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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 highlights recent 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
 Board Liaisons (left to right): Jerry Ford, Donna Simonetti, Julia Cooper
As part of the Municipal Securities Rulemaking Board’s (MSRB) commitment to supporting regulatory compliance, the MSRB Board of Directors established its first external Compliance Advisory Group in fiscal 2018 to expand the MSRB’s access to a diverse group of municipal market professionals to better understand the compliance needs of our regulated entities. Now in its second year and consisting of 11 municipal market professionals, the Compliance Advisory Group meets frequently with MSRB Board of Directors liaisons to discuss potential regulatory topics that may warrant compliance assistance such as new guidance and resources, improved digital communications to regulated entities and enhanced outreach and engagement.
“This assembly of compliance-oriented senior professionals from a diverse set of firms is a tremendous asset to the MSRB,” said Jerry W. Ford, municipal advisor representative and one of three Board liaisons to the Compliance Advisory Group. “Hearing how MSRB rules are interpreted and implemented by our regulated entities is a great tool for evaluating the efficacy of our compliance guidance and materials.”
The Compliance Advisory Group meetings provide the Board with important insight and perspective into the varied processes firms undertake to comply with MSRB rules. Advisory group members provide input on the types of MSRB guidance and resources that their teams find to be most helpful and digestible. “These professionals are dedicated to promoting a culture of compliance and aid in the development process for guidance, resources and external communications, including the Compliance Corner newsletter and the Compliance Tip of the Week," said public Board representative and advisory group liaison Donna Simonetti.
Julia Cooper, public representative on the MSRB Board and liaison said, “I cannot overstate the value that advisory group members bring to our compliance resource development process.”
Compliance Advisory Group Members, FY2019
Kathy Aho, President, Springsted Incorporated
Jonas Biery, Business Services Manager, Bureau of Environmental Services, City of Portland
Mark Borrelli, General Counsel, Hutchinson, Shockey, Erley & Co.
Joey Frebes, Senior Vice President, KeyBanc Capital Markets
George Hinchcliff, Director, FIC Compliance Advisory, RBC Capital Markets
Phil Jerome, Managing Director, Compliance, Charles Schwab & Co., Inc.
Ben Juergens, Executive Director, Morgan Stanley
Leo Karwejna, Managing Director and Chief Compliance Officer, PFM Financial Advisors
Jessica LeBlanc, Senior Compliance Manager, Edward Jones
Kathy Weatherholt, Vice President, Compliance, George K. Baum & Company
Mark Young, Managing Director, KNN Public Finance, LLC
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Compliance Frequently Asked Questions (FAQs)
Get answers to commonly asked questions about compliance with MSRB rules.
Sophisticated Municipal Market Participants and Dealers’ Best-Execution Obligation
Q: If a dealer has a customer who has affirmed Sophisticated Municipal Market Professional (SMMP) status, consistent with MSRB Rule D-15, can the dealer, despite the provisions of MSRB Rule G-48(e) on best execution, agree to use reasonable diligence to ascertain the best market for the municipal securities transaction so that the resultant price to the SMMP is as favorable as possible?
A: Yes. If an SMMP requests to receive, for example, time of trade disclosures or would otherwise like the dealer to retain the best execution or suitability obligation, a dealer may contract with an SMMP to fulfill the obligation(s) that would otherwise be modified under Rule G-48. A dealer is reminded that it may need to modify its supervisory controls to align with any modification.
Compliance Tip
To assist dealers involved in the offer and sale of interests in 529 savings plans and ABLE programs, the Municipal Securities Rulemaking Board (MSRB) has aggregated a list of relevant guidance on rules relating to the 529 plans and ABLE programs. The guidance can be found on our Compliance Resources page of MSRB.org under the drop-down titled Guidance Related to 529 Savings Plans and ABLE Programs.
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Compliance Calendar
Dealers and municipal advisors should note the following key compliance dates and deadlines relevant through the second quarter of calendar year 2019.
March 15, 2019: Series 54 Pilot Enrollment Period Closes (MA)
The MSRB is seeking volunteers to take the Series 54 pilot, which will be available from March 2019 – July 2019. Individuals interested in taking the pilot can enroll from March 4, 2019 – March 15, 2019, and subsequently schedule a test date within a 120‑calendar day period. Learn more.
April 30, 2019: Political Contributions Quarterly Disclosures (MA/BD)
MSRB-regulated entities must submit information to the MSRB through Form G-37 on their municipal securities and advisory business and related political contributions to municipal entity officials, state and local political parties, and bond ballot campaigns. Read instructions for Form G-37.
