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Contact: Jennifer A. Galloway, Chief Communications Officer
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Alexandria, VA – The Board of Directors of the Municipal Securities Rulemaking Board (MSRB) held its quarterly meeting January 23-25, 2013 where it approved several initiatives, including the display of municipal market benchmarks on its transparency website and rules to enhance investor and issuer protection in the municipal securities market.

A key part of the MSRB’s mission is to promote municipal market transparency, primarily through its Electronic Municipal Market Access (EMMA) website. At its meeting, the Board agreed to advance a plan to work with the private sector to provide new tools—including one or more yield curves or other market indices—to help market participants better assess trading activity. “The addition of yield curves and other benchmarks to EMMA is another step in increasing the amount of information investors and others have to gauge market activity,” said MSRB Chair Jay Goldstone.

The MSRB outlined its vision for developing such tools in its 2012 long-range plan for market transparency, which also previewed its goal to transform the EMMA website into a central transparency platform that would provide the market with a price discovery mechanism. “These are much-needed developments in our market and the MSRB is engaging market participants in developing this new paradigm,” said Goldstone.

The Board authorized the submission of three rule proposals to the Securities and Exchange Commission (SEC), each of which was the subject of prior MSRB notices and concept releases. The first is to create a regulatory database to evaluate 529 college savings plans. The database would include information about 529 plans including assets, contributions, distributions, fees and expenses, and performance data and would allow the MSRB to better oversee the characteristics and risks of the 529 plan market. 

“This information will help the MSRB evaluate whether further safeguards are necessary for the families who use 529 plans to save for college expenses,” said Goldstone.

The Board also agreed to establish requirements for municipal securities dealers in support of “retail order periods.”  Some issuers of municipal securities designate that specific amounts or maturities of new bonds are offered to retail investors prior to institutional customers. The Board will ask the SEC to approve rule amendments to ensure that underwriters communicate details about an issuer’s retail order period to all dealers involved in a bond sale, and that dealers collect certain information about each customer order. The MSRB will also require dealers to report the existence of a retail order period to ensure better enforcement of these new rules.

In order to protect the interests of investors, the MSRB agreed to curtail the ability of an underwriter to consent to changes to bond authorizing documents, which establish rights of and protections for municipal securities investors. If approved by the SEC, the new regulations would seek to ensure that consents are made by those bondholders with a long-term economic interest in the bonds, with several limited exceptions.

In an effort to provide clarity for regulated entities, the Board plans to reorganize or eliminate certain interpretive guidance associated with MSRB Rule G-17 on fair dealing into new or revised rules that highlight core principles. The first phase of the plan will reorganize concepts involving mandatory time-of-trade disclosures to customers. The MSRB will soon issue a request for comment on the new time-of-trade disclosure rule. Subsequent phases of the plan will address the concepts of suitability, fair pricing and sophisticated municipal market participants.

Separately the Board adopted the use of a simplified format for MSRB rules that tracks the format of other self-regulatory organizations and incorporates the use of supplementary material to enhance understanding of the principles and concepts outlined in rule language.

Finally, the Board continued to discuss new disclosure obligations for underwriters to their state and local government clients and plans established in an interpretive notice to MSRB Rule G-17 and will soon provide additional guidance to assist dealers in implementing the interpretive guidance.