Compliance Corner: Summer 2020
Compliance in Focus: LIBOR Transition Information
The MSRB is publishing this information regarding the LIBOR reference rate and encouraging regulated entities to review their activities related to LIBOR transactions, particularly given that the financial authority responsible for the publication of LIBOR has stated that it cannot guarantee that the LIBOR reference rate will be published beyond 2021. This information is intended to highlight existing MSRB rules that promote the protection of municipal entities by ensuring they are apprised of risks associated with the LIBOR reference rate when entering into new LIBOR-based transactions.
Compliance Frequently Asked Questions ( FAQs)Get answers to commonly asked questions about compliance with MSRB rules. Q: If a registered municipal advisor employs a subcontractor to act as a co-municipal advisor on an issuance of municipal securities, is the subcontractor subject to conflicts of interest disclosures under MSRB Rule G-42? A: Yes. MSRB Rule G-42, on duties of non-solicitor municipal advisors, requires municipal advisors to disclose all material conflicts of interest, in writing, prior to or upon a municipal advisor engaging in municipal advisory activities on behalf of a municipal entity or obligated person client. Additionally, if a municipal advisor concludes that it has no known material conflicts of interest based on reasonable diligence, a municipal advisor must provide a written statement to the client to that effect. Generally, a subcontractor, acting as a co-municipal advisor, may not have entered into an engagement with the municipal entity or obligated person client for municipal advisory services. If a subcontractor, in acting in its capacity as a co-municipal advisor, provides advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, such subcontractor is engaged in municipal advisory activities and would be subject to the same conflicts of interest disclosure obligations under Rule G-42 as the employing municipal advisor that was directly engaged by the municipal entity or obligated person client. |
Compliance Tip: Taking Care of (Outside) Business
Under MSRB Rule G-44 , on supervisory and compliance obligations of municipal advisors, a municipal advisor’s written supervisory procedures shall take into consideration, among other things, the likelihood that associated persons may be engaged in relevant outside business activities. Municipal advisors should also bear in mind that SEC Form MA-I requires outside business activities to be disclosed. Read more about written supervisory procedures .
Compliance CalendarDealers and municipal advisors should note the following key compliance dates and deadlines relevant through the third quarter of calendar year 2020.
March 19, 2020: MSRB Webinar: Understanding How
Continuing Disclosures Appear on the EMMA® Website (MA)
March 30, 2020: Comment Deadline on Request
for Comment on Draft Amendments to MSRB Rule A-3:
Membership on the Board (MA/BD)
April 30, 2020: Political Contributions Quarterly
Disclosures (MA/BD)
April 30, 2020: Annual Municipal Advisor Professional
Fee (MA)
May 31, 2020: Annual 529 Plan Underwriting Fee (BD)
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Enforcement InsightThis periodic feature summarizes a recent enforcement matter brought by an examining authority, which includes the SEC, FINRA or applicable bank regulator, relevant to the municipal securities market. Enforcement matters can, when applicable, inform firms and help identify potential compliance risks. Read about the MSRB’s regulatory coordination and enforcement support . On December 2, 2019, FINRA and D.A. Davidson & Co. agreed to a Letter of Acceptance, Waiver and Consent (AWC) . In connection with 22 municipal offerings, during the period of March through October 2016, Davidson violated MSRB Rule G-17 by providing inaccurate or misleading statements in issue price certificates. Interpretive Guidance under Rule G-17 regarding an underwriter’s fair dealing obligations provides that “in connection with a certificate signed by the underwriter that will be relied upon by the issuer or other relevant parties to an underwriting (e.g. an issue price certificate), the dealer must have a reasonable basis for the representations and other material information contained therein.” See Release No. 34-66927 (May 4, 2012); 77 FR 27509 (May 10, 2012) (File No. SR-MSRB-2011-09); and MSRB Notice 2012-25 (May 7, 2012) As the sole underwriter on these 22 municipal offerings, Davidson prepared and provided issuers with an issue price certificate that represented that 10% of the initial offering was or would be sold to the public. However, in each of the 22 municipal offerings certain maturities were sold entirely to other broker-dealers and not to the public. In addition, Davidson violated MSRB Rule G-27, on supervision, because the firm relied on bankers and bond counsel to prepare and execute the statements in the issue price certificates without maintaining its own process or procedure for verifying the accuracy of the information. Davidson agreed to accept a censure and a fine in the amount of $85,000. Davidson also agreed to an undertaking that included a review of the issue price certificates in the 22 municipal offerings and provide prompt notice to the issuers of inaccuracies in the issue price certificates. |
2020 Compliance Advisory Group
For the third consecutive year, the MSRB’s compliance initiatives will be informed by the Compliance Advisory Group (CAG). The MSRB has selected new members for CAG to provide feedback on compliance resources, tools and educational materials to enhance dealers’ and municipal advisors’ understanding of MSRB rules and to assist their efforts in developing effective supervisory and compliance programs. Advisory groups serve as a resource to the MSRB in advancing its strategic goal of enriching stakeholder engagement.
Regulatory Roundup
Keep up with current requests for comment, updated regulatory requirements and upcoming rule filings, and learn about opportunities to provide input at various stages of the MSRB’s rulemaking process.
February 18, 2020: SEC Approval Order on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
February 6, 2020: MSRB Response to Comments on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
December 20, 2019: SEC Request for Extension of Time on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
December 9, 2019: Comment Letter to the Securities and Exchange Commission (SEC) on its Proposed Exemptive Order for Registered Municipal Advisors
November 27, 2019: Federal Register Notice of Filing on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
November 19, 2019: Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
October 18, 2019: Revisions to the Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination