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Contact:            Jennifer A. Galloway, Chief Communications Officer
                         (703) 797-6600
                         jgalloway@msrb.org

 

MUNICIPAL SECURITIES RULEMAKING BOARD PROVIDES GUIDANCE TO
DEALERS ON SALES PRACTICE OBLIGATIONS TO INDIVIDUAL INVESTORS
Also Proposes Greater Transparency for Variable Rate Securities

 

Alexandria, VA - The Municipal Securities Rulemaking Board (MSRB) today provided guidance to municipal securities dealers on their disclosure duties and other obligations to individual investors, emphasizing the need to provide material information about credit-enhanced municipal bonds and provisions of bank agreements that provide liquidity for variable rate demand obligations. 

MSRB rules require dealers to provide investors with material information about municipal securities transactions by the time they place a purchase order. Dealers also must follow rules on the fair pricing and suitability of recommended transactions.  Dealers must apply these principles to transactions in variable rate demand obligations (VRDOs) and must consider the different forms of liquidity support for VRDOs and potential implications of credit downgrades on VRDO liquidity when making recommendations to investors. The MSRB is filing today's guidance with the Securities and Exchange Commission.

"Investors must weigh many factors when considering the purchase of municipal securities and dealers are required to provide them with all material information related to a particular bond," said Lynnette Kelly Hotchkiss, Executive Director of the MSRB. "Municipal securities have grown increasingly complex and dealers must be aware of their features prior to offering them for sale," she said. 

As a new established industry information source, the MSRB's Electronic Municipal Market Access (EMMA) website, at www.emma.msrb.org, has significantly increased the amount of municipal securities information available to the marketplace.  The MSRB wants to ensure that dealers are paying close attention to their obligations to individual investors, especially the need to provide them with all relevant and material information about a security.

In a related action, the MSRB also today published a proposal to increase disclosure and transparency related to VRDOs and municipal auction rate securities (ARS). The proposed plan would require VRDO remarketing agents and ARS program dealers to submit additional documents to the MSRB for public dissemination on EMMA to provide investors access to critical information about ARS programs and VRDO issues.  Specifically, dealers would be required to submit to the MSRB documents defining auction procedures and interest rate setting mechanisms as well as VRDO liquidity facility documents, including letters of credit and stand-by bond purchase agreements.  As with all other information on EMMA, additional disclosures about VRDOs and ARS would be available for free to investors.

The Municipal Securities Rulemaking Board (MSRB) protects and strengthens the municipal bond market, enabling access to capital, economic growth, and societal progress in tens of thousands of communities across the country. MSRB fulfills this mission by creating trust in our market through informed regulation of dealers and municipal advisors that protects investors, issuers and the public interest; building technology systems that power our market and provide transparency for issuers, institutions, and the investing public; and serving as the steward of market data that empowers better decisions and fuels innovation for the future. MSRB is a self-regulatory organization governed by a board of directors that has a majority of public members, in addition to representatives of regulated entities. MSRB is overseen by the Securities and Exchange Commission and Congress.

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