIP numbers), the name and date of the

document being filed, the type of filing and, if the filing is a material event

notice, the nature of the material event.6

P Pursuant to an agreement between Texas MAC and the CUSIP Service

Bureau, the CUSIP Service Bureau is providing DisclosureUSA with a

complete database of municipal CUSIP data, and a daily feed to update the

databa~e.~

The CUSIP Service Bureau has also set up a website

(www.CUSIP.com) for municipal issuers to access and obtain a list of the

CUSIP numbers assigned to their respective municipal securities.

Tickler System

> DisclosureUSA includes an optional electronic "tickler" system to notify

persons making filings of upcoming filing deadlines. A filer can enroll in

the service by accessing the DisclosureUSA website and keying in the

requested information (e.g., reminder date, e-mail address, subject line,

,

6

However, if paper filings are received by Texas MAC for scanning and filing without CUSIPs or any of the

other required information and DisclosureUSA is unable to promptly obtain such information, such a filing will

be transmitted to the NRMSIRs and SIDs without such information. If such information subsequently becomes

available, the documents will be retransmitted with it by Texas MAC to the NRMSIRs and SIDs.

' The agreement has an initial term that ends on December 31, 2009, and the agreement provides that it is

automatically renewed for successive one year terms unless either party notifies the other of a decision not to

extend.

309349.19 027150 MEM

Martha Mahan Haines, Chief

September 1,2004

Page 6

and text of tickler message). DisclosureUSA sends an e-mail with that

message to the designated e-mail address on the date(s) requested.

Optional Services for Non-Electronic Filings

9 Issuers will be encouraged to upload filings in an electronic format

directly to the DisclosureUSA website. Beginning on the date Texas MAC

receives the requested interpretative guidance from the SEC staff, for a

fee Texas MAC will accept filings on paper or by facsimile transmission,

convert them into an electronic (PDF) format and send

them

electronically to the FTP sites of the NRMSIRs and SIDs by uploading

them through the DisclosureUSA system. In addition, for a fee Texas

MAC will accept documents delivered to it by e-mail and send them

electronically to the FTP sites of the NRMSIRs and SIDs by uploading

them through the DisclosureUSA system. Filers who desire to use these

scanning andlor filing services will be charged a flat fee per document (a

single filing may consist of more than one document): in year 1 (which

will run through December 31, 2005) after establishment of

DisclosurelJSA, $25; year 2, $35, and year 3, $45. Only filings uploaded

directly to the DisclosureUSA website will be accepted after year 3.

P Paper filings will be scanned, forwarded to NRMSIRs and SIDs, and

added to DisclosureUSA's index no later than five business days from

receipt, provided that the processing of material event notices shall b e .

completed within 24 hours from receipt.

9 Issuers who need to have their documents scanned in order to file them

with DisclosureUSA are not required to use Texas MAC for this service.

There are a multitude of commercial document scanning services and

other means available to Issuers to convert their paper documents into an

electronic format. In most cases, electronic versions of documents will be

available from an Issuer's auditors, lawyers, financial advisors, printers

and other preparers.

NRMSIR/SID Coordination

Over the last few months, Texas MAC has tested and refined DisclosureUSA. Texas

MAC has worked with the NRMSIRs and SIDs to ensure compatibility of systems and

documents and developed protocols designed to ensure prompt, efficient and effective transfer of

data. Each NRMSIR and SID has established an FTP site to automatically receive the

documents and indexing information transmitted by Texas MAC. The indexing information is

sent in XML (extensible Markup Language) format, which allows the NRMSIRs and SIDs to

309349.19 027150 MEM

,

Martha Mahan Haines, Chief

September 1,2004

Page 7

automatically import the information into their system. Upon receiving a filing, the computers at

the NRMSIRs and SIDs automatically send a return receipt to the DisclosureUSA website. This

receipt is posted on the DisclosureUSA website so that Issuers, as well as the general public, can

view both the time the filing was sent to the NRMSIRs and SIDs and the acknowledgement fkom

the NRMSIRs and SIDs of the time the filing was received. A daily log is sent by

DisclosureUSA to each NRMSIR and SID advising what filings DisclosureUSA has sent to them

over the past 24 hours. This allows them to determine if they received every filing

DisclosureUSA sent to them. If they are missing a filing, they can send a "reorder" message to

DisclosureUSA and it will automatically resend the filing to them.

Filing Process

The process for an Issuer to file documents is clear, straightforward, and largely

automatic.

First, a representative of the Issuer (a "filer") creates an account on

www.DisclosureUSA.org with contact information, including an e-mail address. The system

then generates a password and e-mails it to the filer at the e-mail address provided. After

logging in, the filer keys in a six-digit CUSIP number, and the system displays the name of the

Issuer related to that CUSIP number for verification. The filer is then given a list of bond issues

associated with the six-digit CUSIP. Upon selecting a bond issue, every nine-digit CUSIP

belonging to each maturity of that bond issue is included in the filing (excluding, however,

CUSIP numbers associated with secondary market derivatives). Filers have the option to select

or deselect maturities, and can repeat this process for each bond issue for which they are making

a filing.

Once a filer has selected all CUSIPs associated with a filing, he may upload all

documents associated with the filing. The filer is presented with a confirmation page that shows

all of the information that describes the filing. If a filer needs to make changes, he can; if not,

the filer clicks a button that "completes" the filing. When the filer clicks the "Complete and

Send to NRMSIRs" button, the system generates a separate job for each of the NRMSIRs and

applicable SID. Another application,'running on a separate server, has a timer that activates

every ten seconds to see if there are any new filings to process. When it detects a new filing, it

generates an XML version of the electronic filing coversheet, and combines it with all of the

documents the Issuer uploaded to the system into a compressed ZIP file. It then retrieves a

listing of all of the NRMSIRs and appropriate SID and sends the ZIP file to each one of them

sequentially in a random order. It records the date and time the ZIP file was sent. The

NRMSIRs and SIDs have developed systems that automatically send an electronic receipt back

to DisclosureUSA, which processes the receipt and records the date and time they received the

filing.

