MSRB Board of Directors Holds Special Rulemaking Meeting

Date: May 23, 2011

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

MSRB BOARD OF DIRECTORS HOLDS SPECIAL RULEMAKING MEETING

Alexandria, VA – The Board of Directors of the Municipal Securities Rulemaking Board (MSRB) held a special meeting on May 19-20, 2011 in Alexandria, VA where it advanced major rule proposals governing fiduciary duty, conflicts of interest and fair dealing requirements for firms and individuals that provide financial advisory and underwriting services for municipal entities.

 “After significant consideration of how these rule proposals will protect issuers without unduly burdening the markets, the Board has created a set of fundamental rules governing some of the most important activities of municipal advisors and dealers,” said MSRB Chair Michael G. Bartolotta. “Ensuring that the municipal market operates fairly is the MSRB’s primary goal, and we believe these proposals will establish sound and enforceable professional standards of conduct for municipal advisors and dealers, and protect the interests of municipal entities.”

At its meeting, the Board amended earlier draft rule proposals based on public comments received and its intent to protect municipal entities and maintain an efficient market. Once approved by the Securities and Exchange Commission, MSRB rules have the force of federal law and apply to municipal advisors and dealers that provide municipal advisory and underwriting services to municipal entities, including state and local governments, public pension funds and obligated persons.

The MSRB Board of Directors agreed to seek SEC approval on the rule proposals covering the fiduciary duty responsibilities of municipal advisors toward municipal entity clients, including interpretive guidance on the duty of loyalty and care; the giving of gifts by municipal advisors in relation to their municipal advisory activities; and the application of the MSRB’s existing “fair dealing” rule to both municipal advisors and underwriters with respect to their work on behalf of municipal entities and obligated persons, as well as the solicitation of municipal entities on behalf of others. The MSRB expects to file all the rule proposals with the SEC during the month of June.

Since October 2010, the MSRB has been working to establish a regulatory framework for municipal advisors based on a set of principles-based rules consistent with provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The MSRB has also been reviewing dealer regulations to ensure that it is fulfilling its mission to protect municipal entities, in addition to investors and the public interest.

In other meeting business, the MSRB Board of Directors met with SEC Commissioner Elisse Walter to exchange information about municipal market oversight, and also with Richard Ketchum, Chief Executive Officer of the Financial Industry Regulatory Authority (FINRA) to discuss municipal market enforcement issues. The discussions were the second time during the MSRB’s current fiscal year that formal conversations among the three organizations have occurred. These meetings are in addition to ongoing staff discussions held regularly by MSRB, SEC and FINRA about municipal market oversight.


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.