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Interpretive Guidance -
Publication date:
Time of Trade Disclosures in Inter-Dealer Transactions
Rule Number:

Rule G-47

For inter-dealer transactions, there is no specific requirement for brokers, dealers or municipal securities dealers (individually and collectively, “dealers”) to disclose all material facts to another dealer at time of trade. A selling dealer is not generally charged with the responsibility to ensure that the purchasing dealer knows all relevant features of the municipal securities being offered for sale. The selling dealer may rely, at least to a reasonable extent, on the fact that the purchasing dealer is also a professional and will satisfy their need for information prior to entering into a contract for the municipal securities.
 
The items of information that professionals in an inter-dealer transaction must exchange at or prior to the time of trade are governed by principles of contract law and essentially are those items necessary adequately to describe the municipal security that is the subject of the contract. As a general matter, these items of information do not encompass all material facts, but should be sufficient to distinguish the municipal security from other similar issues. The Board has interpreted Rule G-17 to require dealers to treat other dealers fairly and to hold them to the prevailing ethical standards of the industry. The rule also prohibits dealers from knowingly misdescribing municipal securities to another dealer. As a result, it is possible that non-disclosure of an unusual feature might constitute an unfair practice and thus become a violation of Rule G-17 even in an inter-dealer transaction.
 
For example, with respect to bonds that prepay principal, non-disclosure of the fact that a bond prepays principal could be a violation of Rule G-17. This would be especially true if the information about the prepayment feature is not accessible to the market and is intentionally withheld by the selling dealer. Whether or not non-disclosure constitutes an unfair practice in a specific case would depend upon the individual facts of the case. However, to avoid trade disputes and settlement delays in inter-dealer transactions, it generally is in dealers’ interest to reach specific agreement on the existence of any prepayment feature and the amount of unpaid principal that will be delivered.

 
Notice 2025-04 - Informational Notice
Publication date:
Notice 2025-03 - Informational Notice
Publication date:
Notice 2025-02 - Request for Comment
Publication date: | Comment due:
Notice 2025-01 - Informational Notice
Publication date:
Interpretive Guidance - Interpretive Letters
Publication date:
Previously Registered Entitites

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.

Interpretive Guidance - Interpretive Notices
Publication date:
Interpretive Notice on Underwriting Assessment
Rule Number:

Rule A-13

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.

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