MUNICIPAL SECURITIES

General

Municipal Advisors

FINRA is issuing this Notice to remind member firms of their supervisory obligations under FINRA Rules 3110 (Supervision) and 3120 (Supervisory Control System) if they hold or transact in customer accounts owned by municipal entities or obligated persons (municipal clients), as defined in Section 15B of the Securities Exchange Act of 1934 (Exchange Act), and participate in investment-related activities with municipal clients, such as recommending or selling non-municipal securities products to such municipal clients. Under these circumstances, member firms are obligated to determine if such activities require registration as a municipal advisor.

FINRA Regulatory Notice 19-28 (August 16, 2019): Guidance Regarding Member Firms’ Supervisory Obligations When Participating in Investment-Related Activities with Municipal Clients

 

SEC Approves Amendments to MSRB Rules and Data Collection Related to Primary Offering Practices

The MSRB received approval from the SEC on June 27, 2019 of amendments to MSRB Rule G-11, on primary offering practices, MSRB Rule G-32, on disclosures in connection with primary offerings and MSRB Form G-32, regarding a collection of data elements provided in electronic format to the Electronic Municipal Market Access Dataport (EMMA® Dataport) system in connection with primary offerings. The compliance date for the amendments to Rule G-11 and Rule G-32 will become effective on January 13, 2020.

MSRB Regulatory Notice 2019-15 (June 28, 2019): SEC Approves Amendments to MSRB Rules and Data Collection Related to Primary Offering Practices

 

Advertising Rule Changes for Brokers, Dealers and Municipal Securities Dealers

The MSRB received approval from the SEC on May 7, 2018 to amend MSRB Rule G-21, on advertising by brokers, dealers or municipal securities dealers, and to adopt new MSRB Rule G-40, on advertising by municipal advisors. The SEC also approved a technical amendment to MSRB Rule G-42, on duties of non-solicitor municipal advisors. With these rule changes, as well as the previously announced development of the municipal advisor principal examination (Series 54), the MSRB, in the exercise of authority granted by the Dodd-Frank Wall Street Reform and Consumer Protection Act, has completed the core of its Congressionally mandated comprehensive regulatory framework for municipal advisors. 

The effective date for the amendments was August 23, 2019.

MSRB Information Notice 2019-07 (February 26, 2019): MSRB Establishes Effective Date for Advertising Rules and Provides Social Media Guidance and Related Rule Amendments

As referenced in MSRB Notice 2019-07, the following revised compliance resource is designed to provide practical assistance to municipal advisors with their understanding of Rule G-40’s content standards through the analysis of mock advertisements. The MSRB derived the principles discussed in this compliance resource from Rule G-40 and its related rulemaking record, and this compliance resource should be read in conjunction with Rule G-40 and its related guidance. The compliance resource does not create new legal or regulatory requirements or new interpretations of existing requirements. The MSRB does not intend for this compliance resource to be interpreted by municipal advisors or examining authorities as establishing new standards of conduct.

MSRB Regulatory Notice 2018-32 (December 19, 2018): MSRB Provides Compliance Resource on Application of Content Standards to Advertisements by Municipal Advisors Under MSRB Rule G-40

 

Designation Information Regarding Mandatory Participation in Business Continuity and Disaster Recovery Testing

The MSRB has established criteria for designating Participants for the next mandatory functional and performance testing of the operation of the MSRB’s Business Continuity/Disaster Recovery Plans. Such criteria are designed to ensure participation by those MSRB Registrants that the MSRB reasonably determines are, taken as a whole, the minimum necessary for the maintenance of fair and orderly markets in the event of the activation of its BC/DR Plans.

MSRB Notice 2019-09 (March 13, 2019): Designation Information Regarding Mandatory Participation in Business Continuity and Disaster Recovery Testing

 

Best Execution Rule

The MSRB is adopting clarifying amendments to implementation guidance on Rule G-18, on best execution. The Implementation Guidance primarily provides answers to frequently-asked questions (FAQs) about Rule G-18. Since the MSRB’s best execution requirements became effective in 2016, some market participants have communicated to the MSRB that the practice of posting the same bid-wanted for a municipal security simultaneously on multiple trading platforms may have harmful effects on dealers, investors and the market as a whole while not necessarily achieving improved execution for customers. While the posting of bid-wanteds simultaneously on multiple trading platforms is not prohibited by MSRB rules and may be considered by dealers under prevailing facts and circumstances to be consistent with their best-execution obligations and beneficial to their customers, the MSRB has stated previously, including in the Implementation Guidance, that such simultaneous posting is not required.

