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
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 bacome 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
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
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
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 principals 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. 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
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