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Compliance Tip of the Week 2021

Compliance Tip of the Week 2021

(A weekly newsletter providing compliance tips for regulated entities):

December 20, 2021: Stocking Up Holiday Treats to Share, but Keep Track of Your Giving

Have you finished your holiday gift shopping? All year long, keep track of gifts or gratuities given by the firm and each associated person to a particular recipient to ensure such gifts or gratuities do not exceed the $100 limit under Rule G-20(c), for gifts or gratuities given in relation to the municipal securities or municipal advisory activities of the employer of the recipient. Remember that the value of all gifts that are not covered under an exclusion must be aggregated over the course of the year, so that the total of all gifts or gratuities for the year does not exceed $100 for a particular recipient. Keeping a separate record of each gift is also required under Rule G-8, on books and records.


December 13, 2021: One for the Records

As the end of year draws near, this may be a good time to review your books and records being made and maintained under MSRB Rules G-8 and G-9 and look for anything that might need to be updated or revised. For example, it's a great time for a municipal advisor to check that it has obtained and retained written consent to service of process for all of its associated persons. As a reminder, for a sole proprietorship, by signing the Form MA-I you are agreeing to consent to service of process and do not need to create a separate form.


December 6, 2021: Get in the Holiday Spirit—Review the MSRB's Systems Holiday Schedule

As the days grow shorter and air outside gets nippy, we are reminded that the holiday season is fast approaching. The MSRB publishes a Systems Holiday Schedule to assist dealers with determining submission deadlines associated with Rule G-14, on transaction reporting, Rule G-32, on disclosures in connection with primary offerings, and Rule G-34 (c), on variable rate security market information. Review the MSRB's System Status webpage for real-time information on the operational status of the MSRB's market transparency systems.


November 29, 2021: Peanut Butter and Jelly Received Their Pardons, Now on With the Holiday Season

Can you feel the "chemistree" between supervision and compliance? They complement each other but are different. For example, while the role of a chief compliance officer may be outsourced by the firm, the role of a supervisory principal must be fulfilled by an employee of the firm. MSRB Rule G-44 requires municipal advisors to establish and maintain a supervisory system that is reasonably designed to achieve compliance with MSRB rules. Municipal advisors should be mindful about the reasonableness of their supervisory system, including ensuring that designated supervisory principals are able to effectively fulfill their supervisory obligations, because final responsibility for proper supervision rest with the firm.


November 22, 2021: We are Thankful for the Role of Compliance

At this time of Thanksgiving, the MSRB is thankful for the role that compliance plays in fostering a fair and efficient market. Compliance is a shared responsibility; to aid your efforts, be sure to subscribe to MSRB newsletters for updates on regulatory matters, market data, and events.

Read the MSRB’s most recent Compliance Corner and MSRB Update.


November 15, 2021: Municipal Advisor End-of-Year To-Do List

Tis the season for year-end to-do lists. If you have not done so already, check off these regulatory obligations as you prepare for year-end closing:

Continuing Education Requirements - Under MSRB Rule G-3, municipal advisors must, at least annually, conduct a needs analysis, develop a written training plan, and deliver CE training in accordance with the needs analysis.

Chief Executive Officer(s) Certification - Under Rule G-44, municipal advisors must have their CEO certify annually, in writing, that the municipal advisor has in place processes to establish, review, test and modify its compliance policies and written supervisory procedures.

Notification Requirements Related to Municipal Advisory Client Education - Under Rule G-10, municipal advisors must provide their municipal advisory clients with the required written notification once each calendar year during the course of the municipal advisory relationship.


November 8, 2021: Sophistication Takes Some Effort

Have your clients indicated that they are Sophisticated Municipal Market Professionals (SMMPs)? From time to time, consider reviewing your SMMP customers' affirmations related to exercising independent judgement and the ability to timely access material information that is publicly available. While an annual review is not required, this practice may provide a basis to continue to reasonably conclude that a customer is an SMMP. Additionally, this check could be timely, given the recent amendments to MSRB Rule G-10, on investor and municipal advisory client education and protection, and accompanying amendments to MSRB Rule G-48 to exempt SMMPs from the required notification requirements.


