Compliance Corner: Fall 2018

CC Fall 18

Compliance Corner is a quarterly electronic newsletter published by the MSRB to support the compliance obligations of brokers, dealers and municipal securities dealers (collectively "dealers") and municipal advisors. Compliance Corner provides regulatory updates and resources to facilitate understanding of MSRB rules. Items below labeled “MA” are for municipal advisors; “BD” for dealers; “MA/BD” for all. 


Compliance in Focus

By Lynnette Kelly, MSRB President and CEO

Nearly a year ago, the MSRB announced a strategic shift to provide additional compliance resources as a way of supporting industry adoption of substantive rules established in recent years. To inform these efforts, we sought public comment on our approach and formed the MSRB’s first-ever Compliance Advisory Group—nine compliance-oriented senior executives representing the diversity of MSRB-regulated firms. These professionals are well positioned to advise the MSRB on helping regulated firms better understand MSRB rules of professional conduct and to develop effective compliance systems

Public feedback and the advisory group’s insight have shaped our approach to increasing compliance support, including providing more clarity about the scope of compliance resources, making them as useful as possible and clearly stating their intent for regulated entities and enforcement authorities. But we know that challenges remain. Stakeholders continue to express concern about the intent and purpose of MSRB compliance resources, as well as about market advisories addressing topics they believe are beyond the scope of the MSRB’s regulatory jurisdiction.

We are committed to continuing our dialogue with stakeholders about how we can continue to improve our efforts. One of our next steps will be to revise our policy on providing interpretive guidance to ensure it facilitates our efforts to serve as a resource to regulated entities. The MSRB welcomes feedback from stakeholders about how the organization can continuously improve our approach to providing compliance support and ensure the resources available to regulated entities are clear, helpful and relevant. Please contact the MSRB at  

On behalf of the Board of Directors, I would like to express our thanks to the individuals who graciously lent their time, perspectives and insights to advance the MSRB's long-term strategic goal to facilitate compliance. Guidance from the Compliance Advisory Group and other stakeholder input allowed the MSRB to provide the following compliance assistance for regulated entities in fiscal year 2018:


Read more about the MSRB's FY 2018 compliance initiatives.

Compliance FAQs

Get answers to commonly asked questions about compliance with MSRB rules.


Q: If I am a municipal advisor firm, does everyone at my firm need to be Series-50 qualified?

A: Anyone engaging in municipal advisory activities must pass the MSRB’s Municipal Advisor Representative Qualification Examination (Series 50 exam). Remember, if a municipal advisor firm currently has an SEC Form MA-I on file for a person that has not passed the Series 50 exam, that Form MA-I should be amended to indicate that the person is not engaging in municipal advisory activities on behalf of the firm.  See SEC’s Registration of Municipal Advisors FAQs Section 16: Professional Qualifications and Municipal Advisor Firms

Have a compliance question? Send your inquiry to the MSRB at

Compliance Tip

Subscribe Envelope

Subscribe to receive a weekly compliance tip, like the below example, directly to your inbox. 

    Stay vigilant! Cybercriminals aren’t interested in municipal bonds for the public interest, they want to steal the closing funds. To that end, a cybercriminal will cast a wide net by sending phishing emails to multiple contacts at organizations involved in the deal, including issuers, municipal advisors, underwriters and bond counsel, hoping for just one person to take the bait and unknowingly give the cybercriminal access to an organization’s systems. Once in, the cybercriminal can view internal calendars and contact information for upcoming deal closings. As a closing nears, the cybercriminal can send a sophisticated and well-timed email from a fake account with new wiring information that will, unless detected, allow the cybercriminal to steal the funds.

    Read more about avoiding closing scams from the Consumer Financial Protection Bureau.

    Compliance Calendar

    Dealers and municipal advisors should note the following key compliance dates and deadlines relevant through the third quarter of calendar year 2018.


    October 1, 2018 – December 31, 2018: Temporary Fee Reduction on Underwriting, Transaction and Technology Fees Assessed on Dealers
    Effective October 1, 2018, the rates of assessment for the MSRB’s underwriting, transaction and technology fees under MSRB Rule A-13 will be reduced temporarily by approximately one-third to provide short-term limited relief to dealers. The lower assessment rate will apply only for activity that occurs during the period October 1, 2018 – December 31, 2018. Read MSRB Notice 2018-16.


    October 1, 2018: Implementation Date for MSRB’s Modified Professional Qualifications Program

    Amendments to Rule G-3, which reflect the MSRB’s intended plan to revise the Municipal Securities Representative Qualification Examination (Series 52) into a specialized knowledge examination and recognize the SIE Examination as a prerequisite for the Series 52 examination, have an implementation date of October 1, 2018. Read MSRB Notice 2018-11 for more details

    October 31, 2018: Payment Due for Annual MSRB Registration Fee 
    All dealers and municipal advisors must submit disclosures to the MSRB, on a quarterly basis, regarding political contributions under MSRB Rule G-37. The quarterly disclosures must be submitted through Form G-37 by January 31, April 30, July 31 and October 31 of each year. See MSRB Rule G-37.

