MSRB Responds to Adoption of Volcker Rule by Federal Regulators

Date: December 10, 2013

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


Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) welcomed the harmonization of treatment of municipal securities under the so-called Volcker Rule on proprietary trading with how municipal securities are treated under existing federal securities laws. As passed, the provisions of the Volcker Rule avoid making artificial distinctions between municipal securities issued by state and local governments and those issued by their agencies or authorities. The MSRB believes that such distinction would not have served the purposes of the Volcker Rule and would have created regulatory complexity due to divergent treatment under the various applicable federal securities laws.

“The MSRB is pleased that the federal financial regulators agreed with the MSRB’s analysis and amended the initial proposal to avoid an unnecessary bifurcation of the municipal market,” said MSRB Chair Dan Heimowitz. “Exemption of all municipal securities as defined by the Securities Exchange Act ensures that the municipal market will not be splintered unnecessarily as a result of the Volcker Rule.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandated the development of a federal rule to restrict an insured depository institution and its affiliates from engaging in proprietary trading, among other provisions.

In a January 2012 comment letter to the five federal regulators jointly developing the Volcker rule, the MSRB urged that all municipal securities be treated equally under the governmental obligations exemption. The regulatory agencies – the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation and the U.S. Department of the Treasury Office of the Comptroller of the Currency – adopted a final rule that reflects the MSRB’s recommendation. The rule adopted today becomes effective April 1, 2014.

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.