MSRB Regulatory Notice 2019-05 (February 7, 2019): MSRB Amends Implementation Guidance On MSRB Rule G-18, On Best Execution

In light of the increasingly automated market for equity securities and standardized options, and recent advances in trading technology and communications in the fixed income markets, FINRA is issuing this Notice to reiterate the best execution obligations that apply when firms receive, handle, route or execute customer orders in equities, options and fixed income securities. FINRA is also issuing this Notice to remind firms of their obligations, as previously articulated by the Securities and Exchange Commission (SEC) and FINRA, to regularly and rigorously examine execution quality likely to be obtained from the different markets trading a security.

FINRA Regulatory Notice 15-46 (November 2015): Guidance on Best Execution Obligations in Equity, Options and Fixed Income Markets

 

Frequently Asked Questions Regarding Use of Municipal Advisory Client Lists and Case Studies Under MSRB Rule G-40

The MSRB’s FAQs described in the Notice below provide further explanation of Rule G-40, particularly with respect to a municipal advisor’s use of municipal advisory client lists and case studies. The MSRB derived the principles discussed in these FAQs from Rule G-40 and its related rulemaking record, and these FAQs should be read in conjunction with Rule G-40 and related guidance. These FAQs do not create new legal or regulatory requirements. The MSRB does not intend for these FAQs to be interpreted by municipal advisors or examining authorities as establishing new standards of conduct.

MSRB Regulatory Notice 2018-24 (September 17, 2018): MSRB Answers FAQs Regarding Use of Municipal Advisory Client Lists and Case Studies Under MSRB Rule G-40

 

Compliance Advisory for Municipal Advisors

The MSRB is providing this Compliance Advisory as a compliance resource to assist municipal advisors in their continuing compliance efforts. This Compliance Advisory highlights certain MSRB rules and provides considerations a municipal advisor could use in assessing its own policies and procedures for compliance with the applicable rules. This Compliance Advisory is not designed to address all regulatory obligations applicable to municipal advisors pursuant to each MSRB rule or under other securities laws and regulations (“applicable rules”) or identify an exhaustive list of considerations for ensuring compliance with the applicable rules. This resource should be read in conjunction with the relevant rules and related guidance. It does not create new legal or regulatory requirements, or new interpretations of existing requirements, and should not be interpreted as establishing new standards of conduct.

MSRB Regulatory Notice 2018-18 (August 14, 2018): Compliance Advisory for Municipal Advisors

 


Frequently Asked Questions Regarding MSRB Rule G-42 and Making Recommendations

On February 15, 2018, the MSRB sought public input on draft answers to frequently asked questions (FAQs) and related scenarios regarding MSRB Rule G-42, on duties of non-solicitor municipal advisors, and the making of recommendations. The MSRB received eight comment letters and revised the draft FAQs to reflect these comments as well as insight gained from the MSRB’s ongoing engagement with the industry regarding compliance with Rule G-42. FAQs Regarding MSRB Rule G-42 and Making Recommendations, has been published as a compliance resource for municipal advisors, provides further explanation of Rule G-42, particularly with respect to making a recommendation and the obligations for municipal advisors that result therefrom. Access the FAQs and other compliance resources in the Compliance Center on MSRB.org. It should be noted that the FAQs do not create new legal or regulatory requirements, or new interpretations of existing requirements and should not be interpreted by municipal advisors or examining authorities as establishing new standards of conduct.

MSRB Regulatory Notice 2018-12 (June 20, 2018): MSRB Answers Frequently Asked Questions Regarding MSRB Rule G-42 and Making Recommendations

 

Investor Education Resources on New Mark-Up Disclosure Requirements

On April 4, 2018, to support investor awareness and understanding of information about mark-up and mark-down disclosures that will begin appearing on certain municipal securities trade confirmations, the MSRB made available new and updated investor education resources. Brokers, dealers and municipal securities dealers, particularly retail broker networks, that work with individual investors, may find the documents helpful as they adapt to the new disclosure standard.

