MSRB Requests Comment on Supervisory Rule for Municipal Advisors

Date: May 25, 2011

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

Rule Aimed at Ensuring Compliance with MSRB Rules

Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) is requesting comment on a proposed rule that would require municipal advisors to adopt a basic supervisory structure to ensure compliance with applicable MSRB and Securities and Exchange Commission (SEC) rules. Comments are due no later than June 24, 2011.

MSRB Rule G-44 would require municipal advisors to establish and maintain a system to supervise the municipal advisory activities of associated persons. The rule would set the minimum requirements for this system, including the establishment and maintenance of written procedures. Ultimate responsibility for appropriate supervision rests with the municipal advisor.

The rule would also require municipal advisors to adopt, maintain and enforce written procedures to ensure municipal advisory activities are conducted in accordance with applicable MSRB and SEC rules. The rule would set the minimum requirements for these procedures, including those relating to the manner in which municipal advisory activities will be monitored and supervised for compliance.

“As the MSRB puts in place rules for municipal advisors, it is essential that a corresponding supervisory structure be undertaken to ensure that these newly regulated market intermediaries are meeting their duties and obligations,” said MSRB Executive Director Lynnette Kelly Hotchkiss. 

Current MSRB Rule G-27 requires supervision of brokers, dealers and municipal securities dealers (collectively, dealers) to ensure compliance with MSRB rules and also covers the financial advisory activities of dealers. The new supervisory rule would cover municipal advisory activities not subject to MSRB Rule G-27. The MSRB is developing a set of rules for municipal advisors based on its expanded jurisdiction under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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.