MSRB Monthly Update - December 2014

December 2014
Upcoming Event

MSRB and Municipal Advisory Council of Texas Education and Outreach Seminar

Renaissance Hotel
2222 North Stemmons Freeway
Dallas, TX 75207

Thursday, March 5, 2015
3:00 p.m. - 6:00 p.m. ET
2:00 p.m. - 5:00 p.m. CT
12:00 p.m. - 3:00 p.m. PT

The MSRB will host a public education and outreach seminar for municipal market professionals to discuss municipal market structure issues and development of new regulations for professionals that provide financial advice to state and local governments, among other topics.

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Did you know

MSRB Chair Kym Arnone outlines the MSRB's top priorities in new video message. 
Watch the video message here.

MSRB and FINRA Proposing to Provide Pricing Reference Information on Retail Customer Confirmations

In November, the MSRB and Financial Industry Regulatory Authority (FINRA) released companion proposals that would require disclosure of pricing reference information on customer confirmations for transactions in fixed income securities. The proposals are similar but each seeks input on factors that may be unique to the corporate or municipal bond markets. Read the MSRB’s request for commentRead FINRA’s request for comment.

Under the two proposals, bond dealers in retail-sized fixed income transactions would be required to disclose on the customer’s confirmation the price of certain same-day principal trades in the same security, as well as the difference between this reference price and the customer’s price.

The MSRB's consideration of a pricing reference information disclosure requirement is the next step in its efforts to improve price transparency in the municipal securities market.

The MSRB and FINRA are seeking input on the two proposals. Specific comment is also sought as to alternatives that could similarly increase price transparency. Comments should be submitted no later than January 20, 2015.


MSRB Preparing to Collect Asset-Backed Securities Disclosures Under SEC Rule

The MSRB is making changes to its Electronic Municipal Market Access (EMMA®) system to accept disclosures about municipal asset-backed securities as required by Securities Exchange Act Rule 15Ga-1. In 2011, the Securities and Exchange Commission (SEC) designated EMMA as the venue to collect and disseminate certain disclosures related to municipal asset-backed securities to facilitate use by municipal securities investors.

Included in the changes to EMMA are enhancements to its search functionality and email alert service to assist investors in finding ABS disclosures on EMMA. The MSRB also will provide resources for municipal securitizers, including updated information on the document submission process and the ability to subscribe to email reminders about recurring disclosure obligations.

The precise effective date of changes in January 2015 will be announced in a notice published on the MSRB website. For more information on the SEC rule on disclosures related to asset-backed securities, click here. The rule stems from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 


Update on Professional Qualification Requirements for Municipal Advisors

The MSRB continues to advance its development of professional qualification requirements for municipal advisors. In November it filed a proposed rule change with the SEC to create baseline standards of professional qualification for municipal advisors.

The proposed amendments to the MSRB’s existing Rule G-3 on professional qualifications establish two classifications of municipal advisor professionals, representative and principal, with firms required to designate at least one principal to oversee the municipal advisory activities of the firm. The proposed rule change also will require each municipal advisor representative and principal to take and pass a qualification test.

The Dodd-Frank Wall Street Reform and Consumer Protection Act charged the MSRB with developing professional qualification standards as part of a comprehensive regulatory framework for municipal advisors. The creation of uniform standards of competency will help ensure municipal advisors engaged in advisory work are qualified in their duties.

The MSRB has engaged in extensive outreach to gather input from municipal advisors and others about the development of a professional qualification exam. The MSRB currently is developing the content outline for the test and plans to administer a pilot exam in 2015.  


Flows of Municipal Bond Mutual Funds Remain Positive in 2014

Flows of Municipal Bond Mutual Funds Remain Positive in 2014

According to the Investment Company Institute, municipal bond mutual funds have experienced 10 straight months of net cash inflows in 2014, after 10 straight months of outflows that began in March 2013 and ended in December that year. In 2013, net cash outflow of municipal bond funds reached $16.6 billion in June, the lowest level since 2007, the earliest publicly available information. Net cash flow into municipal bond mutual funds in October 2014 was $2.2 billion, a decrease from the $3 billion inflow in September 2014. In contrast to net inflows for municipal bond mutual funds, taxable bond funds experienced a net cash outflow of more than $30 billion in September and October of 2014.      

For municipal new issuance, trading activity, continuing disclosures or variable rate resets, visit the MSRB’s EMMA website.  


Regulatory Roundup

SEC Approves MSRB Rule G-18 on Best Execution of Transactions in Municipal Securities and Related Amendments to Exempt Transactions with Sophisticated Municipal Market Professionals December 8, 2014

Amendments to EMMA Continuing Disclosure Service to Add Asset-Backed Securities Disclosures Under Securities Exchange Act Rule 15Ga-1 November 25, 2014

Proposed Rule Change Consisting of Amendments to MSRB's Electronic Municipal Market Access (EMMA) System to Add Disclosures Related to Municipal Asset-Backed Securities November 25, 2014

Proposed Rule Change Consisting of Amendments to Rule G-1, on Separately Identifiable Department or Division of a Bank; Rule G-2, on Standards of Professional Qualification; Rule G-3, on Professional Qualification Requirements; and Rule D-13, on Municipal Advisory Activities November 18, 2014

Request for Comment on Draft Rule Amendments to Require Dealers to Provide Pricing Reference Information on Retail Customer Confirmations November 17, 2014