MSRB proposes 'pay-to-play' rule for muni advisers, discusses fee plan

By Angela McDaniels

Tacoma, Wash., April 18 - The Municipal Securities Rulemaking Board proposed a "pay-to-play" rule that would prohibit municipal advisers from advising municipal issuers for pay for two years if they make certain political contributions to state or local government officials with hiring authority.

A similar ban would apply to municipal advisers that solicit certain types of state and local public sector business on behalf of third parties, according to an MSRB news release.

At its quarterly meeting on Thursday and Friday in Nashville, the MSRB board of directors agreed to seek approval of proposed MSRB Rule G-42, which would establish a set of core rules for municipal advisors, from the Securities and Exchange Commission.

Supervisory structure proposed

The board also agreed to publish for public comment a draft rule that would require all municipal advisers to adopt a basic supervisory structure, including the designation of a municipal adviser principal, to supervise compliance with MSRB rules.

The rule would also require municipal advisers to adopt written supervisory procedures for compliance with MSRB rules, annual compliance training and review of the firm's municipal advisory activities and review of correspondence and maintenance of the adviser's books and records.

G-23 to be partially amended

In other action, the board agreed to file a partial amendment to its existing proposal on MSRB Rule G-23, which seeks to prohibit a broker, dealer or municipal securities dealer from acting both as a financial adviser and an underwriter for the same new issue.

According to the release, the partial amendment would modify an interpretive guidance included in the original proposal to further clarify the role of the underwriter and its provision of issue-related advice in its capacity as an underwriter.

Fees ahead

Since October 2010, the MSRB has been working to establish a regulatory framework for municipal advisers based on the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The MSRB is developing an interim plan to assess fees on municipal advisers as it begins to collect data to establish a permanent assessment structure.

MSRB said the interim plan will take into account the Dodd-Frank Act requirement that it not create a burden for smaller municipal advisory firms.

The board also will consider rebalancing assessments paid by different categories of entities. This could include potential reductions in existing dealer assessments, such as the underwriting assessment, transaction assessment or technology fee.

The board of directors will hold a special meeting in May to discuss other rule proposals, including municipal advisers' fiduciary duty and fair dealing obligations, as well as the MSRB's proposal relating to the fair-practice duties of underwriters.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.