Statement from the MSRB on Opinion in Rule G-37 Legal Challenge

Date: July 14, 2017

Contact: Jennifer A. Galloway


Washington, DC - The United States Court of Appeals for the Sixth Circuit today dismissed a legal challenge filed last year against the Municipal Securities Rulemaking Board (MSRB) and the Securities and Exchange Commission (SEC) to recent amendments to the MSRB’s pay-to-play rule, MSRB Rule G-37, which extended the rule to cover municipal advisors. Read the Court’s decision.

A key aspect of the mission of the MSRB is to promote a fair and efficient municipal securities market. The MSRB firmly believes that pay-to-play rules are vital to protect the integrity of the $3.8 trillion municipal securities market. Rule G-37 is narrowly tailored to address quid pro quo corruption, and the appearance of this type of corruption, in the awarding of business by state and local governments to regulated firms and their professionals that have made political contributions to officials in a position to influence such awards. 

The rule has been in effect for municipal securities dealers since 1994. The U.S. Court of Appeals for the D.C. Circuit upheld the approach used in Rule G-37 as constitutional under the First Amendment in a 1994 legal challenge. The constitutionality of Rule G-37 is not contradicted by today’s ruling that the challengers did not have standing to bring a case against the recent amendments. As a result of today’s ruling, the important amendments to Rule G-37, which extended this longstanding rule to municipal advisors, remain in place.

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.