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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.
Compliance in Focus: LIBOR Transition Information
The MSRB is publishing this information regarding the LIBOR reference rate and encouraging regulated entities to review their activities related to LIBOR transactions, particularly given that the financial authority responsible for the publication of LIBOR has stated that it cannot guarantee that the LIBOR reference rate will be published beyond 2021. This information is intended to highlight existing MSRB rules that promote the protection of municipal entities by ensuring they are apprised of risks associated with the LIBOR reference rate when entering into new LIBOR-based transactions.
Read more.
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Compliance Frequently Asked Questions (FAQs)
Get answers to commonly asked questions about compliance with MSRB rules.
Q: If a registered municipal advisor employs a subcontractor to act as a co-municipal advisor on an issuance of municipal securities, is the subcontractor subject to conflicts of interest disclosures under MSRB Rule G-42?
A: Yes. MSRB Rule G-42, on duties of non-solicitor municipal advisors, requires municipal advisors to disclose all material conflicts of interest, in writing, prior to or upon a municipal advisor engaging in municipal advisory activities on behalf of a municipal entity or obligated person client. Additionally, if a municipal advisor concludes that it has no known material conflicts of interest based on reasonable diligence, a municipal advisor must provide a written statement to the client to that effect.
Generally, a subcontractor, acting as a co-municipal advisor, may not have entered into an engagement with the municipal entity or obligated person client for municipal advisory services. If a subcontractor, in acting in its capacity as a co-municipal advisor, provides advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, such subcontractor is engaged in municipal advisory activities and would be subject to the same conflicts of interest disclosure obligations under Rule G-42 as the employing municipal advisor that was directly engaged by the municipal entity or obligated person client.
Compliance Tip: Taking Care of (Outside) Business
Under MSRB Rule G-44, on supervisory and compliance obligations of municipal advisors, a municipal advisor’s written supervisory procedures shall take into consideration, among other things, the likelihood that associated persons may be engaged in relevant outside business activities. Municipal advisors should also bear in mind that SEC Form MA-I requires outside business activities to be disclosed. Read more about written supervisory procedures.
Read MSRB Rule G-42(.01).
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Compliance Calendar
Dealers and municipal advisors should note the following key compliance dates and deadlines relevant through the third quarter of calendar year 2020.
March 19, 2020: MSRB Webinar: Understanding How Continuing Disclosures Appear on the EMMA® Website (MA)
During this free webinar, MSRB staff will demonstrate how issuers can modify a published disclosure and upcoming enhancements to the EMMA® website to improve transparency of the timing of issuers' annual and audited financial disclosures. Register here.
March 30, 2020: Comment Deadline on Request for Comment on Draft Amendments to MSRB Rule A-3: Membership on the Board (MA/BD)
The MSRB seeks comment from interested persons on draft amendments to MSRB Rule A-3, on membership on the board, designed to improve Board governance. The amendments would tighten the independence standard required of public representatives, reduce the size of the Board, impose a limit on the number of years a Board member may serve, require that Board committees responsible for assisting the Board in overseeing critical governance functions be led by public representatives, and make certain other changes described below. Read the notice.
April 30, 2020: 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, 2020: 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 31, 2020: Annual 529 Plan Underwriting Fee (BD)
Payment is due by May 31, 2020 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.
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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 December 2, 2019, FINRA and D.A. Davidson & Co. agreed to a Letter of Acceptance, Waiver and Consent (AWC). In connection with 22 municipal offerings, during the period of March through October 2016, Davidson violated MSRB Rule G-17 by providing inaccurate or misleading statements in issue price certificates. Interpretive Guidance under Rule G-17 regarding an underwriter’s fair dealing obligations provides that “in connection with a certificate signed by the underwriter that will be relied upon by the issuer or other relevant parties to an underwriting (e.g. an issue price certificate), the dealer must have a reasonable basis for the representations and other material information contained therein.” See Release No. 34-66927 (May 4, 2012); 77 FR 27509 (May 10, 2012) (File No. SR-MSRB-2011-09); and MSRB Notice 2012-25 (May 7, 2012)
As the sole underwriter on these 22 municipal offerings, Davidson prepared and provided issuers with an issue price certificate that represented that 10% of the initial offering was or would be sold to the public. However, in each of the 22 municipal offerings certain maturities were sold entirely to other broker-dealers and not to the public. In addition, Davidson violated MSRB Rule G-27, on supervision, because the firm relied on bankers and bond counsel to prepare and execute the statements in the issue price certificates without maintaining its own process or procedure for verifying the accuracy of the information.
Davidson agreed to accept a censure and a fine in the amount of $85,000. Davidson also agreed to an undertaking that included a review of the issue price certificates in the 22 municipal offerings and provide prompt notice to the issuers of inaccuracies in the issue price certificates.
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2020 Compliance Advisory Group
For the third consecutive year, the MSRB’s compliance initiatives will be informed by the Compliance Advisory Group (CAG). The MSRB has selected new members for CAG to provide feedback on compliance resources, tools and educational materials to enhance dealers’ and municipal advisors’ understanding of MSRB rules and to assist their efforts in developing effective supervisory and compliance programs. Advisory groups serve as a resource to the MSRB in advancing its strategic goal of enriching stakeholder engagement.
Learn more.
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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.
February 18, 2020: SEC Approval Order on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
February 6, 2020: MSRB Response to Comments on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
December 20, 2019: SEC Request for Extension of Time on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
December 9, 2019: Comment Letter to the Securities and Exchange Commission (SEC) on its Proposed Exemptive Order for Registered Municipal Advisors
November 27, 2019: Federal Register Notice of Filing on Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
November 19, 2019: Proposed Rule Change to Amend the Information Facility of the MSRB's Electronic Municipal Market Access (EMMA) System
November 13, 2019: Federal Register Notice of Approval for Proposed Rule Change to Amend and Restate the MSRB's August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities
November 7, 2019: MSRB Response to Comments on Proposed Rule Change to Amend MSRB Rule A-11, on Assessments for Municipal Advisor Professionals, to Increase the Annual Professional Fee Over a Two-Year Phase-In Period
November 6, 2019: SEC Approval Order on Proposed Rule Change to Amend and Restate the MSRB's August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities
November 5, 2019: Federal Register Notice of Immediately Effective Rule Change on Revisions to the Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination
October 31, 2019: MSRB Response to Comments: Proposed Rule Change to Amend and Restate the MSRB's August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities:
October 31, 2019: Amendment Number Two: Proposed Rule Change to Amend and Restate the MSRB's August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities:
October 30, 2019: SEC Approval Order on Revisions to the Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination
October 18, 2019: Revisions to the Content Outline for the Municipal Advisor Principal Qualification Examination and Its Associated Selection Specifications for the Examination
October 7, 2019: MSRB Response to Comments: Proposed Rule Change to Amend and Restate the MSRB's August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities:
October 7, 2019: Amendment Number One: Proposed Rule Change to Amend and Restate the MSRB's August 2, 2012 Interpretive Notice Concerning the Application of Rule G-17 to Underwriters of Municipal Securities:
September 30, 2019: Federal Register Notice of Immediately Effective Rule Change on Proposed Rule Change to Amend MSRB Rule A-11, on Assessments for Municipal Advisor Professionals, to Increase the Annual Professional Fee Over a Two-Year Phase-In Period
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