Completed Retrospective Rule Review Activity
Since 2012, the MSRB has been engaged in an effort to promote efficiency, consistency and clarity in regulating the municipal securities market. With many MSRB rules in place for more than 40 years, the MSRB recognizes the need to regularly review rules to identify potential changes to ensure that they function as efficiently as possible, reflect current market practices and are consistent with the rules of other regulators, where appropriate.
To date, the MSRB has amended, consolidated and streamlined several key rules in response to recommendations received from stakeholders and in accordance with the MSRB's rulemaking process. A major component of the rulemaking process is receiving input from municipal market participants and other regulators. In addition to conducting internal reviews of its rules, the MSRB regularly solicits public comment on rulemaking initiatives and the implications they may have on market conditions. The MSRB aligns its process closely with those of other self-regulatory organizations in an effort to promote more effective and efficient compliance. Read about each of the rule changes below.
Promoting Consistency of Advertising Regulations with those of other Regulators
To promote consistency in the regulation of advertising by dealers, the MSRB adopted amendments to MSRB Rule G-21, on advertising by brokers, dealers or municipal securities. The amendments bring greater consistency with the provisions of other regulatory organizations in areas such as content standards and the use of testimonials.
Modernizing Customer Account Transfer Rule
To promote a uniform standard and reduce confusion and risk to investors, the MSRB amended MSRB Rule G-26, on customer account transfers. The amendments, effective January 2018, update Rule G-26 to better harmonize with the customer account transfer rules of other self-regulatory organizations.
Handling of Customer Complaints
The MSRB amended MSRB Rule G-10 on customer complaints to apply to municipal advisors, while also modernizing the requirements for municipal securities dealers. The updated rule provisions, effective October 13, 2017, focus more clearly on customer and municipal advisory client education and protection.
Efficiency Gains in Close-Out Procedures
Amendments to MSRB Rule G-12, on uniform practice, regarding close-out procedures for failed municipal securities transactions, compress the timing to initiate and complete an inter-dealer close-out from 90 calendar days to 10, with an allowance for an additional 10-calendar-day extension at the buyer’s discretion.
Moving to a Two-Day Settlement Cycle
Consistent with a broad securities industry initiative to transition to a two-day (T+2) regular-way settlement cycle, the MSRB was one of the first regulators to express support for the initiative by amending MSRB Rule G-12, on uniform practice, and MSRB Rule G-15 on confirmation, clearance and settlement, to facilitate this shift.
Codification of Gift-Giving Guidance
To enhance market understanding of interpretive guidance related to exclusions, aggregation of gifts and the applicability of more restrictive state or other laws, the MSRB consolidated and codified this guidance in MSRB Rule G-20, on gifts, gratuities, non-cash compensation and expenses of issuance. The rule incorporates certain interpretive guidance previously adopted by the MSRB that is consistent with the gift-giving guidance of other regulatory organizations.
Web-Based Delivery of Regulatory Element Continuing Education
The MSRB, in conjunction with FINRA, amended its continuing education requirements for municipal securities dealers to eliminate the requirements for in-firm and test-center delivery of the Regulatory Element. The advances in Web-based delivery of continuing education will provide registered persons the flexibility to meet the Regulatory Element requirement of MSRB Rule G-3 at a location of their choosing, including their private residence.
Aligning Professional Qualification Requirements with Industry Practices
To align regulatory requirements with current business practices, the MSRB amended its professional qualification rules for municipal securities dealers. The changes included the elimination of the Financial and Operations Principal (FINOP) classification and the restriction of the permitted activities of a “limited representative – investment company and variable contracts products” to sales to and purchases from customers of municipal fund securities.
Consolidation of Fair-Pricing Obligations of Municipal Securities Dealers
The MSRB consolidated numerous fair-pricing obligations of dealers into a single fair-pricing rule for principal and agency transactions, MSRB Rule G-30, on prices and commissions.
Consolidation and Codification of Fair-Dealing Obligations for Municipal Securities Dealers
The MSRB codified several fair-dealing obligations of municipal securities dealers into new rules, MSRB Rule G-47, on time of trade disclosure, MSRB Rule D-15, on sophisticated market professionals and MSRB Rule G-48, on transactions with sophisticated municipal market professionals.
Alignment of Dealers' Suitability Obligation with that of other Regulators
The MSRB revised its Rule G-19 on the suitability of dealers’ recommendations of municipal securities transactions to incorporate existing interpretive guidance and to more closely align the obligation with that promulgated by other regulatory organizations.
Consolidation of Registration Requirements
To make the MSRB registration process more efficient and clearly stated for dealers and municipal advisors, the MSRB consolidated its multiple registration requirements and forms into a single rule and form, MSRB Rule A-12 and Form A-12.
Streamlining of New Issue Submission Requirements
The MSRB amended its rules to streamline certain new issue reporting requirements and to integrate into the Electronic Municipal Market Access (EMMA®) system certain data submitted by underwriters to the New Issue Information Dissemination Service operated by the Depository Trust and Clearing Corporation.
Cooperation and Coordination with Other Regulators
As part of the MSRB’s focus on regulatory efficiency, it has enhanced its interaction with other regulators. The MSRB collaborates extensively with the Securities and Exchange Commission (SEC) in its oversight of the municipal market, and provides enforcement support to regulatory authorities that examine for compliance with and enforce MSRB rules, including the SEC, FINRA and federal bank regulators. The MSRB frequently provides rule interpretations and training for examiners, and facilitates access to municipal market information in support of their examinations and enforcement activities. Frequent communications also occur between the MSRB and other federal regulators, such as the Internal Revenue Service, where the MSRB assists with the agency’s enforcement of tax laws related to municipal securities.