November 1, 2021: 30 Days Left to Take the Series 54 Exam

Today marks the beginning of the last 30 days in which to request an enrollment window that will afford the applicable associated persons of a municipal advisor firm time to take the Series 54 exam before the November 30, 2021 compliance date. The MSRB encourages individuals to start their preparation by reviewing the Series 54 Content Outline. This is the best approach to tailor your studies coming down the home stretch.


October 25, 2021: Keeping the Record Straight

MSRB Rule G-9 states the amount of time records maintained pursuant to MSRB Rule G-8 must be preserved and requires that records be accessible for inspection by the appropriate regulatory agency. Take time to revisit the record preservation timelines. Rule G-9 (a) and (b) outline records that dealers must preserve for a period of four years or six years; and MSRB Rule G-9 (h) outlines records that municipal advisors must preserve for a period of not less than five years and for at least six years, under certain conditions prescribed under the rule.


October 18, 2021: Be Mindful of the "Like" Button

Have you been wondering how to use the power of social networking to promote, among other things, news regarding the municipal advisor services or municipal securities business of your firm? Depending on the facts and circumstances, any material that relates to such services of your firm could constitute advertising and therefore be subject to the content standards and approval prior to first use.

Conversely, as a general matter, third parties, such as a customer or client, can post to your firm's social media webpage and even "like" content that has been posted, and these unsolicited posts or “likes,” would not constitute advertising by the regulated entity or its associated persons under MSRB rules.

Be mindful not to become entangled with or adopt third-party posts.

For additional information, please see the MSRB's FAQs regarding the Use of Social Media under MSRB Rule G-21, on Advertising by Brokers, Dealers or Municipal Securities Dealers, and MSRB Rule G-40, on Advertising by Municipal Advisors.


October 11, 2021: Don’t Be Spooked - Filing on Sunday October 31 Is on Time

Regulated entities must file Form G-37 quarterly, but what happens if that deadline falls on a weekend or holiday like today? You can be confident that if you submit your Form G-37 on a weekend or holiday, it will be accepted that day.

The next deadline for filing Form G-37 is Sunday October 31, 2021. You can submit your Form G-37 on that date, and the submission will be timely.


October 4, 2021: Opportunity on Thursday for Municipal Advisors to Engage with Regulators

This Thursday, October 7, 2021, is the 2021 Compliance Outreach Program for Municipal Advisors. Register now to hear from the SEC, FINRA, and MSRB on current compliance issues – submit your questions to municipal advisor regulators and industry practitioners today! We look forward to “seeing” you there!


September 27, 2021: Unlike Couples, Municipal Advisors Must Register BEFORE Getting Engaged

The SEC recently charged two individuals with improperly providing municipal advice to two charter school clients without their firm being registered with the SEC or the MSRB as a municipal advisor. In addition, the individuals were charged with violating MSRB Rule G-42 for failing to adequately disclose conflicts of interest and for engaging in a prohibited fee-splitting arrangement with an underwriter.


September 20, 2021: Compliance Outreach Program for Municipal Advisors – October 7, 2021

On October 7, 2021, the SEC, FINRA, and MSRB will host the 2021 Compliance Outreach Program for Municipal Advisors. This event will be held virtually from 10 a.m. to 5 p.m. Registration is now open. Plan on attending to hear from regulators and industry practitioners about compliance issues that are top of mind for municipal advisors in the coming year. We look forward to “seeing” you there!

Register now!


September 13, 2021: Evergreen Agreements Still Need Care and Attention

In autumn we rake leaves and can ignore our evergreens – however evergreen agreements still need to tending to. Municipal advisors with evergreen agreements reflecting ongoing relationships with issuer clients need to ensure that the MSRB Rule G-42 disclosures made in those agreements stay current. Supplementary Material .06 of Rule G-42 requires municipal advisors to amend or supplement relationship documentation, including an evergreen agreement, to reflect any material change to conflicts of interest or other disclosures.