April 30, 2019: Annual Municipal Advisor Professional Fee (MA)
Payment is due by April 30 for the MSRB’s municipal advisor professional fee, which is equal to $500 per associated person who is qualified as a municipal advisor representative and for whom the firm has a Form MA-I on file with the SEC as of January 31 of each year. Invoices are sent the first week of April. See MSRB Rule A-11.
May 28, 2019: Comments Due on MSRB Rule G-34 “CUSIP Requirement” (MA)
The MSRB is seeking comment on MSRB Rule G-34(a)(i)(A)(3) (the “CUSIP Requirement”), which requires a municipal advisor advising an issuer with respect to a competitive sale of a new issue of municipal securities to apply for the assignment of a CUSIP number or numbers with respect to such issue within a specified time frame, subject to exceptions. Read the notice.
May 31, 2019: Annual 529 Plan Underwriting Fee (BD)
Payment is due by May 31, 2018 for the MSRB’s annual 529 plan underwriting fee, which is $.005 per $1,000 of the total aggregate plan assets as of December 31 of each year as reported on MSRB Form G-45. Invoices are sent the first week of May. See information on dealer assessments and fees.
Events and Virtual Workshops
To submit questions in advance of any workshop or to suggest topics for future workshops, email MSRBEvents@msrb.org. |
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MSRB Regional Compliance Roundtable
March 22, 2019, 8:00 AM – 1:00 p.m. ET
Atlanta, Georgia
Join the MSRB for a compliance roundtable at the Atlanta office of Raymond James.
Compliance Outreach Program for Municipal Advisors
May 21, 2019, 8:00 AM – 4:00 p.m. PT
San Francisco, California
During this open forum in San Francisco, representatives from the MSRB, FINRA and the SEC will discuss regulatory and compliance issues with municipal advisory industry professionals. View the agenda.
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Enforcement Insight
This periodic feature summarizes a recent enforcement matter brought by an examining authority, which includes the SEC, 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.
On January 16, 2019, FINRA released its decision, Dept. of Enforcement v. Cantone Research Inc., et al. that held that a broker-dealer, Cantone Research, Inc. (CRI), and its President, Anthony Cantone (Mr. Cantone) made material omissions and a misrepresentation in connection with the sale of securities and that CRI and its Chief Compliance Officer, Christine Cantone (Ms. Cantone), failed to supervise Mr. Cantone.
During the period in question, the firm’s written supervisory procedures (WSPs) specified that Ms. Cantone had responsibility for reviewing correspondence, including emails. As a result of her review, Ms. Cantone was aware of a number of red flags suggesting that the firm and Mr. Cantone had made material omissions and misrepresentations to investors regarding the financial condition of recommended investments. Ms. Cantone was obligated to fulfill her supervisory obligations as designated in the firm’s WSPs and yet she failed to take any steps to address the red flags and failed to direct Mr. Cantone to inform the relevant investors of financial issues with the investments.
Because this was not Ms. Cantone’s first violation for failing to supervise, FINRA imposed a two-year suspension from engaging in all supervisory activities as well as the requirement that she requalify by examination. In addition, Ms. Cantone was fined $73,000 jointly and severally with CRI.
Read more.
Compliance Toolbox
Interpretive Guidance on Use of Social Media under MSRB Advertising Rules (MA/BD)
These answers to frequently asked questions, effective August 23, 2019, address permissible and impermissible uses of social media as part of their municipal securities business or municipal advisory activities under MSRB Rule G-21, on advertising by brokers, dealers or municipal securities dealers, and under MSRB Rule G-40, on advertising by municipal advisors.
Resources Related to 2019 Municipal Securities Examination Priorities (MA/BD)
This document highlights select MSRB rules, interpretative guidance and resources that correlate with municipal securities topics identified as 2019 examination priorities by the Office of Compliance Inspections and Examinations (OCIE) of the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA).
Understanding the Municipal Advisor Principal Qualification Examination (MA)
This guide is intended to assist individuals preparing to take the Municipal Advisor Principal Qualification Examination (Series 54).
Application of the Content Standards to Advertisements by Municipal Advisors under MSRB Rule G-40 (MA)
This compliance resource illustrates the application of content standards to sample/mock advertisements of municipal advisors under MSRB Rule G-40, on advertising by municipal advisors.
FAQs on Price Variance Alerts on Reported Trades (BD)
This document provides answers to frequently asked questions about the price variance alert process related to the MSRB’s Real-Time Transaction Reporting System (RTRS).
