MSRB takes note of fair-practice duties of municipal advisers, dealers

By Susanna Moon

Chicago, Jan. 31 - The Municipal Securities Rulemaking Board said it agreed to seek comment on a draft interpretive notice on the application of the MSRB's Rule G-17 on fair dealing to municipal advisers.

Rule G-17 is a fundamental rule governing the conduct of municipal financial intermediaries, with its application to municipal advisers effective in December 2010.

The MSRB's draft interpretive notice provides details on how the rule applies to municipal advisers in their dealings with obligated persons and to municipal advisers who solicit business from municipalities on behalf of others.

The board also agreed to seek comment on a separate draft interpretive notice on the application of MSRB Rule G-17 to underwriters of municipal securities, which sets out basic duties of fairness owed by underwriters to issuers in the process of underwriting their new issues.

Both the draft interpretive notice for municipal advisers and the draft interpretive notice for underwriters would require disclosure to clients of material terms and risks of proposed transactions, as well as any incentives and conflicts of interest associated with such transactions.

Both draft interpretive notices will be published for comment in the coming weeks.

The industry regulatory organization approved the draft rulemaking proposal for municipal advisers and dealers at its quarterly board of directors meeting Thursday and Friday in San Diego.

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