Contact: Jennifer A. Galloway, Chief Communications Officer
(703) 797-6600
jgalloway@msrb.org
MUNICIPAL SECURITIES RULEMAKING BOARD HOLDS QUARTERLY BOARD MEETING
Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) held its first meeting with a public majority governing board with representation of municipal advisors on October 20-22, 2010. At the meeting, the Board took actions related to the regulation of municipal securities dealers and municipal advisors, agreeing to prohibit dealers that act as financial advisors on new bond issues from serving as underwriters for the same issues and proposing a set of initial administrative rules for municipal advisors.
At the opening of the meeting in Alexandria, VA, the MSRB Board of Directors ratified the Board’s executive leadership, consisting of Michael G. Bartolotta as Chair and John W. Young II as Vice Chair, who were elected in July 2010.
“I am grateful for the support and confidence of the Board to lead the MSRB,” said Chair Bartolotta. “Congress has given us an important new mandate to protect municipal entities that requires deep experience and a commitment to the integrity of the municipal market. The MSRB plans to continue to promote a fair, efficient and transparent market and deliver on the job that Congress has entrusted with us.”
Effective October 1, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the mission of the MSRB to protect municipal entities and those whose credit stands behind municipal bonds. The Dodd-Frank Act also broadened the MSRB’s jurisdiction to include the regulation of municipal advisors in connection with their advice to municipal entities on municipal securities or investment-related matters. The MSRB has protected investors in the municipal market since 1975 by regulating municipal securities dealers that trade, sell and underwrite municipal securities.
The Board approved filing with the Securities and Exchange Commission (SEC) changes to MSRB administrative and definitional rules associated with the regulation of municipal advisors. These changes would provide for the establishment of an MSRB registration system for municipal advisors and the assessment of associated initial and annual fees to help defray a portion of the costs associated with the MSRB’s new role as regulator of municipal advisors. In addition, the changes would extend the MSRB’s rulemaking procedures to municipal advisory activities. The MSRB expects to file the initial set of rules in early November 2010 and to begin accepting registrations of municipal advisors in mid-November.
The Board also agreed to apply MSRB Rule G-17, on fair dealing, to municipal advisors.
In other Dodd-Frank Act related action, the Board agreed to establish a Nominating Committee composed of a majority of public members and that has fair representation of regulated entities, as required by the Act.
The Board discussed and agreed to changes proposed for comment in August 2010 to prohibit municipal securities dealers that act as financial advisors on new issues of municipal securities from serving as underwriters on the same issue. The MSRB plans to file the proposal with the SEC in the near future.
"This issue is important to many municipal market participants," said Chair Bartolotta. "The Board recognizes that prohibiting the switching of roles is the best approach for market integrity and the change will eliminate what could be perceived of as a conflict of interest for municipal securities dealers.”
In other business, the Board met with SEC Commissioner Elisse Walter to discuss the regulatory partnership between the SEC and the MSRB. The SEC oversees the MSRB but the two organizations work closely on oversight of the municipal market.
The Board also met with Richard Ketchum, chairman and chief executive officer of the Financial Industry Regulatory Authority (FINRA), and other FINRA executives to discuss cooperation between FINRA and the MSRB on enforcement of MSRB rules. FINRA enforces MSRB rules for the broker-dealer community and the two organizations cooperate on the exchange of information with respect to market activities and emerging enforcement issues.
The MSRB’s quarterly meeting, the first of its fiscal year, included review of its annual operating plan that covers activities related to rulemaking, market information transparency, market leadership, and education and outreach. The MSRB’s FY2011 operating plan includes rulemaking activities for municipal securities dealers and municipal advisors, delivery on existing commitments to expand market information services, an expanded education and outreach focus, and implementation of the new mandates under the Dodd-Frank Act.
The Board also discussed at length the MSRB’s priority to reach and communicate with newly regulated and protected parties. The MSRB is hosting two educational seminars — in New York on November 2, 2010 and in Chicago on December 6, 2010 — to kick off its expanded outreach efforts to municipal advisors and municipal entities.
The Board, which typically meets on a quarterly basis, will hold a special meeting in early December 2010 to take up additional municipal advisor rulemaking and again in January 2011 at its regularly scheduled quarterly meeting.