August 30, 2021: It’s Back to School Time

As our kids head back to school, it's time for individuals engaged in the management, direction or supervision of a firm’s municipal advisory activities to consider their own educational needs. The compliance deadline for these individuals to take and pass the Municipal Advisor Principal Qualification Examination (Series 54 Exam) is rapidly approaching, and now is the time to register and begin studying for the exam. To facilitate compliance with municipal advisors' obligations to have at least one person appropriately qualified with the Series 54 exam by the impending November compliance date, the MSRB recently announced that the Series 54 exam is now available online in addition to ongoing in-person testing at Prometric testing centers. Individuals who wish to test online should carefully review the set of frequently asked questions for detailed information on requesting the interim accommodation.

See our resources:


August 23, 2021: Attend a Virtual Regional Town Hall for Municipal Advisors

The MSRB is holding a series of virtual regional town halls for municipal advisor firms, where MSRB Board members and staff update participants on MSRB initiatives and participants can ask questions and raise topics for discussion. These town halls provide an opportunity for municipal advisors to share their challenges so the MSRB can develop tools and resources that facilitate compliance with MSRB rules.

The MSRB has already held two virtual regional town halls—one for municipal advisors in Midwest states and one for municipal advisors in Western states—and has three more to go. The next town hall, for Southwest firms, will be held on Tuesday, August 24, 12:00-1:30 p.m. MT (2:00-3:30 p.m. ET).


August 16, 2021: Are You Flying Solo?

Even if you're flying solo, MSRB Rule G-3(e) (iii) on numerical requirements applies to your sole proprietorship. Pursuant to Rule G-3, every municipal advisor must have at least one municipal advisor principal; and pursuant to MSRB Rule G-44 such designated principal is responsible for the supervision required under the rule. So, if you still need to take and pass the Municipal Advisor Principal Qualification Examination (Series 54) by the November 12, 2021, compliance date, be sure to visit the MSRB's Series 54 webpage for up-to-date information. Additionally, in case you haven't heard, on Monday, August 23, the Series 54 exam will be launched online, on a temporary basis, to provide flexibility to individuals in meeting their compliance obligation by the compliance deadline.


August 9, 2021: Back to School Planning

As part of back-to-school planning, parents may use this as an opportunity to review their 529 account balance and investment options. When advising customers regarding 529 plan investment options, including share-class recommendations, dealers are reminded of their suitability obligations under MSRB Rule G-19. Dealers must have written supervisory procedures, consistent with MRSB Rule G-27, that are reasonably designed to achieve compliance with the suitability obligations under Rule G-19.


August 2, 2021: Non-NIIDS-Eligible? Form G-32 has a place for you.

As part of back-to-school planning, parents may use this as an opportunity to review their 529 account balance and investment options. When advising customers regarding 529 plan investment options, including share-class recommendations, dealers are reminded of their suitability obligations under MSRB Rule G-19. Dealers must have written supervisory procedures, consistent with MRSB Rule G-27, that are reasonably designed to achieve compliance with the suitability obligations under Rule G-19.


July 26, 2021: Give Your All By Enrolling and Preparing for the Series 54 Exam

National All or Nothing Day encourages people to give their all to every task. Celebrate today by enrolling and preparing for the Series 54 exam.

Visit the dedicated Municipal Advisor Principal Qualification Examination (Series 54) webpage for helpful information on the exam enrollment process and tools for preparing. In accordance with Rule G-3, on professional qualification requirements, individuals acting in the capacity of a municipal advisor principal must take and pass the Series 54 exam on or before November 12, 2021.


July 19, 2021: Bank Dealers – Who Is a Municipal Finance Professional?

Bank dealers are reminded that any officer(s) designated by the bank's board of directors as responsible for the day-to-day conduct of the bank’s municipal securities activities (dealer supervisory chain persons) are considered municipal finance professionals under Rule G-37(g)(ii)(D). As a result, political and bond ballot campaign contributions or payments made by municipal finance professionals must be disclosed quarterly on Form G-37 and certain political contributions made by these individuals can trigger Rule G-37’s ban on municipal securities business.

To learn more, read the MSRB’s Summary of Ban on Business Provisions under MSRB Rule G-37 and Questions and Answers Concerning Political Contributions and Prohibitions on Municipal Securities Business.


