MSRB Chair Testifies at Congressional Hearing on the Impact of the Dodd-Frank Act on Municipal Finance

Date: July 20, 2012

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

MSRB CHAIR TESTIFIES AT CONGRESSIONAL HEARING ON THE IMPACT OF
THE DODD-FRANK ACT ON MUNICIPAL FINANCE 

Alexandria, VA – Municipal Securities Rulemaking Board (MSRB) Chair Alan D. Polsky testified today at a Congressional hearing on the effect of municipal securities provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. His testimony to the Subcommittee on Capital Markets and Government Sponsored Enterprises of the House Financial Services Committee emphasized the need to protect state and local governments in their municipal finance transactions.

“High profile examples like the Jefferson County, Alabama bankruptcy, municipal bid-rigging convictions, and unsuitable derivative transactions sold to local governments illustrate the price of gaps in regulation of the municipal securities market,” Polsky said. “The MSRB is concerned, above all, with protecting state and local governments in the context of their municipal finance transactions.”

The Dodd-Frank Act expanded the mission of the MSRB to protect state and local governments and to regulate the professionals that provide them with financial advice. Many of these municipal advisors are subject to regulation for the first time.

Chair Polsky told the Subcommittee that municipal bond transactions often can involve complex structures and typically involve multiple professionals whose compensation is tied to the deal’s closing. “In the majority of cases, state and local government issuer officials are unfamiliar with the mechanics of these transactions,” he said. "Unqualified municipal advisors can compound the challenges faced by issuers in the municipal market and can have undisclosed ties to other market participants that threaten the integrity of the municipal market."

The MSRB has developed draft rules to establish fair practice obligations, eliminate conflicts of interest and address pay-to-play issues by municipal advisors. “Our draft rules are designed to promote conduct that is consistent with a municipal advisor’s fiduciary duty to its state and local government clients,” Polsky said.

Read the MSRB’s written testimony submitted to the House Subcommittee on Capital Markets and Government Sponsored Enterprises.


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.