MSRB Holds Quarterly Meeting; Publishes Report on Unregulated Market Participants

Date: April 6, 2009

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

Expanded Regulation, Transparency Are Topics at
Quarterly Meeting of the Municipal Securities Rulemaking Board

Alexandria, VA -The Municipal Securities Rulemaking Board held its quarterly meeting April 1-2, 2009 where it discussed a report it is releasing today on unregulated participants in the municipal market. The report details the prevalence of financial advisors and other entities in municipal market transactions and further underscores the MSRB's earlier call for these market participants to be brought under federal regulation. 

"Data show that unregulated financial advisors are a very significant force in municipal transactions, and the MSRB believes that these and other market intermediaries require federal regulatory oversight," said MSRB Chair Ronald A. Stack.  The MSRB has been calling for regulation of unregulated participants such as financial advisors, swap advisors and GIC brokers since January.  All of these entities help municipal bond issuers make important financial and investment decisions but are not subject to any oversight whatsoever.

At its meeting, the MSRB also discussed municipal credit default swaps, which are used by investors to hedge risk.  The U.S. Treasury last week announced a plan in which derivative contracts would be cleared through central counterparties or reported to trade repositories. "We believe that transparency is vitally important for CDS and other derivatives in the municipal market," Chair Stack said. "The MSRB continues to believe that municipal credit default swaps, interest re-rate swaps and other municipal derivatives should be included in the government's overall regulatory review and any new oversight for derivatives.  We are available to assist the Administration and Congress in any way as they evaluate the derivatives market."

The Board also reviewed a staff analysis of political contribution practices by underwriters to bond ballot campaign committees that authorize issuance of municipal bonds. MSRB Rule G-37 bans underwriters from doing municipal securities business with state and local governments if certain political contributions have been made to key elected officials.  Rule G-37 also requires underwriters to disclose their political contributions, which are made available to the general public by the MSRB at  The Board determined that, based on the information it has been able to gather, there is not adequate evidence to suggest that bond ballot campaign contributions have a negative effect on the integrity of the municipal marketplace.  However the Board agreed to continue to research any link between contributions and questionable practices that the Board could further consider.

The Board discussed the numerous enhancements to its Electronic Municipal Market Access (EMMA) system and the large-scale undertaking to collect continuing disclosures from municipal bond issuers and make them readily available to investors for the first time on the EMMA website ( In an effort to further expand transparency of issuer disclosures, the Board agreed to request permission from the Securities and Exchange Commission to enable issuers to file voluntary disclosures with EMMA. "The effort and pace of progress by the MSRB to add transparency to the municipal market is unparalleled," said Chair Stack.  "The July 1st launch of the EMMA's continuing disclosure service will forge new ground for issuers, investors and the MSRB."

The Board also agreed to seek public comment on enhancements to information available on EMMA about municipal auction rate securities and variable demand rate obligations.  The MSRB recently began collecting and publishing interest rate data for these securities.   The Board will seek comment on adding auction rate bidding information, additional information on VRDOs such as the identity of liquidity providers, as well as documents that define auction procedures and interest rate setting mechanisms for ARS and liquidity facilities for VRDOs.   The Board believes that collecting and publishing this extensive information would add a greater level of transparency to the municipal short-term market.  In additional business, the Board set at $5,000 the fee for a subscription to a real-time feed of data on ARS and VRDOs.

The Board also agreed to request comment on a proposed change to deadlines in MSRB Rule G-11 on settlement of syndicate accounts.  The Board will seek public comment on shortening the deadlines for final settlement of an issue to 30 days following the date all securities have been delivered by the syndicate from the current 60 days.  The Board also will seek comment on reducing to within 10 days from the current 30 days for the distribution of credit to a syndicate member from a customer in connection with the purchase of securities.

At its meeting, the Board also participated in additional strategic planning work with an eye towards a mid-summer completion date.  

As it does each spring, the Board met with the MSRB's Investor and Issuer Advisory Groups and discussed market liquidity, bond insurance and issuer disclosure.  "We are enormously grateful for the dialogue and input that our advisory groups provide," said Chair Stack.  "We learn first-hand what are the top concerns of investors and issuers, and their views better inform the work of the MSRB."

Ahead of its Board meeting on April 1, the MSRB hosted an outreach event at the Harvard Club for New York City area municipal market participants.  More than 150 people attended the event.

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.