MSRB Requests Comment on Proposal Regarding Retail Order Periods

Date: March 6, 2012

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


Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) announced today it is requesting comment on amendments to MSRB rules that would govern the responsibilities of dealers in the conduct of retail order periods. The proposed rule changes seek to address concerns regarding dealers’ disregard of terms and conditions established by issuers of municipal securities in connection with bond sales, among other practices.

“The MSRB has a mandate to ensure the interests of state and local governments are protected when issuing bonds,” said MSRB Executive Director Lynnette Kelly. “These proposed rules would provide additional protections to ensure that issuers’ requests are honored and help retail investors achieve fair pricing for their bonds.”

The MSRB is proposing rule amendments and a related interpretation as part of its mandate to protect municipal entities and investors, and because retail order periods have become prevalent. State and local governments often wish to designate that a specific amount or specific maturities of new bonds be placed with retail investors.

The MSRB’s proposed amendments make clear it that it is the responsibility of a municipal securities issuer to define what it means by “retail investors,” since definitions vary. The amendments would require a syndicate manager to provide all members of a syndicate and any selling group members a written statement of the issuer’s terms and conditions, including any retail order period requirements, the priority provisions, and any subsequent changes.  

Dealers placing orders for securities during a retail order period would be required to provide written documentation of whether the order met the issuer’s definition of retail, among other requirements. The rules also would require an underwriter to report to the MSRB’s Electronic Municipal Market Access (EMMA®) system whether a primary offering of securities included a retail order period and when the retail order period was conducted. 

Over the last two years, the MSRB has been concerned about disregard by certain dealers of terms and conditions required by issuers for retail order periods, the failure of syndicate managers to disseminate timely notice of issuer terms and conditions regarding retail order periods to all dealers, and whether retail order periods result in fair pricing to retail investors.  Enforcement agencies have also requested that the MSRB adopt additional recordkeeping requirements concerning retail order periods to assist in the enforcement of MSRB rules, which today’s proposal also addresses.

Comments on today’s proposal are due April 13, 2012.

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.