MSRB Fine-Sharing Policy

Securities Exchange Act Section 15B(c)(9) provides for the sharing with the MSRB of fines collected by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) for violations of MSRB rules. Specifically:

• Fines paid to the SEC for violations of the rules of the MSRB shall be equally divided between the SEC and the MSRB; and
• Fines paid to FINRA for violations of the rules of the MSRB shall be allocated 2/3 to FINRA and 1/3 to the MSRB, although the portion of such fines payable to the MSRB may be modified at the direction of the SEC upon agreement between MSRB and FINRA.

The MSRB seeks to use these fine-sharing revenues in a manner that guards against potential conflicts of interest in connection with the receipt of such fine-sharing revenues and the regulatory and other activities of the MSRB. The amount of fine revenue actually realized each year by the MSRB varies from year-to-year based on enforcement actions relating to MSRB rules by the SEC and FINRA.

Consequently, the MSRB uses its fine-sharing revenues in accordance with the following parameters:

• Fine-sharing revenue may be used to pay operational, project and capital expenses for activities that support the MSRB mission; however, fine-sharing revenue may not be used to pay costs of rulemaking activities.
• All fine-sharing revenue received from the SEC and FINRA will be accounted for separately, and staff will report to the MSRB Board of Directors Finance Committee quarterly on fine-sharing revenue received.
• Fine-sharing revenues received above the budgeted amount at fiscal year-end will become part of the reserves of the organization unless otherwise approved for expenditure by the Finance Committee or designated by the Board.
• Staff will complete an annual analysis of expenses to ensure that fine-sharing revenue is not relied upon to fund rulemaking activities and report results to the Finance Committee.