It is possible for multiple filers to be associated with an Issuer's six-digit CUSIP(s).

Whenever a filing is made, all filers who have registered for the same six-digit CUSIP will

receive an e-mail notice that a filing has been made.

309349.19 027150 MEM

Martha Mahan Haines, Chief

September 1,2004

Page 8

Beta Testing

The DisclosureUSA website has been operational and in beta testing mode since

February 23, 2004. The purpose of the beta testing is to determine any operation problems and

to solicit suggestions for improvement from test filers. At this point, to our knowledge, all

operational problems have been corrected. In addition, many helpful suggestions have been

incorporated.

As of August 15,2004:

230 test accounts

2,661 filings, which include 3,095 documents

349 filings from non-Texas issuers

90 suggestions received (comments e-mailed from beta testers)

Term

Texas MAC has agreed to perform the CPO services for an initial five-year period ending

December 3 1,2009, and has agreed to give the Muni Council and the staff of the SEC's Division

of Market Regulation at least one year's notice if it determines at any time to discontinue CPO

services. At the end of the five-year period, if either the Muni Council recommends another

entity to operate the CPO to the SEC, or Texas MAC decides not to continue to operate the

CPO, Texas MAC has agreed that (1) it will convey all right, title and interest in and to the CPO

data to the successor operator of the CPO system and to any subsequent successors approved by

the Muni Council (while retaining a copy of such data for its own use) and (2) Texas MAC will

own all rights to the CPO software that it has developed, but would grant to operators of the CPO

system a long-term royalty-free license to use, copy and create derivative works in the CPO

software.

Quality Control and Ongoing Reports to the SEC

Texas MAC understands the need for SEC staff to monitor on a regular basis the

operations of DisclosureUSA and of NRMSIRs, and will provide agreed-upon-reports to the

SEC.

Sewer Specifications

DisclosureUSA will be operational for uploading filings at all times (24/7/365), other

than downtime for routine maintenance and unforeseen emergencies. Texas MAC has three

309349.19 027150 MEM

Martha Mahan Haines, Chief

September 1,2004

Page 9

computer programmers on staff to respond to any problems with the operation of the website that

arise between 8:00 am and 5:00 pm (Austin time), Monday through Friday.

To assure that DisclosureUSA operates with minimal or no down time, and to enhance

the security of DisclosureUSA, the web servers are a cluster of load-balanced servers. If one

server becomes inoperative, the other server(s) in the cluster would continue serving requests.

The servers are located in a third-party data center with which Texas MAC has contracted to

operate the web servers and provide support services to ensure maximum "uptime". By way of

example, the data center (located off-site from Texas MAC, but in the Austin area) currently

satisfies the following specifications:

Redundant high-bandwidth connectivity

Intelligent traffic load balancing among multiple servers

24x7 monitoring and support of network connection and server availability

Fire detection and fire suppression systems with dry pipe pre-action sprinkler systems

Redundant power supply providing dual power feeds and backup batteries, water

coolant systems, and generators

Redundant climate control providing ,primary and backup chiller units, cooling

towers, and water storage

Local network operations center monitors data center's operations

Electronic access at all data center entrances, including biometric hand scanners

DisclosureUSA as Conduit

Texas MAC has agreed to perform the CPO functions described above at no charge

(other than the fees for filings not directly uploaded to DisclosureUSA's website). The

transmittal sheets by which the Issuers would transmit their materials to DisclosureUSA (i)

authorizes Texas MAC as CPO to submit such materials to the NRMSIRs and SIDs, (ii) provides

that there is no contractual, agency, fiduciary or other relationship between an Issuer and Texas

MAC as CPO, and (iii) provides that Texas MAC as CPO has no responsibility to review the

materials submitted to determine whether they satisfy an Issuer's continuing disclosure

8

The transmittal sheet would, for those that submit documents electronically, be a "click-through" agreement that

could be completed on-line or, for those that submit paper filings, be a form that could be printed from the CPO

website.

309349.19 027150 MEM

Martha Mahan Haines, Chief

September 1,2004

Page 10

obligations. The CPO will function simply as a conduit that transmits to the NRMSIRs and the

SIDs whatever filings are submitted by Issuers to DisclosureUSA.

Request

For all of the reasons summarized above, it is our position that if Texas MAC performs

the functions and undertakes the responsibilities outlined above, then (i) a Participating

Underwriter (as defined in the Rule) may reasonably determine that an undertaking by an Issuer

in a written agreement or contract to provide the continuing disclosure filings specified by

paragraph (b)(5)(i) of the Rule by transmitting such filings, either directly or indirectly through

an indenture trustee or a designated agent, to DisclosureUSA for submission to the NRMSIRs

and any applicable SID (without also separately submitting such filings to the NRMSIRs and any

applicable SID by some other means) is an undertaking described in such paragraph, and (ii) an

Issuer that chooses to satisfy an existing undertaking (that does not reference DisclosureUSA) by

the method described in clause (i) is acting in a manner consistent with the intent of the Rule.

We respectfully request the staffs concurrence in our position.

If you have any questions in connection with this request, please contact either Laura

Slaughter of Texas MAC (512.476.6947) or John McNally of Hawkins Delafield & Wood LLP

(202.682.1495), who assisted us in preparing this request.

Very truly yours,

W. David Holland

Chairman, Texas MAC

m k i n s Delafield & Wood I&P

309349.19 027150 MEM