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MSRB CREATES SUPERVISION AND COMPLIANCE REQUIREMENTS FOR MUNICIPAL ADVISORS
Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) received approval from the Securities and Exchange Commission (SEC) to create the first new rule for municipal advisors since the SEC released its final registration rule for these professionals in September 2013. New MSRB Rule G-44 establishes baseline supervisory and compliance obligations for municipal advisors.
“Developing effective procedures for supervision and compliance is a critical step for municipal advisor firms that are newly subject to regulatory oversight,” said MSRB Executive Director Lynnette Kelly. “The MSRB’s supervision rule will help firms prevent and promptly detect and address any compliance issues.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act charged the MSRB with developing a comprehensive regulatory framework for municipal advisors. The MSRB’s creation of rules and standards of professional qualification are designed to protect the interests of state and local governments and other municipal entities that rely on the services of municipal advisors, as well as the interests of investors in municipal securities.
“In addition to the federal fiduciary duty established by Dodd Frank, municipal advisors currently are subject to registration and fair dealing rules, among other requirements established by the MSRB,” Kelly said. “When Rule G-44 is in effect, municipal advisor firms will have an explicit obligation to effectively supervise their personnel in the interest of promoting compliance with all regulatory requirements.”
The new supervision requirements take effect April 23, 2015, providing firms six months to implement the required policies and procedures. By April 23, 2016, the chief executive officers (or the equivalent) of municipal advisor firms must make the first of their annual certifications in writing that the municipal advisor has in place processes to establish, maintain, review, test and modify written compliance procedures and written supervisory procedures reasonably designed to achieve compliance with applicable rules.
The MSRB provides education and outreach to assist municipal advisors in understanding their regulatory obligations. On November 3, 2014, the SEC, the Financial Industry Regulatory Authority and the MSRB are jointly hosting a seminar on compliance examinations for municipal advisors in Chicago, IL and via webcast on the SEC’s website. Learn more about the event.
The MSRB also offers educational publications, news and resources on its website in the Resources for Municipal Advisors section. The MSRB will announce details of a webinar on the key provisions of the supervision rule in advance of the effective date.
The MSRB is continuing to develop other rules for municipal advisors. The MSRB is nearing finalization of proposals to set baseline professional qualification requirements and to create core standards of conduct for non-solicitor municipal advisors. Additionally, the MSRB is considering market feedback on draft amendments to extend the MSRB’s pay-to-play rule for dealers to municipal advisors. The MSRB proposed the same approach with its existing gifts rule for dealers.