Many Means to Retrospective Review

The MSRB recognizes that to be effective, its rules must be responsive to changes in the municipal securities market and in the policymaking, economic, stakeholder and technological environment. MSRB rules also must be consistent, where appropriate, with rules of other financial market regulators to provide for more efficient compliance. To address these imperatives, the MSRB regularly considers and evaluates its rules, and proposes amendments as appropriate. The means by which the MSRB carries out its ongoing retrospective rule review are described below. 

Board of Directors’ Expertise
The MSRB’s regulatory activities benefit from the insight of participants in the municipal securities marketplace who serve on its Board of Directors. The Board consists of 10 MSRB-regulated members who represent municipal finance professionals at broker-dealers, bank dealers and municipal advisors and embody the diverse perspectives and activities of MSRB-regulated entities. Eleven independent members who represent the public, including investors and municipal entities, also serve on the Board.

Board members serve staggered four-year terms so that the MSRB continually benefits from fresh perspectives on the practical realities of implementing its regulatory objectives. A “class” of new Board members joins the Board each year, ensuring that the MSRB receives new input on the application of and experience with MSRB rules. Use of Board member input is one of the most important ways the MSRB considers, on an ongoing basis, the need for changes to existing rules.

Use of Ad Hoc Advisory Boards and Committees
To further draw on the expertise and perspectives of market participants, the MSRB may create advisory boards or committees to advise on topics of market interest. For example, the MSRB currently supports an Investor Advisory Group to ensure the MSRB’s investor protection proposals, such as potential changes to MSRB rules on primary offering practices, are informed at the earliest point of consideration by input from investors in municipal bonds.

Participatory Rulemaking Process Informed by Economic Analysis
The MSRB’s rulemaking process, which includes changes or updates to an existing rule, includes multiple opportunities to collect public input and therefore for the MSRB to understand and balance the varied perspectives of municipal market participants. In identifying an issue that may warrant rulemaking, the MSRB may issue a concept release to solicit insight from market participants on the underlying issue, including possible alternatives to rulemaking. To provide further opportunity to gather public input, the MSRB generally publishes a request for comment so that the public and regulated entities can provide input on the proposed rulemaking, including information on any anticipated burdens of implementing the proposed rulemaking.

The MSRB applies a formal economic analysis policy beginning at the earliest stage of the rulemaking process to inform the choice, design and development of policy options before any specific regulatory course has been determined. This analysis supports a rigorous assessment of potential implications of possible approaches to addressing market issues. 

Additional Outreach to Market Participants
The MSRB conducts extensive outreach to brokers, dealers, municipal securities dealers, municipal advisors, municipal entities, investors and fellow regulators on a regular basis to solicit input that informs the MSRB’s policy initiatives. MSRB Board members and staff frequently participate in industry events around the country and engage regularly with industry trade associations, issuer associations, investor representatives and other stakeholder groups. The MSRB’s outreach initiatives also help ensure that market participants are aware of the MSRB’s commitment to promoting a fair and efficient municipal securities market, how the MSRB’s regulatory policy serves that mission and how regulatory developments may affect them.

Scope and Interconnectedness of MSRB Rules
The approximately 45 standard-setting rules in the MSRB rule book are largely principles-based and generally can be categorized as (1) fair practice rules (e.g., requirements for dealers and municipal advisors to provide affirmative disclosures of material facts; to ensure the suitability of dealer recommendations of municipal securities transactions; to fairly price transactions; to avoid conflicts of interest; and to publish fair and accurate advertisements and price quotations); (2) uniform practice rules (e.g., rules to ensure that standard procedures are followed in underwriting, clearing, confirming and settling transactions in municipal securities; helping ensure the efficiency of market operations while accommodating the differences between municipal securities and other debt instruments); (3) market transparency rules (e.g., rules requiring real-time reporting of trade prices; underwriter filing of disclosure documents); (4) professional qualification rules (e.g., requirements for dealers and municipal advisors to pass tests demonstrating competency; continuing education requirements); and (5) operational standards (e.g., rules regarding recordkeeping; supervision of processionals). 

The process of assessing whether an existing MSRB rule continues to serve the goal it was designed to achieve (e.g., providing investors material information on transactions, disclosing potential conflicts of interest to municipal entities), often necessitates a thorough review of related rules in the same category as the rule under consideration.

Strategic Planning and Operating Planning Processes
Market feedback received throughout the year is synthesized and incorporated into the MSRB’s formal strategic and operating planning processes. Periodically, the Board meets in a dedicated strategy session to review the MSRB’s strategic direction and goals. These planning sessions are informed by market conditions, input received from market participants, the unique regulatory needs of the municipal market and relevant priorities of policymakers. The MSRB’s strategic goals guide the development of annual operating plans that prioritize the activities the MSRB will undertake in any given year to best serve its mission. This process includes identifying MSRB rules that may need to be evaluated to determine whether they need to be amended, consolidated, streamlined or deleted to be more efficient, effective and/or better align with current behaviors and conditions in the municipal market. The MSRB has initiated a plan to assess the impact of municipal advisor regulations implemented in recent years.

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