July 12, 2021: UEFA--Victory in Understanding Engagement Facts for Advisors

A municipal advisory relationship must be evidenced with one or more writings. Rule G-42 requires that such writing(s) be dated and include, among other things, disclosure of all material facts regarding conflicts of interest. These disclosures must be in sufficient detail to inform the client of the nature, implications and potential consequences of each conflict and include an explanation of how the municipal advisor addresses or intends to manage or mitigate each conflict. These disclosures also need to be promptly amended during the engagement to reflect any material changes or additions.


June 28, 2021: Social Media Can Be an Advertisement

For over a year most of our communications have been online, and many of us have increased our social media presence as a way to stay connected with clients in this new normal. Social media has become an increasingly important part of our work lives, as well, and social media communications related to a firm’s business are likely subject to MSRB Rule G-40 or MSRB Rule G-21. Click here to determine how the MSRB’s advertising rules apply to your online presence.


June 21, 2021: On Par with the Tools for MAs' WSPs

Municipal advisors establish, implement, and maintain written supervisory procedures (WSPs) and routinely modify those procedures to reflect changes in applicable rules and as changes occur in the municipal advisor’s supervisory system. Check out a tool to help with this Rule G-44 obligation--a sample template and checklist. The template illustrates one possible format for developing WSPs, and the checklist can be used as an aid in assessing whether WSPs address the applicable rules.


June 14, 2021: Do You Know Who Your Municipal Finance Professionals Are?

One of the five types of MFPs is a "municipal finance representative," defined as any associated person primarily engaged in municipal securities representative activities other than sales activities with natural persons. The activities described in Rule G-3(a)(i) that describe municipal securities representative activities include underwriting and trading or sales of municipal securities. If a person associated with your firm is primarily engaged in such activities, they may need to be designated as an MFP if their activities do not constitute sales activities with natural persons.


June 7, 2021: Meet the MSRB's Market Regulation Team

The MSRB is committed to providing compliance resources to advance understanding of MSRB rules. In 2018, the MSRB launched the distribution of its Compliance Tip of the Week. To date, we have issued more than 160 compliance tips to over 2,000 subscribers. We strive to make this Monday ritual concise, sometimes funny and, most importantly, helpful. As we enter the summer of 2021, we will feature a compliance tip from each of the MSRB’s Market Regulation team members to introduce this great team to all of you. Please don’t hesitate to reach out to any one of us with questions at compliance@msrb.org.

Read the latest issue of the MSRB's Compliance Corner newsletter.
See the MSRB's Compliance Center.


May 24, 2021: Maintain and Preserve – Municipal Advisor Books and Records

Even as we all start experiencing a new normal, municipal advisors’ books and records must still be maintained and preserved. Read Considerations for Developing a Municipal Advisory Supervisory System and Compliance Program for a checklist of many of the required records to be made as part of a municipal advisor’s supervisory system and consider reviewing the firm’s written supervisory procedures and compliance policies to evaluate whether they are reasonably designed to comply with the applicable books and records requirements under SEC Rule 15Ba1-8 and MSRB Rules G-8 and G-9.


May 17, 2021: Your Input Will Help Reduce Compliance Burdens

On Friday, the MSRB issued a Request for Comment (RFC) proposing amendments to Rule G-10(a) on dealers' obligations to provide certain annual notifications to customers. Given the devil is always in the details, the MSRB is seeking your comments to better assess which customers would most directly benefit from such annual notifications and to understand the estimated cost savings to dealers under the proposed amendments. Comments should be submitted no later than June 28, 2021.

Click here to read MSRB Notice 2021-08.


May 3, 2021: Down the stretch--Guidance to be Archived on May 10

Sometimes tradition is timeless and iconic, like the mint julep at the Kentucky Derby, but other things do not age as well. On Monday May 10, fifteen pieces of interpretive guidance will be removed from the MSRB Rule Book and retired. Archiving retired guidance that no longer achieves its intended purpose serves to reduce compliance burdens and advances the MSRB's initiative to streamline and modernize the MSRB Rule Book.

