MSRB Reminds Dealers of Sales Practice and Due Diligence Obligations

Date: September 20, 2010

Contact:         Jennifer A. Galloway, Chief Communications Officer
                      (703) 797-6600
                      jgalloway@msrb.org 

MUNICIPAL SECURITIES RULEMAKING BOARD REMINDS DEALERS OF 
SALES PRACTICE AND DUE DILIGENCE OBLIGATIONS
 

Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB), in coordination with the Financial Industry Regulatory Authority, today reminded firms that sell and trade municipal securities of their obligations to customers. MSRB rules, available on www.msrb.org, include standards of professionalism and fair practice, and the obligation of municipal securities dealers to fully understand bonds they sell as part of their disclosure, suitability and pricing obligations. In every municipal security transaction, dealers must obtain, analyze and disclose all material facts known to the dealer, or that are reasonably accessible to the market through established industry sources.

“Today’s notice serves as a reminder to dealers that the MSRB’s most fundamental rules governing the sale and trading of municipal securities apply to every transaction, whether in a primary offering or the secondary market,” said Lynnette Kelly Hotchkiss, Executive Director of the MSRB. “Selling securities is not like selling other types of products,” she said. “Dealers must ensure that a recommended security is suitable, that all material information about it is known and that the security is fairly priced.”

Of particular importance, Hotchkiss said, is the duty of dealers to assess the material facts about a security that are generally available in official statements, continuing disclosures and other information made available through the MSRB’s Electronic Municipal Market Access (EMMA). However dealers have a duty to obtain and disclose information that is not available through EMMA, if it is material and available through other established sources.

Today’s notice also reminds dealers that the Securities and Exchange Commission recently approved amendments to Securities Exchange Act Rule 15c2-12, governing continuing disclosures that will be effective in December 2010. These changes will increase the continuing disclosure requirements for certain municipal securities and establish timeliness standards for submission to EMMA of material event notices by municipal bond issuers, among other changes.

View the full MSRB notice to dealers.


The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is overseen by the Securities and Exchange Commission and Congress.