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Contact: Jennifer A. Galloway, Chief Communications Officer


Washington, DC – The Board of Directors of the Municipal Securities Rulemaking Board (MSRB) convened on April 23–25, 2019 to discuss the MSRB’s market oversight activities and strategic initiatives that support its mission to protect municipal securities investors, issuers and obligated persons, and promote a fair and efficient municipal market.

Stakeholder Engagement
As part of the MSRB’s commitment to stakeholder engagement and Board member presence at conferences, town hall events and firm visits this year, the Board discussed how these outreach opportunities have enabled Board members to directly engage with and receive feedback from municipal market participants, and how this feedback has informed the MSRB’s retrospective rule review, compliance support and other initiatives. At its meeting, the Board also met with its three advisory groups—the Compliance Advisory Group, the Municipal Fund Securities Advisory Group and the Retail Investor Advisory Group.

“Hearing directly from our advisory groups and other stakeholders enhances our appreciation for the practical implications of MSRB rules and guidance our Board promulgates and provides,” said Board Chair Gary Hall. “The real-time feedback and insights we receive from advisory group members serve as a valuable backdrop to our strategic discussions and decisions.”

After the meeting, Board members also met with members of the Municipal Chief Financial Officers Forum, a group consisting of chief financial officers from the largest cities in the United States.

Regulatory Issues
On the rulemaking front, the Board discussed certain elements of the MSRB’s retrospective rule review, including proposed amendments to its 2012 interpretive guidance concerning the application of MSRB Rule G-17, on conduct of municipal securities and municipal advisory activities, to municipal securities underwriters to ensure and promote fair dealing practices with issuers. The MSRB has provided two formal opportunities for comment on the 2012 guidance. At its meeting, the Board discussed comments received and approved filing with the U.S. Securities and Exchange Commission (SEC) proposed amendments to the 2012 guidance as generally articulated in the November 2018 request for comment, but with modifications based upon stakeholder feedback the MSRB received.

“We have worked diligently through the comment process and additional stakeholder outreach to arrive at a set of improvements that preserve the intent of the rule in protecting issuers,” said Chair Hall. “And we believe the proposed changes will add efficiency and clarity to the underwriter disclosure process—important themes of our retrospective rule review.”

The Board also discussed draft interpretive guidance, published in September 2018, about the potential harms of “pennying.” This practice involves a dealer’s purchase of bonds for its own account from a customer seeking to sell a municipal security—after the dealer has reviewed other dealers’ bids—by matching a high bid or purchasing the bond at a price that is nominally higher than the highest bid. The Board considered the SEC’s Fixed Income Market Structure Advisory Committee recent discussion on pennying in the municipal and corporate markets, and determined to continue to evaluate market feedback and data related to this practice.

The Board discussed comments received regarding draft interpretive guidance published for comment in January 2019 concerning the application of MSRB rules and prior interpretive guidance to certain prearranged trading in connection with primary offerings of municipal securities. The MSRB will continue to evaluate comments received on the draft guidance and determine any next steps at a later date.

The Board also approved publication of a compliance resource to enhance market understanding of the limited scope of permissible “business entertainment” under MSRB Rule G-20, on gifts and gratuities. This resource will supplement existing frequently asked questions on Rule G-20 and include supervisory considerations for complying with the limited exclusion for business entertainment. 

Data and Technology
An integral part of the MSRB’s mission involves the collection and dissemination of municipal market data in support of market transparency. Earlier this year, as part of a strategic objective to ensure the long-term reliability, data quality and security of its market transparency systems, the MSRB conducted a feasibility assessment of a potential migration to the cloud. At its meeting last week, the Board determined to undertake an enterprise-scale migration of MSRB market transparency systems and data to the cloud to advance the MSRB’s mission and establish a foundation for the organization’s future technology infrastructure.

“Transitioning our information systems to the cloud will offer certain operational efficiencies today along with preparing the MSRB for safeguarding the municipal market of tomorrow,” Chair Hall said. “Board members believe the MSRB’s market oversight role can benefit from big data analytics and computation. Being in the cloud is an important pathway for achieving this.”

Market Transparency
The Board previewed the application of a new algorithm in the Electronic Municipal Market Access (EMMA®) website that allows for predictive searching. By typing just a few characters in the search box on EMMA’s home page, users can quickly and easily navigate to securities and issuer homepages directly from a dropdown list of suggested items. EMMA’s smart search will be available in late May.

“EMMA users asked for a smarter search, and I can tell you that no one will be disappointed in this major improvement,” Chair Hall said.

The Board continued conversations from its January meeting about the timeliness of financial disclosures by municipal securities issuers in response to concern raised by SEC Chairman Jay Clayton and other policymakers who have expressed concern about the age of financial disclosures in the municipal securities market. The Board reviewed and discussed options for leveraging the EMMA website to highlight when financial disclosures are made available and educating investors about how they can more easily determine the age of financial disclosures.

Financial Sustainability
As part of its financial oversight responsibilities, the Board continued its ongoing discussion about ensuring a fair and equitable balance of fees, responsibly managing expenses and estimating future revenue needs of the MSRB. As part of this discussion, the Board evaluated the MSRB’s data subscription service pricing and considered potential future adjustments. It also discussed the current fee structure for regulated entities and will consider possible changes in conjunction with the FY2020 budget process. The Board has previously indicated that it may need to consider additional revenue sources or increases in current revenue sources in the future to maintain the financial health of the MSRB given that budget projections for fiscal years 2020 and 2021 include deficit spending to reduce reserve levels.

Education and Outreach
MuniEdPro® is the MSRB’s catalog of interactive, online courses designed specifically for municipal market participants. On April 17, 2019, the MSRB announced that MuniEdPro courses would be available for free to ensure all municipal market participants have access to these educational resources. The Board discussed the transition to the free platform and response from market participants.

The MSRB also recently launched the MSRB Podcast—a series about the regulatory and market structure of the municipal market. The MSRB will periodically release new episodes.