What is the MSRB’s role with ABLE programs?
Much like interests in 529 plans, interests in ABLE programs may be considered “municipal fund securities” under MSRB rules. Further, much like brokers, dealers and municipal securities dealers (collectively, “dealers”) that effect transactions in 529 plans, dealers that effect transactions in ABLE programs may be subject to regulation by the MSRB. Because of the similarities in the structure of ABLE programs to 529 plans, the MSRB sought and received guidance from the staff of the Securities and Exchange Commission (SEC) about the status of interests in ABLE programs under the federal securities laws.
The SEC staff guidance provides, in part, that depending on the facts and circumstances, interests in ABLE programs may be municipal securities under the federal securities laws. The SEC staff guidance also provides that (i) the offering of interests in ABLE programs may be considered a “primary offering” pursuant to Rule 15c2-12(f)(7) under the Securities Exchange Act of 1934, as amended, and (ii) dealers that act as underwriters in connection with a primary offering of interests in an ABLE program may be subject to the requirements of Rule 15c2-12 under the Exchange Act. Therefore, consistent with the SEC staff’s views, dealers effecting transactions in ABLE programs may be subject to all MSRB rules, unless such dealers are specifically exempted from any of those rules, because those dealers would be effecting transactions in municipal fund securities
MSRB regulation means, among other things, that the activities of dealers that offer interests in ABLE programs may be subject to the MSRB’s fair practice rules. The fair practice rules require, in part, that recommendations made by a dealer must be suitable, advertisements must not be materially misleading, and that investors must receive certain disclosures. Read more about the MSRB’s fair practice rules.
What guidance has the MSRB provided to dealers and municipal advisors relating to ABLE programs?
In April 2016, the MSRB provided guidance under MSRB Rule D-12 that interests in ABLE programs may be municipal fund securities under MSRB rules. That guidance also provided that all previous guidance applicable to the sale of interests in 529 plans by dealers, also applies to the sale of interests in ABLE programs, as relevant.
In August 2016, the MSRB filed for immediate effectiveness with the SEC, amendments to MSRB Rules G-42, and G-44 to provide guidance relating to municipal advisors to sponsors or trustees of municipal fund securities, including ABLE programs.
The MSRB anticipates that it will publish additional guidance relating to dealers and/or municipal advisors to ABLE programs.
Does the MSRB collect data about ABLE programs?
Yes, beginning June 30, 2018, MSRB Rule G-45, on reporting of information on municipal fund securities, requires that underwriters to ABLE programs submit certain information to the MSRB about the ABLE programs they underwrite. That information includes program descriptive information; program manager information; aggregate program information about assets, contributions, and distributions; program transaction and service fee information; and investment option information, including performance data.
Underwriters must submit this information to the MSRB on a semi-annual basis, except for the performance data, which underwriters must submit on an annual basis. The information collected assists the MSRB and other regulators that perform examinations and other oversight activities of dealers and municipal advisors by providing them with important information about ABLE programs. The information submitted under Rule G-45 is not disseminated publicly.