MSRB Requests Comment on Proposed Guidance to Broker’s Brokers

Date: September 9, 2010

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

MSRB Requests Comment on Proposed Guidance to Broker’s Brokers

Alexandria, VA - The Municipal Securities Rulemaking Board (MSRB) announced today it is seeking comment on proposed guidance to broker’s brokers in an effort to address MSRB rule violations highlighted by enforcement agencies. Broker’s brokers, who principally effect transactions for other dealers, are important to the secondary market for municipal bonds owned by retail investors. When these investors wish to sell their bonds, their own brokers frequently turn to broker’s brokers to solicit bids from other dealers in a process known as a “bid wanted.” 

The MSRB recognizes that while most broker’s brokers make considerable efforts to comply with MSRB rules, enforcement actions by the Securities and Exchange Commission and the Financial Industry Regulatory Authority have highlighted broker’s broker activities that are clear violations of MSRB rules. The MSRB therefore considers it appropriate to provide reminders and additional guidance on how its rules apply to broker’s brokers, in particular, rules on fair pricing and fair practice.

“Because of the important role that broker’s brokers play in the secondary market, it is essential that broker’s brokers satisfy their obligation under MSRB rules to make a reasonable effort to obtain a fair and reasonable price for those bonds in relation to prevailing market conditions,” said Lynnette Kelly Hotchkiss, Executive Director of the MSRB.

Read the full notice and request for comment.

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.