MSRB Seeks Comment on Clarifying Exceptions to Minimum Denomination Rule

Date: April 7, 2016

Contact: Jennifer A. Galloway, Chief Communications Officer


Washington, DC – The Municipal Securities Rulemaking Board (MSRB) is seeking comment on draft rule amendments to support the practical implementation of its rule that generally prohibits dealers from selling bonds below a stated minimum denomination. The amendments seek to clarify exceptions that are consistent with the rule’s original intent to protect investors.

The MSRB’s minimum denomination rule – a provision of MSRB Rule G-15 on customer transactions – is designed to protect investors in cases where municipal securities issuers determine that the complexity, risks, lack of disclosure or other factors make the securities inappropriate for a retail customer. The rule generally prohibits municipal securities dealers from trading such securities with customers below the minimum denomination specified in the official statement; however, the rule contains certain exceptions intended to preserve liquidity for investors.

“The MSRB understands that both firms and enforcement agencies could benefit from greater clarity about circumstances in which sales below the minimum denomination could be permissible,” said MSRB Executive Director Lynnette Kelly. “The proposed additional exceptions to the rule would facilitate regulatory efficiency and enhance liquidity for investors that currently hold positions below the minimum denomination while preserving the spirit of the rule.”

Comments should be submitted no later than May 25, 2016.

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.