    December 31, 2018: Deadline for Continuing Education Needs Analysis
    Under MSRB Rule G-3, municipal advisor firms are required to complete a needs analysis, develop a continuing education program for their covered persons and deliver training to all covered persons by December 31, 2018. See MSRB Notice 2017-10.

    December 31, 2018: Investor and Municipal Advisory Client Education Notifications
    All dealers and municipal advisors must provide a written notification to customers and municipal advisory clients with a statement that they are registered with the MSRB and the Securities and Exchange Commission (SEC); the MSRB’s website address; and a statement as to the availability of the Information for Municipal Securities Investors and/or Information for Municipal Advisory Clients brochures. This notification must be provided once each year. See MSRB Rule G-10.

    December 31, 2018: SEC Form MA Verification

    Within 90 calendar days after a municipal advisor firm’s fiscal year end (calendar year end for sole proprietors), the municipal advisor firm must file an “annual update,” which is an amendment to the municipal advisor firm’s SEC Form MA, that either confirms the information is accurate or updates responses to any item for which the information is no longer accurate. See SEC Rule § 240.15Ba1-5.

    Webinar icon

    Virtual Workshops

    To submit questions in advance of any workshop or to suggest topics for future workshops, email

    MSRB Rule G-37: Completing Form G-37 (MA/BD)

    September 14, 2018, 12:30 – 1:30 p.m. ET


    Register to attend this free, virtual compliance workshop. MSRB staff discuss key provisions of MSRB Rule G-37 on Political Contributions and Prohibitions on Municipal Securities Business and Municipal Advisory Business related to Form G-37. The workshop will follow a question-and-answer format based on questions and suggestions from regulated entities and other stakeholders.  


    EMMA® for Municipal Advisors (MA)

    October 11, 2018, 3:00 – 4:00 p.m. ET


    Register to attend this free, virtual compliance workshop to learn how municipal advisors can leverage the MSRB’s Electronic Municipal Market Access (EMMA®) website to find information about the municipal securities market and specific state and local government issuers. Explore EMMA’s intuitive navigation, quick links to interactive tools and improved display of information about individual bonds, including trade data and disclosure documents.

    MSRB Rules G-21 and G-40: 

    Advertising by Dealers and Municipal Advisors (MA/BD)

    November 8, 2018, 3:00 – 4:00 p.m. ET

    Register to attend this free, virtual compliance workshop. MSRB staff will conduct an in-depth discussion about key provisions of MSRB Rule G-21, on advertising by dealers, and MSRB Rule G-40, on advertising by municipal advisors. This workshop will follow a question-and-answer format based on questions and suggestions from regulated entities and other stakeholders.

    Enforcement Insight

    This periodic feature summarizes a recent enforcement matter brought by an examining authority, which includes the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) or applicable bank regulator, relevant to the municipal securities market. Enforcement matters can, when applicable, inform firms and help identify potential compliance risks. Read about the MSRB’s regulatory coordination and enforcement support

    Municipal Bond “Flipping”: On August 14, 2018, the Securities and Exchange Commission (SEC) charged two firms and 18 individuals (collectively, “defendants”) in federal court for engaging in conduct which the SEC characterized as “flipping,” where the defendants posed as retail investors to purchase new issue municipal bonds based on a prearranged understanding that the bonds would be sold immediately to broker-dealers for a fee. Effectively, the defendants were acting as unregistered broker-dealers and obtaining the securities from underwriters in contravention of priority order and allocation provisions established for the offerings. Read more.


    On August 22-24 2018 and September 4, 2018, the SEC settled with  fifteen of the defendants, including Core Performance Management, LLC (“CPM”), James P. Scherr, who was the majority owner and managing director of CPM,  RMR Asset Management Company (RMR), which like CPM, engaged in unregistered broker-dealer activity, buying and selling new issue municipal bonds, Ralph M. Riccardi, RMR’s owner, as well as employees of CPM and independent contractors associated with RMR.


    Fifteen defendants consented to be permanently enjoined from future violations of Sections 10(b) and 15(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and MSRB Rule G-17, with CPM and Scherr also consenting to be permanently enjoined from future violations of Section 17(a) of the Securities Act of 1933. Each of these defendants were barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating agency, with a right to reapply after two years, subject to multiple conditions, including satisfaction of any disgorgement orders, restitution orders and arbitration awards. In addition, the consent judgments require these defendants to pay more than $3 million in disgorgement and prejudgment interest and $890,000 in civil penalties.


    Two defendants consented to be permanently enjoined from future violations of Sections 15(a)(1) of the Exchange Act of 1934. Each of these defendants were suspended for twelve months from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating agency.