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Coming Soon
MSRB to Enhance Information on MSRB.org about Municipal Advisors
The MSRB provides on its website information about the registration and professional qualification standards of municipal advisors. In March, the MSRB will be enhancing this webpage so that the list of municipal advisors includes links to required disclosures that municipal advisor firms make to the U.S. Securities and Exchange Commission (SEC) on SEC Forms MA and MA-I. Each municipal advisor firm’s name listed on MSRB.org will be linked to its filing with the SEC. The MSRB also will be adding links to SEC filings for the qualified municipal advisor representatives of municipal advisor firms. These disclosures may include information about criminal actions, regulatory actions, investigations, terminations, judgements, liens, civil judicial actions, customer complaints, arbitrations and civil litigation, if any.
The enhancements to MSRB.org to provide access to current disclosures on file with the SEC will support municipal advisor compliance with the obligation to maintain the accuracy of these forms by providing a convenient way to view information on the form. Municipal advisors may wish to review their SEC filings to ensure that the information being made accessible on MSRB.org is complete and accurate.
Series 54 Pilot Exam
The MSRB launched its pilot Series 54 exam in March 2019. When the permanent version of the exam is launched in fall 2019, municipal advisor principals will be required to pass the exam within 12 months. The MSRB will provide regular communications to keep muncipal advisor firms informed on the professional qualification requirements for principals, including information on the Series 54 pilot and permanent exam.
The enrollment period for the Series 54 pilot exam is just 12 days, from March 4-15, 2019. However, once enrolled, pilot participants will be able to take the exam between February and June 2019. Any individual who takes and passes the pilot exam during this period will be appropriately qualified as a municipal advisor principal once the permanent exam is available.
Read more about the Series 54.
Types of MSRB Compliance Information
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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.
March 6, 2019: Federal Register Notice of Immediately Effective Rule Change To Amend Rule G–21, on Advertising by Brokers, Dealers and Municipal Securities Dealers, Rule G–40, on Advertising by Municipal Advisors, and Rule G–8, on Books and Records
March 6, 2019: Federal Register Notice of Immediately Effective Rule Change on Interpretive Guidance About Frequently Asked Questions Regarding the Use of Social Media Under the MSRB’s Advertising Rules
March 5, 2019: Federal Register Notice of Immediately Effective Rule Change on Proposed Rule Change to the MSRB’s Facility for the Short-Term Obligation Rate Transparency (SHORT) System To Modernize and Consolidate the Information Facility for the SHORT System
February 28, 2019: SEC Approval Order on Proposed Rule Change Consisting of Interpretive Guidance about Frequently Asked Questions Regarding the Use of Social Media under the MSRB’s Advertising Rules
February 28, 2019: SEC Approval Order on Proposed Rule Change to Amend Rule G-21, on Advertising by Brokers, Dealers and Municipal Securities Dealers, Rule G-40, on Advertising by Municipal Advisors, and Rule G-8, on Books and Records
February 27, 2019: Request for Comment on MSRB Rule G-34 Obligation of Municipal Advisors to Apply for CUSIP Numbers When Advising on Competitive Sales
February 25, 2019: SEC Filing on Proposed Rule Change to the MSRB's Short-Term Obligation Rate Transparency (SHORT) System Information Facility
February 21, 2019: Federal Register Notice of Immediately Effective Rule Change on Proposed Rule Change to Amend Rule A-16, on Examination Fees, to Establish a Test Development Fee for the Series 54 Examination
February 14, 2019: SEC Approval Order on Proposed Rule Change to Amend Rule A-16, on Examination Fees, to Establish a Test Development Fee for the Series 54 Examination
February 11, 2019: SEC Filing on Proposed Rule Change to Amend Rule A-16, on Examination Fees, to Establish a Test Development Fee for the Series 54 Examination
February 4, 2019: Federal Register Notice of Immediately Effective Rule Change on Proposed Rule Change to Extend the Effective Date of Previously-Approved Amendments to Rule G-21 and New Rule G-40
January 29, 2019: SEC Approval Order on Proposed Rule Change to Extend the Effective Date of Previously-Approved Amendments to Rule G-21 and New Rule G-40
January 28, 2019: SEC Filing on Proposed Rule Change to Extend the Effective Date of Previously-Approved Amendments to Rule G-21 and New Rule G-40
January 3, 2019: Request for Comment on Draft Interpretive Guidance on Application of MSRB Rules to Certain Prearranged Trading in Connection with Primary Offerings
December 31, 2018: Federal Register Notice of Immediately Effective Rule Change on Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination
December 21, 2018: SEC Approval Order on Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination
December 20, 2018: SEC Filing on Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination
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