The Municipal Securities Rulemaking Board told members of Congress that it has implemented a suite of core rules dealing with oversight of municipal advisers within the $3.7 trillion municipal securities market. The MSRB’s rules were mandated by Dodd-Frank Act reforms enacted in response to the Great Recession.
Key achievements. According to a press release accompanying the MSRB’s letter to congressional leaders, the MSRB’s municipal adviser rules seek to enhance market transparency while also providing tools to educate market participants and investors. The MSRB said it plays a “unique” role regarding municipal entity protection, but also works with the SEC and the Financial Industry Regulatory Authority, Inc. on examinations of municipal advisers.
MSRB Chair Nathaniel Singer summarized the regulator's achievements: “New rules guard against unfair practices by municipal advisors and work to ensure that the professionals advising our state and local governments are qualified and are appropriately trained, licensed and educated. The MSRB has also advanced new education and outreach initiatives and market transparency tools since the enactment of the Dodd-Frank Act that support the objective to protect municipal entities and complement the new regulatory framework.”
MSRB rules. The MSRB explained to members of Congress that it has made significant inroads on a variety of topics impacting municipal securities markets. The MSRB’s rules for municipal advisers cover principles of fair dealing, fiduciary duties, professional standards, education requirements, and fees. Here is a mini primer on the MSRB’s rules:
- Final SEC rules for municipal adviser registration (Release No. 34–70462, September 20, 2013).
- Rules on fair dealing—MSRB Rule G-17 and the related interpretive guidance deal with principles of fair dealing for municipal dealers. MSRB Rules G-20 and G-37 cover gifts and political contributions. MSRB Rule G-37 has proven to be controversial for its pay-to-play limits. The amended rule drew a legal challenge by a trio of state Republican party organizations who dispute the SEC’s argument that the rule became effective by operation of law only rather than by the SEC’s approval, which could have violated a ban on such regulations for FY 2016 that was imposed by Section 707 of Title VII of the Consolidated Appropriations Act, 2016.
- Fiduciaries—MSRB Rule G-42 sets standards for non-solicitor municipal advisors, while MSRB Rule G-44 details supervisory and compliance duties.
- Professional standards—Municipal advisers must meet the qualifications developed under MSRB Rule G-3. The MSRB’s letter to congress touted the turn-out for the MSRB’s pilot exam.
- Records—MSRB Rules G-8 and G-9 set out the records and records retention requirements for municipal advisers.
- Fees—Several of the MSRB’s administrative rules also apply to municipal advisers. As an example, MSRB Rule A-12 establishes a fee structure for entities within the MSRB’s jurisdiction, including municipal advisers, through which the MSRB can fund its activities