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Contact: Jennifer A. Galloway
              202-838-1500
              jgalloway@msrb.org

STATEMENT FROM THE MSRB ON OPINION IN RULE G-37 LEGAL CHALLENGE

Washington, DC - The United States Court of Appeals for the Sixth Circuit today dismissed a legal challenge filed last year against the Municipal Securities Rulemaking Board (MSRB) and the Securities and Exchange Commission (SEC) to recent amendments to the MSRB’s pay-to-play rule, MSRB Rule G-37, which extended the rule to cover municipal advisors. Read the Court’s decision.

A key aspect of the mission of the MSRB is to promote a fair and efficient municipal securities market. The MSRB firmly believes that pay-to-play rules are vital to protect the integrity of the $3.8 trillion municipal securities market. Rule G-37 is narrowly tailored to address quid pro quo corruption, and the appearance of this type of corruption, in the awarding of business by state and local governments to regulated firms and their professionals that have made political contributions to officials in a position to influence such awards. 

The rule has been in effect for municipal securities dealers since 1994. The U.S. Court of Appeals for the D.C. Circuit upheld the approach used in Rule G-37 as constitutional under the First Amendment in a 1994 legal challenge. The constitutionality of Rule G-37 is not contradicted by today’s ruling that the challengers did not have standing to bring a case against the recent amendments. As a result of today’s ruling, the important amendments to Rule G-37, which extended this longstanding rule to municipal advisors, remain in place.

The Municipal Securities Rulemaking Board (MSRB) was established by Congress in 1975 with the mission to protect investors, issuers and the public interest and to promote efficiency, competition and capital formation. MSRB is a private, self-regulatory organization governed by an independent board of directors with market knowledge and expertise. MSRB does not receive federal appropriations and is funded primarily through fees paid by regulated entities. MSRB is overseen by Congress and the Securities and Exchange Commission.

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