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Contact: Jennifer A. Galloway, Chief Communications Officer
             (703) 797-6600


Alexandria, VA – The Board of Directors of the Municipal Securities Rulemaking Board (MSRB) held its quarterly meeting October 24-26, 2012 where it advanced a proposal to increase disclosure of contributions by municipal securities dealers and municipal finance professionals to bond ballot campaigns and further refined a number of investor protection initiatives.

The MSRB will seek approval from the Securities and Exchange Commission (SEC) to amend MSRB rules to require municipal securities dealers and municipal finance professionals to disclose more detailed information about their contributions to bond ballot campaigns and to identify specific items of business they conduct related to such contributions. The award of municipal securities underwriting business tied to dealer contributions to campaigns that secure voter approval for taxpayer-funded public projects can give rise to real or perceived conflicts or related concerns that can adversely affect the integrity of the municipal market.

If approved by the SEC, dealers will be required to disclose the timing of bond ballot contributions, the identity of the municipal entity issuing the bonds subject to the ballot initiative and bond offerings underwritten by the dealer resulting from the campaign. Availability of this information will enable the MSRB and the public to further analyze market practices related to bond ballot contributions and their relationship to the awarding of municipal underwriting business.

The MSRB recognizes that many market stakeholders would like to see the MSRB restrict bond ballot contributions by dealers in order to improve integrity of the municipal market. The decision to require disclosure of additional information is an important step in determining whether such a ban is merited. The MSRB must carefully evaluate the First Amendment issues that would be implicated by restrictions on contributions and build the record needed to show whether or not there is a direct connection between dealer contributions and the award of business.

The Board also agreed to further refine several existing proposals to ensure that they are appropriately crafted to address market issues. Among them is a plan to further protect municipal securities investors who buy and sell municipal securities through electronic brokerages. The MSRB will continue to study the practices of electronic brokerages to determine whether they should be required to strengthen their account opening and supervisory procedures related to individual investors who purchase municipal securities online. 

The MSRB also plans to seek further industry comment on a modified proposal to create a database of market information about 529 college savings plans, which are municipal fund securities. The MSRB regulates dealers that sell and distribute the plans on behalf of states and the database would provide the MSRB with more comprehensive information about the 529 plan market. The MSRB also will further refine its earlier proposal on the practice by dealers of consenting to changes in bond authorizing documents and will publish a modified proposal for public comment.  

The Board also met with Securities and Exchange Commission (SEC) Chairman Mary Schapiro and the SEC’s Office of Municipal Securities Director John Cross to discuss top issues facing the municipal securities market, including regulation of municipal advisors and the SEC’s recent report on the municipal market. The Board reviewed recent and current MSRB initiatives that support the themes outlined in the SEC’s July report, including enhanced price transparency through disclosure of inter-dealer trade prices and large-sized trades, improvements to the MSRB’s Electronic Municipal Market Access (EMMA®) website, including enhanced search capabilities, and new education efforts for investors and state and local governments. The SEC told the Board it would continue to work with the MSRB to help prioritize other recommendations in the report and to finalize the definition of municipal advisor.

“The MSRB is committed to working closely with the SEC in regulation of the municipal market,” said Chair Goldstone. “The opportunity to have a direct exchange of views with Chairman Schapiro serves as a critical tool for both the SEC and the 21-member board of the MSRB to fulfill their shared goals in this market, with the MSRB Board lending its in-depth expertise in the marketplace to better inform SEC policymaking.”

At its meeting, the MSRB Board also discussed feedback it has received on recent changes to MSRB Rule G-17 on underwriters’ obligations to state and local governments.  Chair Goldstone said that, while the Board fully supports the principles to protect state and local governments that are addressed in the new rules, the Board directed staff to continue outreach efforts to market participants to gain a fuller understanding of the efficacy and any potentially unintended consequences of the process of making critical disclosures to state and local governments in connection to bond deals.  The MSRB Board will use this input to evaluate whether further guidance or technical changes are warranted.