MSRB opts to broaden protection of municipal issuers via new rules

By Jennifer Chiou

New York, Oct. 25 - The Municipal Securities Rulemaking Board announced that it took actions at meetings last week related to the regulation of municipal securities dealers and municipal advisers, agreeing to prohibit dealers acting as financial advisers on new bond issues from also taking on underwriting responsibilities for the same issues.

At the meeting held in Virginia, the board also proposed a set of initial administrative rules for municipal advisers.

Effective Oct. 1, the Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the mission of the MSRB to protect municipal entities and those whose credit stands behind municipal bonds, according to an MSRB release.

Among the changes, the Dodd-Frank Act also requires the MSRB to adopt rules about municipal advisers, whereas the MSRB previously made rules regulating only the dealers of municipal securities.

The release stated that the board also discussed at length the MSRB's priority to reach and communicate with newly regulated and protected parties, adding that the MSRB is hosting two educational seminars - in New York on Nov. 2 and in Chicago on Dec. 6 - to kick off its expanded outreach efforts to municipal advisers and municipal entities.

The board, which typically meets on a quarterly basis, said it will hold a special meeting in early December to take up additional municipal adviser rulemaking. It will meet again in January at its regularly scheduled quarterly meeting.

Municipal advisers include firms and individuals that provide advice on municipal securities to issuers of municipal securities or that solicit business on behalf of broker-dealers, bank dealers, other municipal advisers or investment advisers from municipal entities, according to the release.

The new rules also require that MSRB have municipal adviser representation on its board of directors, which it does as of Oct. 1.

Under the new regulations, municipal advisers must register with the Securities and Exchange Commission. MSRB will begin its own registration process following the adoption of associated MSRB administrative rules.

At the meeting, the board of directors ratified the MSRB's executive leadership, consisting of Michael G. Bartolotta as chair and John W. Young II as vice chair, both elected in July.

In addition, the board also agreed to apply MSRB Rule G-17 on fair dealing to municipal advisers.

In other Dodd-Frank Act related action, the release noted that the board agreed to establish a nominating committee composed of a majority of public members and that has fair representation of regulated entities.

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