    Relatedly, on August 14, 2018, the SEC instituted settled administrative proceedings against a registered broker-dealer/MSRB registrant (“dealer”), its former head of municipal trading and its chief compliance officer (“CCO”), who was also responsible for supervising the former head of municipal trading. The SEC alleged that the dealer and its former head of municipal trading: (1) engaged in a practice, characterized as “parking,” in which the dealer sold municipal bonds that it was underwriting to unaffiliated and unregistered persons (i.e., including to CPM and Scherr), subject to an agreement that the dealer would repurchase those bonds for its own inventory at a higher price following the completion of the offering; and also (2) placed “orders” with CPM and Scherr to obtain new issue municipal bonds that had been obtained from other underwriters under the guise that the purchases were for investors. As a result, the dealer and its former head of municipal trading were found to have violated, among other things, MSRB Rule G-17 and the CCO, who had failed to implement the dealer’s procedures for the quarterly review of the transactions conducted by the head of municipal trading, was found to have violated MSRB Rule G-27.


    The Division of Enforcement’s Public Finance Abuse Unit is continuing to investigate conduct related to the defendants’ flipping scheme.  

    Compliance Toolbox

    New Resources Icon

    The MSRB supports regulatory compliance by providing interpretive guidance, checklists, sample templates and other resources about municipal market regulations. Learn more about the types of available compliance informationThe latest resources are listed below and available in the MSRB’s online Compliance Center. 

    • Compliance Resource: Supervisory Responsibilities of Qualified Principals (BD)
      This resource is designed to assist dealers in understanding the scope of municipal securities activities that designated principals are permitted to supervise, pursuant to MSRB Rule G-27, on supervision, consistent with MSRB Rule G-3, on professional qualification requirements.
    • Compliance Resource: Compliance Advisory for Municipal Advisors (MA)
      This Compliance Advisory highlights certain MSRB rules and provides considerations a municipal advisor could use in assessing its own policies and procedures for compliance with the applicable rules.
    • Compliance Resource: Organizational Change Checklist (BD/MA)
      This resource provides a checklist of questions regulated entities may wish to consider when contacting MSRB Support in advance of an upcoming organizational change, such as a reorganization or a merger or acquisition, that may result in a change to their registration status with the MSRB.

        Coming Soon

        • Municipal Advisor Principal Qualification Examination (Series 54): Development is underway for the Series 54 exam—a principal-level examination for municipal advisor professionals defined under MSRB Rule G-3 as municipal advisor principals. The rule defines a municipal advisor principal as a person associated with a municipal advisor who is qualified as a municipal advisor representative and is directly engaged in the management, direction or supervision of the municipal advisory activities of the municipal advisor and its associated persons.  

          Once the MSRB launches a pilot Series 54 exam and later, the permanent Series 54 exam in 2019, municipal advisor principals will be required to pass the permanent exam within 12 months. The MSRB will provide regular communications regarding the formalization of professional qualification requirements for municipal advisor principals, including a corresponding amendment to Rule G-3, as well as information on the Series 54 pilot and permanent exam.

          Regulatory Roundup

          Keep up with current requests for comment, updated regulatory requirements and upcoming rule filings, and learn about opportunities to provide input at various stages of the MSRB’s rulemaking process.

          September 14, 2018: Submit Comments on Draft FAQs on Use of Social Media in Advertising
          Share feedback on draft answers to FAQs addressing the use of social media in advertising by municipal advisors and municipal securities dealers and their associated persons. New MSRB Rule G-40, on advertising by municipal advisors – together with amendments to MSRB Rule G-21, on advertising by municipal securities dealers – becomes effective on February 7, 2019. The MSRB has committed to providing guidance in advance of the effective date to assist regulated entities as they develop their compliance policies and procedures. In addition to today’s draft guidance on social media, the MSRB has sought feedback on draft FAQs on the use of municipal advisory client lists and case studies under Rule G-40. Next month, the MSRB plans to seek input on draft guidance related to Rule G-40’s content standards. 

          September 17, 2018: Submit Comments on Draft Amendments to MSRB Rules on Primary Offering Practices
          Share your input regarding the MSRB’s draft amendments on MSRB rules on syndicate practices and disclosure of information related to primary offerings. The request for comment includes several potential amendments to MSRB Rule G-11, including requiring senior syndicate managers to provide specified information to issuers and standardizing the process for issuing a “free-to-trade wire” to communicate to all syndicate members at the same time that the new issue is free to trade. The potential changes also include amendments to MSRB Rule G-32 to, among other things, collect additional information on Form G-32 to support municipal market transparency efforts. Read the request for comment and submit your response by Monday, September 17, 2018

          November 6, 2018: Submit Comments on Draft Interpretive Guidance on Pennying and Other Trading Practices
          Provide comments on draft interpretive guidance related to the practice of “pennying” and draft amendments to existing guidance on best execution relating to the posting of bid-wanteds on multiple trading platforms. In addition, as part of its ongoing review of its rules, the MSRB also seeks comment as to whether there are other secondary market trading practices that could benefit from additional regulatory guidance or clarity, or whether there are any MSRB requirements related to secondary market trading practices that commenters may feel are no longer necessary and could be removed from and/or amended in MSRB rules.