Click here to learn which pieces of guidance will no longer be in effect and how to engage with the MSRB if you have any questions.


April 26, 2021: Political Contribution Reporting Deadline Is April 30

With the quarterly Form G-37 filing due this Friday, April 30, 2021, it is important to remember that reportable political contributions include those that may not readily come to mind, such as contributions to a bond ballot campaign. Additionally, regulated entities must disclose any undertaking of municipal securities business or municipal advisory business during the relevant quarter of the submission period. For helpful information related to completing Forms G-37 and G-37x, review the MSRB’s Instructions for Forms G37 and G-37x and MSRB Rule G-37. Should you need technical assistance with a form filing, please don’t hesitate to contact MSRB Support at 202-838-1330 or MSRBsupport@msrb.org.


April 19, 2021: Find Key Municipal Securities Stats in the 2020 MSRB Fact Book

The MSRB collects data from the municipal securities market and publishes an annual Fact Book providing statistics on trading patterns and other valuable information including interest rate resets for variable rate securities, continuing disclosures, and primary market information. Check out the 2020 Fact Book, published in March 2021.


April 12, 2021: Free Webinar on Submitting it Faster to EMMA

Join the MSRB on April 15 for a free webinar on Submitting it Faster on EMMA, a virtual training on how to be more efficient and effective when submitting disclosure documents on EMMA.

April 15 is National High Five Day. Attend the webinar and give yourself a high five for learning about ways to save time in the submission process.


April 5, 2021: National Financial Capability Month

It’s National Financial Capability Month. Take this opportunity to empower investors with educational resources. Potential investors in municipal bonds may have questions when considering the purchase of a municipal security. The MSRB offers many educational resources for investors. Among these offerings is a free interactive course on MuniEdPro – Exploring Municipal Bonds: A Course for Investors.


March 29, 2021: 
Like April showers bring May flowers, prudent rulemaking grows from the input of all market participants. Given that, have you noticed that the MSRB has recently issued two Requests for Comment? One Request for Comment is of particular interest to bank dealers and the other is of interest to municipal advisors. The MSRB is requesting comment on the application of Regulation Best Interest (Reg BI) to bank dealers, with a comment period ending June 2, 2021 and on fair dealing obligations of solicitor municipal advisors , with a comment period ending June 17, 2021. We look forward to hearing from you.
 
Do you subscribe to Compliance Corner? See the Winter 2021 issue. Subscribe here.

March 22, 2021: Start the Ball Rolling--Prepare for the Series 54 Exam

While the weather is getting warmer, before you know it, it will be Autumn and the deadline to take and pass the Municipal Advisor Principal Qualification Examination (Series 54) will be here. Individuals qualified with the Series 50 examination will need to become appropriately qualified as a municipal advisor principal to continue to engage in the management, direction or supervision of the municipal advisory activities of a municipal advisor firm. Don’t wait to start studying...no one enjoys cramming for an examination at the last minute. You can start by reviewing Series 54 exam information available on msrb.org. The grace period ends on November 12, 2021.


March 15, 2021: Annual MA CEO Certification

We are all busy and delegate where we can, whether it is Instacart or UberEats, but some things cannot be delegated. While municipal advisors may outsource certain compliance tasks, ultimate responsibility remains with the firm. For example, consistent with MSRB Rule G-44, the chief executive officer (or equivalent officer) of the municipal advisor must certify that the firm has in place processes to ensure that its policies and procedures are reviewed, updated and maintained to be reasonably designed to achieve compliance with applicable rules. This certification is due annually, but based on prior relief granted by the MSRB, municipal advisors have until March 31, 2021 to complete the 2020 certification.


March 8, 2022: Longer Days, More Time to Comply

Like our clocks will spring ahead this weekend to give us more time to enjoy the daylight, the MSRB is providing dealers additional time to operationalize and implement the new Form G-32 requirements. The compliance date for new Form G-32 has been extended from March 31, 2021 to August 2, 2021. Read more about it here.