MSRB Regulatory Notice 2018-06 (April 4, 2018): MSRB Provides Investor Education Resources on New Mark-Up Disclosure Requirements

 

Disclosure Requirements Under MSRB Rule G-15 And Prevailing Market Price Guidance Pursuant To Rule G-30

Effective May 14, 2018, amendments to MSRB Rule G-15, on confirmation, clearance and other matters require brokers, dealers and municipal securities dealers to disclose additional information, including their mark-ups and mark-downs to retail customers on certain principal transactions. In addition, amendments to Rule G-30, on prices and commissions, provide guidance on prevailing market price for the purpose of determining mark-ups and other Rule G-30 determinations. These amendments enhance transparency for retail investors as to the costs of their transactions in municipal securities and provide them with valuable access to pricing and related information about their municipal securities.

• MSRB Notice 2018-05 (March 19, 2018): MSRB Provides New and Updated FAQs on Confirmation Disclosure and Prevailing Market Price

• MSRB Regulatory Notice 2017-12 (May 17, 2017): MSRB Provides Implementation Guidance on Confirmation Disclosure and Prevailing Market Price

• MSRB Notice 2016-28 (November 29, 2016): New Disclosure Requirements Under MSRB Rule G-15 and Prevailing Market Price Guidance Pursuant to Rule G-30 Effective May 14, 2018

 

Municipal Fund Security Product Advertisements

The SEC approved amendments to MSRB Rule G-21(e), on municipal fund security product advertisements by brokers, dealers and municipal securities dealers. The amendments address important regulatory developments and enhance investor protection in connection with municipal fund security product advertisements. The amendments will became effective on November 18, 2017.

• MSRB Regulatory Notice 2017-16 (August 21, 2017):  SEC Approves Amendments to the MSRB’s Rule on Municipal Fund Security Product Advertisements

 

Customer Account Transfers

The SEC approved amendments to MSRB Rule G-26, on customer account transfers, to modernize the rule and promote a uniform customer account transfer standard for all brokers, dealers, municipal securities brokers and municipal securities dealers. The amendments became effective on January 29, 2018.

MSRB Regulatory Notice 2017-15 (July 31, 2017): SEC Approves Amendments to MSRB Rule G-26 on Customer Account Transfers

 

Extension of MSRB's Customer Complaint and Related Recordkeeping Rules to Municipal Advisors and the Modernization of Those Rules

The SEC approved: (i) amendments to MSRB Rule G-10, on delivery of investor brochure; Rule G-8, on books and records to be made by brokers, dealers, and municipal securities dealers and municipal advisors; and Rule G-9, on preservation of records; and (ii) an MSRB notice regarding electronic delivery and receipt of information by municipal advisors under Rule G-32, on disclosures in connection with primary offerings (amendments). The adoption of the amendments represents another milestone in the MSRB’s development of a comprehensive regulatory framework for municipal advisors in the exercise of the rulemaking granted to the MSRB by the Dodd-Frank Act. In addition, the adoption of the amendments furthers the MSRB’s mandate to protect investors, municipal entities, obligated persons and the public interest by modernizing the MSRB’s customer complaint and related recordkeeping rules. The amendments became effective on October 13, 2017.

MSRB Regulatory Notice 2017-03 (January 18, 2017): SEC Approves Extension of MSRB’s Customer Complaint and Related Recordkeeping Rules to Municipal Advisors and the Modernization of Those Rules

 

Political Contributions and Prohibitions on Municipal Securities Business

The amendments to MSRB Rule G-37, on political contributions and prohibitions on municipal securities business, and related amendments to MSRB Rules G-8, on books and records, and G-9, on preservation of records, and Forms G-37 and G-37x became effective on August 17, 2016. Amended Rule G-37 extends the core standards under Rule G-37 to municipal advisors, their political contributions and the provision of municipal advisory business. The amendments are specifically designed to address potential “pay-to-play” practices by municipal advisors consistently with the MSRB's existing regulation of dealers.

• MSRB Regulatory Notice 2016-06 (February 17, 2016):  Amendments to MSRB Rule G-37 on Political Contributions and Prohibitions on Municipal Securities Business and Related Amendments are Deemed Approved Under the Securities Exchange Act of 1934

Effective August 17, 2016, the amendments to Rule G-37 extend the core standards under Rule G-37 to municipal advisors, their political contributions and the provision of municipal advisory business. The amendments are designed to address potential “pay-to-play” practices by municipal advisors consistently with the MSRB’s existing regulation of dealers.

