MSRB seeks to apply Rule G-17 on fair dealing to municipal advisers

By Angela McDaniels

Tacoma, Wash., Aug. 24 - The Municipal Securities Rulemaking Board proposed a rule change that would apply its rule on fair dealing to municipal advisers, according to an MSRB notice.

The rule change must be approved by the Securities and Exchange Commission.

Rule G-17 outlines a municipal adviser's duties to the clients being advised and prohibits deceptive, dishonest or unfair practices.

Under the rule, a municipal adviser must determine if a recommended municipal securities transaction is suitable for its client and must provide disclosure of the risks of the transaction, any incentives it has received for recommending the transaction and any other conflicts of interest.

MSRB noted that while municipal advisers are not required to exercise a fiduciary duty when soliciting municipal entities on behalf of third parties, they are required to deal fairly with the municipal entities they solicit and not engage in conduct that is deceptive, dishonest or unfair.

Rule G-17 also prohibits kickback arrangements and certain fee-splitting arrangements with underwriters or the providers of investments or services to obligated persons and payments by municipal advisers made for the purpose of obtaining or retaining municipal advisory business, other than reasonable fees paid to a municipal adviser regulated by the MSRB.

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