MSRB Investment Policy

As a self regulatory organization (SRO) formed pursuant to Section 15B of the Securities Exchange Act of 1934, the MSRB conducts rulemaking regarding the municipal securities activities of dealers and the municipal advisory activities of municipal advisors, and operates a number of programs to protect municipal securities investors, municipal entities and obligated persons, and to foster a fair and efficient municipal securities market. Funding for the MSRB’s programs and services is derived primarily from fees that are directly tied to primary offerings of municipal securities and municipal securities transactions. In addition, the MSRB receives fees from the registration of firms and individuals, and from fine sharing. Fine sharing is sporadic and is not predictable and subject to spending parameters. Each of these types of fees is subject to volatility based on market conditions.

As an SRO that engages in rulemaking and maintains market information transparency programs relied upon by market participants, the MSRB must maintain sufficient reserves to operate the organization without interruption, regardless of market conditions and the level of underwriting and transaction activity. Therefore, in order to ensure the MSRB is always in a position to fulfill its mandate, the organization has set an organizational reserve target of approximately 12 months of operating expenses less depreciation expense plus three-times annual capital needs.

In order to meet its statutory obligations, the investment objective of the MSRB is to emphasize preservation of capital and liquidity, while realizing adequate returns. Additionally, the MSRB strives to avoid any real or perceived conflicts of interest with its constituents by not investing in municipal bonds or any instruments in which its Board members may have a vested interest.

Investment Guidelines
Cash maintained in non-operating bank accounts should not exceed FDIC-insured levels.

Permitted Investments
1. Obligations of the US Government (US Treasury Bills and US Treasury Notes)
2. Non-callable and callable US Government sponsored agencies that are fully guaranteed by the US Government, including agencies with step-up interest rate features (GSA STRIPS are not permitted)
3. Certificates of Deposit that are FDIC insured or collateralized by US Government securities
4. Repurchase agreements collateralized by permitted investments #1 and #2
5. Money-market funds investing in permitted investments #1, #2 and #4

The goal is to hold investments until maturity in order to avoid realizing any principal loss. The executive director and treasurer are authorized to liquidate any holdings if they deem the action prudent and suitable. Maturity restrictions are as follows:

  • Maximum maturity for any single security is 3 years.
  • Weighted average maturity (WAM) of the portfolio is up to two years.
  • Total securities maturing in any single month should not exceed 25% of the total portfolio balance at any time during the year.