MUNICIPAL SECURITIES

General

(NEW) MSRB to Retire Select Interpretive Guidance for Dealers and Municipal Advisors

The MSRB is undertaking a retrospective review of the catalogue of interpretive guidance in its rule book. The goal of this comprehensive review is to streamline and modernize the rule book by clarifying, amending and/or retiring guidance that no longer achieves its intended purposes. The MSRB believes that this multi-year initiative will complement the MSRB’s other retrospective rule review initiatives and will be an impactful way to support compliance and reduce unnecessary costs and burdens for regulated entities, while fulfilling the MSRB’s regulatory obligation to protect investors, municipal entities, obligated persons, and the public interest. As an initial step, the MSRB is retiring 15 pieces of guidance from the MSRB rule book effective May 10, 2021. Such guidance will be archived on the MSRB Archived Interpretive Guidance page of the MSRB.org website, where it can be accessed for its historical value. This retirement date affords an opportunity for any stakeholders to contact the MSRB with any specific comments, questions or concerns.

MSRB Regulatory Notice 2021-02 (February 11, 2021): MSRB to Retire Select Interpretive Guidance for Dealers and Municipal Advisors

 

MSRB Harmonizes Rules with Requirements of Regulation Best Interest

The MSRB received approval from the SECon June 25, 2020 of amendments to MSRB rules that align MSRB rules to the Commission’s recently adopted Rule 15l-1 under the Exchange Act (“Regulation Best Interest”). The effective date of the amendments to MSRB rules was June 30, 2020, which is the compliance date for Regulation Best Interest.

MSRB Regulatory Notice 2020-13 (June 26, 2020): MSRB Harmonizes Rules with Requirements of Regulation Best Interest

 

Obligations of Senior Syndicate Managers Utilizing Electronic Communications

In November 1998, the MSRB published an interpretation about the use of electronic media to deliver and receive information by brokers, dealers and municipal securities dealers under Board rules (the “1998 Interpretation”). The 1998 Interpretation addresses how dealers may use electronic media to satisfy their delivery obligations under MSRB rules, including communications among dealers and between dealers and issuers. It states, “. . . a dealer that undertakes communications required under Board rules with other dealers and with issuers in a manner that conforms with the principles stated [in the 1998 Interpretation] relating to customer communications will have met its obligations with respect to such communications.” The MSRB wishes to remind dealers of the 1998 Interpretation, particularly in light of the January 13, 2020 compliance date for certain amendments to MSRB Rule G-11, on primary offering practices.

MSRB Regulatory Notice 2020-01 (January 6, 2020): Obligations of Senior Syndicate Managers Utilizing Electronic Communications

 


Amendments to Underwriters’ Fair Dealing Obligations to Issuers Under Rule G-17

The MSRB established a compliance date of November 30, 2020 for its amended and restated guidance regarding the fair dealing obligations underwriters owe to issuers of municipal securities under MSRB Rule G-17, on conduct of municipal securities and municipal advisory activities (the “Revised Interpretive Notice”). The SEC approved the Revised Interpretive Notice on November 6, 2019. The Revised Interpretive Notice incorporates various amendments to the MSRB’s 2012 Interpretive Notice. The MSRB reminds brokers, dealers and municipal securities dealers these amendments and encourages them to review the Revised Interpretive Notice in its entirety in advance of the November 30, 2020 compliance date.

MSRB Regulatory Notice 2020-03 (January 31, 2020): MSRB Establishes Compliance Date for Revised Interpretive Notice of Underwriters’ Fair Dealing Obligations to Issuers
MSRB Regulatory Notice 2019-20 (November 8, 2019): SEC Approves Amendments to Underwriters’ Fair Dealing Obligations to Issuers Under Rule G-17

 

Municipal Advisors

FINRA issued 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 became 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

 

MSRB Provides Compliance Resource on Application of Content Standards to Advertisements by Municipal Advisors under MSRB Rule G-40

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

 

Best Execution Rule

The MSRB adopted 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 issued Regulatory Notice 15-46 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 also issued this Notice to remind firms of their obligations, as previously articulated by the 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 provided 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

 

Investor Education Resources on New Mark-Up Disclosure Requirements

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

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 became effective on May 14, 2018. 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