March 1, 2021: Certain Relief Is Expiring Soon

It has been an unprecedented year, but don’t be like the White Rabbit in Alice's Adventures in Wonderland -- late, late for a very important date. March 31, 2021 is the deadline for implementing the revised underwriter disclosures as described in the revised interpretive notice under Rule G-17 and for certain professional qualification standards under Rule G-3. The original deadlines were extended last year due to the demands of the COVID-19 pandemic. It has been nearly a year since the MSRB provided regulatory relief and extended the deadline for these requirements, so don't miss the new deadline!


February 22, 2021: Free MSRB Webinar on Interpretive Guidance Review

Don't miss the MSRB's live webinar on its initiative to conduct a comprehensive review of the entire catalogue of interpretive guidance in the MSRB rule book. The goal is to streamline and modernize the rule book by clarifying, amending and/or retiring interpretive guidance that no longer achieves its intended purposes.

MSRB staff will discuss this multi-year initiative and address stakeholder questions on Wednesday, February 24, 2021 from 3:00 p.m. to 4:00 p.m. ET.

Do you have questions for the presenters? Send them in advance to Msrbevents@msrb.org

Register now.


February 8, 2021: Review and Update Associated Person Information

On Monday February 15, we honor our great presidents by closing our banks for the day and taking a moment to remember Washington, Lincoln and others. Bank municipal securities dealers can also ask their associated persons to take a moment to ensure that information related to Form MSD-4 (Uniform Application for Municipal Securities Principal or Municipal Securities Representative Associated with a Bank Municipal Securities Dealer) is current and accurate. MSRB Rule G-7(c) requires each associated person of a bank municipal securities dealer to inform the firm if any information on Form MSD-4 becomes materially inaccurate or incomplete.


February 1, 2021: Is the pandemic making it feel like Groundhog Day?

Like Bill Murray's character lived the same day over and over again in the movie “Groundhog Day,” compliance officers continue to monitor the impact of the COVID-19 pandemic on their firms' operations long after they initially expected to. Similarly, the MSRB provided initial regulatory relief in light of the operational challenges due to the pandemic and has since extended such relief. Regulated entities should be sure to document their reliance on any of the temporary relief and continue to visit the MSRB’s COVID-19 information page for updates to FAQs about the regulatory relief – again and again.

See the COVID-19 FAQs


January 25, 2021: Don't Labor Over LIBOR Transition Resources

The MSRB is highlighting the Securities and Exchange Commission’s Office of Municipal Securities recent statement regarding the potential impact of the discontinuation of LIBOR during 2021 on the municipal securities market. Additionally, the MSRB reminds dealers of its published LIBOR Transition Information, which addresses the duty of fair dealing, under Rule G-17, that could be impacted by the LIBOR transition, as well as municipal advisors' duties, under Rule G-42, when making a recommendation to a municipal entity or obligated person client of a municipal securities transaction (or a municipal financial product) involving LIBOR.


January 11, 2021: Start 2021 off on the right foot!

If you are a dealer or municipal advisor, the Annual Affirmation Period pursuant to Rule A-12 began on January 1. Rule A-12(k) requires every registered dealer and municipal advisor to review, update as necessary, and affirm the information provided on its Form A-12. A dealer or municipal advisor must complete the 2021 Annual Affirmation on or before January 27, 2021, even if the firm’s information has not changed.

See the rule.


January 4, 2021: Resolve to Identify, Disclose, and Manage or Mitigate Conflicts

MSRB Rule G-42 requires a municipal advisor to use reasonable diligence to identify its material conflicts of interest and make robust disclosures of those conflicts to its municipal entity and obligated person clients.

If there are no known conflicts of interest identified, the municipal advisor must provide a written statement to the client to that effect. If material conflicts are identified, a municipal advisor must disclose such conflicts in writing in sufficient detail so that the client is informed of the nature, implications and potential consequences of each conflict and an explanation of how the municipal advisor addresses or intends to manage or mitigate each conflict.

Importantly, Rule G-42 specifically prohibits a municipal advisor from engaging in municipal advisory activities for a municipal entity client if the municipal advisor cannot manage or mitigate the conflicts of interest in a manner that will permit it to act in the municipal entity’s best interests.

See the rule.