Select regulatory documents by category:

Regulatory Document Type

Back to top
Interpretive Guidance - Interpretive Notices
Publication date:
Prohibited Payments to Non-Affiliated Persons for Solicitations of Municipal Securities Business Under Rule G-38 and Form G-38t Submission Requirements

Rule G-38, on solicitation of municipal securities business, prohibits any broker, dealer or municipal securities dealer ("dealer") from making a direct or indirect payment to any person who is not an affiliated person[1] of the dealer for a solicitation of municipal securities business.[2] The current version of Rule G-38 replaced a prior version of the rule, relating to the use of consultants, effective August 29, 2005.[3]  Thus, with one narrowly defined exception discussed below, since August 29, 2005, dealers have been prohibited from making any payments to persons not affiliated with the dealer (including but not limited to any former consultant under the prior version of Rule G-38) for solicitations of municipal securities business.

A dealer is permitted to make a payment to a former consultant who is not an affiliated person of the dealer for a solicitation of municipal securities business if the payment is made solely for solicitation activities undertaken by such former consultant on or prior to August 29, 2005. A transitional payment is permitted only if (A) the former consultant has not solicited municipal securities business from any issuer on behalf of the dealer after August 29, 2005 and (B) the dealer submits Form G-38t to the MSRB for each calendar quarter during which such payment to the consultant is made or remains pending. The dealer must disclose on its initial and all subsequent Form G-38t submissions each item of municipal securities business for which a transitional payment remains pending and the amount of such pending payment, together with other required information, until such quarter in which the payment is finally made.[4]

Dealers are required to submit Form G-38t to the MSRB for a calendar quarter only if a transitional payment to a former consultant is paid during such quarter or remains pending (i.e., payable at a future date) as of such quarter. If no such payments are made or remain pending in any calendar quarter, Form G-38t is not required to be submitted and dealers should not make such submissions. Dealers should note that pending payments must continuously be disclosed on Form G-38t for every calendar quarter, beginning with the quarter ended on September 30, 2005 and each quarter thereafter, until paid. If a pending payment has not been disclosed on Form G-38t for any one or more prior calendar quarters, such payment may no longer be made under the transitional payment provision of Rule G-38 and the dealer would violate Rule G-38 if it subsequently makes such a payment.

The MSRB wishes to remind dealers that Rule G-38 strictly prohibits all payments by a dealer to a non-affiliated person for solicitation activities undertaken after August 29, 2005, even if such solicitation activities are undertaken pursuant to a contract entered into by the dealer with the non-affiliated person on or prior to August 29, 2005. In effect, all paid solicitation activities by non-affiliated persons on behalf of dealers were required to cease as of August 30, 2005, regardless of whether such activities arise from earlier contractual commitments, since any payments by dealers for such activities would violate Rule G-38. Further, as noted above, one of the conditions for permitting transitional payments for solicitations occurring on or prior to August 29, 2005 is that the former consultant does not solicit municipal securities business from any issuer on behalf of the dealer at any time after August 29, 2005. Thus, if a dealer has a pending payment to a former consultant for a solicitation made to an issuer on or prior to August 29, 2005, a subsequent solicitation on behalf of the dealer by such former consultant to the same or a different issuer after August 29, 2005 would disqualify such pending payment from being treated as a valid transitional payment under Rule G-38.  

[1] An affiliated person of a dealer is any partner, director, officer, employee or registered person of the dealer or of an affiliated company. A registered person of a dealer is any associated person of the dealer qualified under MSRB or NASD professional qualification requirements. An affiliated company of a dealer is any entity that controls, is controlled by or is under common control with the dealer and whose activities are not limited solely to the solicitation of municipal securities business.
[2] A solicitation is a direct or indirect communication with an issuer for the purpose of obtaining or retaining municipal securities business. Guidance on the definition of solicitation is provided in Rule G-38 Interpretation - Interpretive Notice on the Definition of Solicitation Under Rules G-37 and G-38, June 8, 2006, reprinted in MSRB Rule Book. Municipal securities business includes negotiated underwritings, private placements and other agency offerings, financial advisory or consultant engagements, and remarketing agent engagements.
[3] Under the prior version of Rule G-38, dealers were required, among other things, to make certain disclosures to issuers and to the MSRB in connection with their use of paid consultants to communicate with issuers to obtain or retain municipal securities business.
[4] Instructions for Forms G-37, G-37x and G-38t, available in the Political Contributions Information area of the MSRB's website at, provides detailed instructions for completing Form G-38t.