Under the Securities Exchange Act of 1934 (“Exchange Act”), MSRB is authorized to fund its operations through mandatory assessments on regulated entities.1 The MSRB may also charge fees related to information and data provided by the MSRB. The MSRB seeks to establish fees that are fair and reasonable, as well as maintain organizational reserves that are appropriately designed to provide financial stability and ensure business continuity. Subject to rule filing with the Securities and Exchange Commission (SEC), rates for regulated entity assessments and data fees can be revised in accordance with the MSRB’s funding needs.
Funding Sources
The MSRB's principal funding sources are described below:
1. Regulated Entity Assessments
The MSRB is primarily funded from assessments on brokers, dealers and municipal securities dealers (collectively “dealers”) and municipal advisors. Dealers are assessed market activity-based fees (e.g., underwriting activities, trading activity and municipal fund securities plan assets). Municipal advisors are assessed a fixed fee per registered individual. All regulated entities are assessed initial registration and annual registration fees.2
2. Data Fees
The MSRB serves as the central repository of data for the municipal securities market. MSRB data is available for free to the general public through MSRB’s EMMA website. The MSRB also offers certain data products and services for a fee (e.g., automated subscriptions-based feeds) in accordance with its Data Access Fee Policy.
3. Fine Revenue
The MSRB receives a portion of fines collected by the SEC or FINRA for MSRB rule violations, which may be used in accordance with its Fine Sharing Policy.
4. Other Revenue
The MSRB also receives funding from other sources including professional qualifications examination fees, investment income, late fees and other miscellaneous sources of revenue.
Guiding Principles
In support of fulfilling its responsibilities under its congressional mandate as outlined in the Exchange Act3, MSRB shall establish fees that are reasonable and necessary to fund the operations of the organization, including:
1. Protecting investors, issuers and the public interest through the regulation of dealers and municipal advisors;
2. Establishing, maintaining and administering a professional qualifications program for dealer and municipal advisor professionals;
3. Establishing, maintaining and operating information systems to provide market transparency for issuers, institutions, and the investing public and to promote fairness, efficiency, competition, and capital formation in the municipal securities market;
4. Promoting regulatory coordination, supporting the internal operations of the MSRB and administering the activities of the Board; and
5. Maintaining prudent organizational reserves.
Organizational Reserves
The MSRB shall maintain sufficient organizational reserves to provide financial stability and ensure business continuity in furtherance of its statutorily required activities. The MSRB’s organizational reserves consist of Working Capital, Risk Reserves, Strategic Investment Reserves and Regulatory Reserves. The MSRB shall establish a target funding level for organizational reserves by conducting a comprehensive analysis of its operating environment. The MSRB shall conduct a periodic review of its organizational reserves target in conjunction with the establishment of any Multi-Year Rate Card.
The MSRB seeks to maintain its operating reserves within +/- 20% of its target level. The MSRB may utilize various strategies to manage excess organizational reserves, including rate reductions, deficit budgets, fee credits, rebates or holidays, or any other such strategy approved by the Board. At the mid-point of an effective Multi-Year Rate Card, the MSRB’s Finance Committee will evaluate and provide the Board of Directors with a recommended course of action if organizational reserves exceed or fall below the established target by 20% or greater.
Multi-Year Rate Card
The MSRB utilizes a Multi-Year Rate Card to establish base rates for Underwriting, Transaction, Trade Count and Municipal Advisor Professional Fees for each year over the term of such rate card. The general purpose of the Multi-Year Rate Card is to appropriately manage organizational reserves at target levels through periodic rate adjustments. The MSRB endeavors to mitigate the degree of rate adjustments that may occur from year to year within a Multi-Year Rate Card by limiting annual rate adjustments incorporated in such rate card to 15% above or below the prior rate. When formulating a Multi-Year Rate Card, the Finance Committee and Board will consider if the rates to be established for such rate card will appropriately balance organizational reserves within +/- 20% of its target levels over the effective period of the rate card. In an extraordinary circumstance where the MSRB’s reserves are above 20% of its target levels during the course of an established Multi-Year Rate Card, the MSRB may evaluate reasonable methods to reduce reserves levels, including temporary rate reductions for certain fees. If a temporary rate reduction for certain fees is utilized to reduce reserves levels, then the degree of reduction in rates may be in excess of the 15% threshold for annual rate changes. These rate adjustment considerations should be factored into the development of a Multi-Year Rate Card, which is approved by the Board. A Multi-Year Rate Card is intended to be effective for its stated period without further adjustment during the term of such rate card, other than those related to excess reserves as described above.
Definitions
- Multi-Year Rate Card: Base rates of assessment for the Rate Card Fees established on a periodic multi-year basis. It is expected that a Multi-Year Rate Card will be effective for a four-year period.
- Rate Card Fees: Underwriting Fee, Transaction Fee, Trade Count Fee and Municipal Advisor Professional Fee.
- Regulated Entities: Entities regulated by the MSRB under the Exchange Act, which are brokers, dealers, municipal securities dealers and municipal advisors that engage in municipal securities or municipal advisory activities and are registered with (or are required to be registered with) the MSRB.
