All broker-dealers and banks that underwrite, trade and sell municipal securities -- collectively known as municipal securities dealers -- must register with the MSRB and the Securities and Exchange Commission (SEC), as required by Section 15(b) of the Securities Exchange Act. The SEC defines a dealer as a person engaged in the business of effecting transactions in securities for the account of others. A dealer is any person engaged in the business of buying and selling securities for his own account, through a broker or otherwise.
Learn about MSRB dealer registration.
Learn about SEC dealer registration.
Inspection and Enforcement
The Exchange Act provides that dealers may not effect a transaction in, or induce or attempt to induce the purchase or sale of, any municipal security in contravention of MSRB rules. The Act also designates enforcement agencies responsible for ensuring dealer compliance with this provision.
As a registered securities association, the Financial Industry Regulatory Authority has this responsibility for its members, which currently includes all securities firms. Bank regulators (the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and the Office of Thrift Supervision) have this responsibility for bank dealers under their respective jurisdictions. The Exchange Act also provides the SEC with broad inspection and enforcement authority over dealers in municipal securities, both with respect to MSRB rules as well SEC rules and other securities laws.
Other Dealer Regulation
In addition to being subject to MSRB rules, dealers in municipal securities also are subject to the anti-fraud provisions of the federal securities laws and a number of related SEC rules. Further regulation, covering basic operational and soundness requirements for dealers, is provided by the SEC and the other agencies inspecting for, and enforcing compliance with, MSRB rules. Dealers also may be subject to the securities laws of individual states and the requirement of state securities regulators.