MSRB seeks to modify public board member standard of independence

By Tali Rackner

Norfolk, Va., June 11 – The Municipal Securities Rulemaking Board is requesting comments on a proposal to modify the application of the standard of independence for the one public member of its board of directors designated to be representative of institutional or retail investors in municipal securities, according to a press release.

The proposed amendment to MSRB Rule A-3, on membership on the board, seeks to allow the MSRB to consider and select an investor representative with significant knowledge of the municipal securities market from a broader group of applicants.

Of the 21-member board, the Securities Exchange Act requires that one public member be representative of institutional or retail investors.

The current standard of independence for public board members was established in 2010 with an inflexible standard of what it means to have “no material business relationship” with any entity regulated by the MSRB, the release said.

In practice, the current standard of independence rejects qualified individuals, whom the board believes have no material business relationship with a regulated entity, from service as a public member because they have a regulated entity within their employer’s corporate structure.

“The MSRB believes that the current standard of independence is too restrictive, resulting in the elimination of qualified individuals with relevant knowledge and expertise that are particularly needed as the Board discusses complex matters of market structure,” chief legal officer Robert Fippinger said in the release.

The MSRB is proposing a new approach to modifying the standard that applies only to applicants for the investor-focused position on the board. The proposal also includes a requirement for the board to undertake additional analysis to ensure that applicants for the investor representative role do not have material business relationships with regulated entities.

The MSRB is also requesting comment on whether it should modify the length of board-member service.

Comments should be submitted to the MSRB no later than July 13.

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