Applicability of Trade Reporting for Certain Allocations to Customer Accounts By Dually-Registered Broker-Dealers/Investment Advisers¹

[Th]e MSRB acknowledges that in certain circumstances a customer allocation may be subject to trade reporting under Rule G-14. However, the MSRB observes that in the case of a purchase of a block order by a dually registered dealer/investment adviser (“BD/IA firm”) of municipal securities that are then allocated internally to advisory accounts at the same price as the block order (i.e., without transaction-based compensation, such as with a non-transaction-based wrap or similar advisory fee), the MSRB historically has only required that the original block order be reported and not the subsequent related allocations to customers in advisory accounts where, with respect to any such allocation, the BD/IA firm is acting as an investment adviser to such account directing an internal delivery of a portion of such block of municipal securities acquired by the BD/IA firm to the advisory account.²  This treatment would continue based on the core principle that, as a price transparency system, RTRS seeks to disseminate publicly only such pricing information that is indicative of market prices and not price information that may not reliably reflect such market prices. The MSRB believes that publishing price information for smaller customer allocations that were priced based on the larger block price of the original block trade is not only unlikely to be indicative of market prices, but could also be misleading.³

¹Excerpt from Letter to Secretary, Securities and Exchange Commission, from Ernesto A. Lanza, Chief Regulatory and Policy Officer, MSRB, dated September 5, 2025, at 5–6, available at https://www.msrb.org/sites/default/files/2025-09/SR-MSRB-2025-01-MSRB-Response-to-Comments_0.pdf (internal citations renumbered). See also Securities Exchange Act of 1934 (“Exchange Act”) Release No. 103987 (Sept. 16, 2025), File No. SR-MSRB-2025-01, 90 FR 45274, 45277 nn.58–60 and accompanying text (Sept. 19, 2025).

²See, e.g., Exchange Act Release No. 74564 (Mar. 23, 2015), 80 FR 16466, 16466 n.4 (Mar. 27, 2025), File No. SR-MSRB-2015-02 (“RTRS serves as an audit trail for municipal securities trading, with the exception of certain internal movements of securities within dealers that currently are not required to be reported”). See also MSRB Notice 2008-19, MSRB Seeks Comment on the Reporting of Proprietary Desk Transactions under Rule G-14, on Reports of Sales or Purchase (Apr. 11, 2008) (the “Prop Desk RFC”) (“Currently, internal movements of securities within a dealer organization are not considered to be reportable under Rule G-14.”). In the Prop Desk RFC, the MSRB proposed potentially requiring reporting to RTRS internal movements between a dealer’s proprietary desk and another part of the same dealer firm. The MSRB determined not to establish such a requirement with respect to such internal movements and continued to adhere to its position that internal movements are not reportable to RTRS. Of course, while the allocation is not reportable, the BD/IA firm would be subject to the full panoply of investment adviser duties, including a fiduciary duty to its customer, when it acts in this capacity as an investment adviser with respect to the customer’s advisory account.

³See, e.g., MSRB Notice 2003-20, Notice on Reporting and Comparison of Certain Transactions Effected by Investment Advisors: Rules G-12(f) and G-14 (May 23, 2003) (discussing the appropriateness of reporting only the price of the single block order trade with a third-party investment adviser rather than individual smaller transfers and allocations directed by such adviser that would be reportable at the same price as the block trade).

Previously registered entitites. Thank you for your letter [name and date deleted] which has been referred to me for response. The letter relates to the Municipal Securities Rulemaking Board's rule A-12, which imposes an initial fee of $100 on municipal securities brokers and municipal securities dealers.

We note that the terms "municipal securities broker" and "municipal securities dealer" are not restricted under the Securities Acts Amendments of 1975 (the "1975 Amendments") to securities firms and banks effecting transactions exclusively in municipal securities. Many municipal securities brokers and municipal securities dealers (other than bank dealers) were registered with the Securities and Exchange Commission (the "Commission") as brokers or dealers prior to the 1975 Amendments. Municipal securities brokers and municipal securities dealers already registered with the Commission were not required to re-register with respect to their municipal securities activities, but nevertheless are subject to payment of the Board's initial fee. In addition, many municipal securities brokers and municipal securities dealers have been and are members of the national securities exchanges and the National Association of Securities Dealers, Inc.

We are unable to conclude from the information set forth in your letter that the initial fee imposed by the Board's rule A-12 is inapplicable to your firm. MSRB interpretation of June 16, 1976.

The Municipal Securities Rulemaking Board (the “Board”) has received several requests for interpretation of rule A-13, which requires each municipal securities broker and municipal securities dealer to pay the Board a fee [on] … the face amount of municipal securities purchased from an issuer as part of a new issue. These requests concern the applicability of the fee to securities which have a stated maturity of [nine months or less], but are part of a new issue having a final stated maturity of [more than nine months]. Rule A-13 is intended to impose the … underwriting assessment on the face amount of all securities purchased from an issuer that are part of a new issue of municipal securities if any part of the issue has a final stated maturity of [nine months or less]… from the date of the securities. Thus, calculation of the fee should be based upon all municipal securities which are part of such new issue, including securities having a stated maturity of [nine months or less]. The assessment is not intended to apply, however, to short-term issues having a final maturity of [nine months or less].
NOTE: Revised to reflect subsequent amendments.