• MSRB Regulatory Notice 2016-18 (August 4, 2016):  MSRB Files Amendment to Rule G-37 to Clarify its Application to Contributions before August 17, 2016

Registration

(New) MSRB to Launch Permanent Series 54 Examination November 12, 2019

The MSRB permanent Municipal Advisor Principal Qualification Examination (Series 54) is now available. As provided for under MSRB Rule G-3, municipal advisor principals2 are required to take and pass the Series 54 examination in order to become appropriately qualified to engage in the management, direction or supervision of the municipal advisory activities of the municipal advisor and its associated persons.3 To facilitate the transition to the new exam requirement, the MSRB is providing a one-year grace period, sunsetting on November 12, 2020, during which individuals qualified with the Series 50 examination will be able to take the Series 54 examination while continuing to engage in principal-level activities. The score required to pass the Series 54 examination is 70 percent.

MSRB Regulatory Notice 2019-18 (October 11, 2019): MSRB To Launch Permanent Series 54 Examination November 12, 2019
MSRB Regulatory Notice 2019-19 (October 18, 2019): MSRB Revises Content Outline For The Municipal Advisor Principal Qualification Examination

MSRB Revises Content Outlines For Professional Qualifications Exam

On June 25, 2018, the MSRB filed for immediate effectiveness a proposed rule change with the SEC to revise the content outline and selection specifications for the Municipal Securities Representative Qualification Examination (Series 52 exam) to remove general securities knowledge content as part of the MSRB’s modifications to its professional qualification examination program. Additionally, the MSRB proposed revisions to the Municipal Advisor Representative Qualification Examination (Series 50 exam), Municipal Fund Securities Limited Principal Qualification Examination (Series 51 exam) and the Municipal Securities Principal Qualification Examination (Series 53 exam) to reflect changes to laws, rules and regulations covered by the examinations, as applicable, and to make technical amendments to delete or update subject-matter topics and references.

MSRB Regulatory Notice 2018-13 (June 25, 2018): MSRB Revises Content Outlines for Professional Qualifications Examinations

 


MSRB Modifies Professional Qualifications Program

On Friday, June 8, 2018, the MSRB filed a proposed rule change for immediate effectiveness with the SEC to modify its professional qualifications program. The amendments to MSRB Rule G-3 reflect the MSRB’s intended plan to revise the Municipal Securities Representative Qualification Examination (Series 52) into a specialized knowledge examination and recognize the FINRA Securities Industry Essentials (SIE) Examination as a prerequisite for the Series 52 examination. The amendments also harmonize certain MSRB professional qualification requirements, under Rule G-3, with FINRA’s approved rules restructuring its professional qualification and registration requirements. The amendments to Rule G-3 were filed for immediate effectiveness with an implementation date of October 1, 2018.

MSRB Regulatory Notice 2018-11 (June 11, 2018): MSRB Modifies Professional Qualifications Program

 

Continuing Education Requirements for Municipal Advisors

The MSRB received approval from the SEC on May 16, 2017 to amend MSRB Rule G-3, on professional qualification requirements, and amend MSRB Rule G-8, on books and records to be made by brokers, dealers, and municipal securities dealers and municipal advisors, to establish continuing education requirements for municipal advisors and related recordkeeping requirements.

MSRB Regulatory Notice 2017-10 (July 12, 2017): SEC Approves Continuing Education Requirements for Municipal Advisors

 

Application of MSRB Rules to Solicitor Municipal Advisors

In MSRB Regulatory Notice 2017-08, the MSRB: (i) summarizes several of the most important MSRB rules applicable to municipal advisors that undertake the solicitation of a municipal entity or obligated person and includes references to various provisions of the Securities Exchange Act of 1934 (the “Exchange Act”) and Exchange Act rules adopted by the SEC that are applicable to the registration of such municipal advisors with the SEC; (ii) sets forth an exhaustive list of all the general MSRB rules applicable to such municipal advisors as well as the key administrative and definitional MSRB rules applicable to them; and (iii) refers to various MSRB and/or SEC resources for additional information on the content summarized herein and, more generally, to select additional resources that may be of interest to all municipal advisors. Because much of the content of this Notice applies to municipal advisors generally, this guidance may be useful to non-solicitor municipal advisors as well.

MSRB Regulatory Notice 2017-08 (May 4, 2017): Application of MSRB Rules to Solicitor Municipal Advisors