MSRB Requests Comment on Revisions to Suitability Rule

Date: March 11, 2013

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

MSRB REQUESTS COMMENT ON REVISIONS TO SUITABILITY RULE

Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) is seeking comment on proposed revisions to a rule requiring municipal securities dealers to make sure recommended municipal securities transactions are suitable for their customers. The changes would add additional considerations for analyzing the suitability of a recommendation and make explicit the requirement that recommendations of investment strategies must also be suitable for the customer.

The revisions closely align the MSRB’s rule on suitability with the Financial Industry Regulatory Authority’s (FINRA) suitability provisions and consolidate existing MSRB interpretive guidance. As with FINRA’s rule, the proposed revisions make clear the specific factors that dealers must consider when recommending a transaction or investment strategy. The MSRB is adopting FINRA’s broad definition of investment strategies, which includes recommendations to hold securities.

“These changes would help ensure investors are presented with municipal securities recommendations that are appropriate based on their investment profile,” said MSRB Executive Director Lynnette Kelly. “The proposed revisions are also part of an ongoing effort to promote regulatory efficiency by identifying opportunities to streamline or consolidate MSRB rules and related guidance, as well as to ensure that the rules continue to reflect current market practices and conditions.” 

The revisions are also consistent with the recommendations of a July 2012 report from the Securities and Exchange Commission on the municipal securities market.

Comments on the proposed suitability revisions should be submitted no later than May 6, 2013.


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.