[ by Howard Haykin ] Life could be so simple if all customers qualified as "sophisticated municipal market professionals," affectionately known as 'SMMP."  The SEC just approved the MSRB's new definition for SMMP's, who are institutional investors capable of independently evaluating investment risks and market value of municipal securities, and exercising independent judgment in evaluating recommendations of a municipal securities dealer.  The amended rule is effective 7/9/12. The Advantage?  The Revised Definition of So-Called ... "sophisticated municipal market professional," 'SMMP', exempts dealers from requirements to make certain disclosures to institutional customers that they must make to other investors, and certain pricing and suitability obligations of dealers to those customers are deemed satisfied. In short, the new definition vastly simplifies the analysis required by dealers when determining whether their customers qualify as SMMPs.  The change will also provide consistency with a new Financial Industry Regulatory Authority rule on suitability for institutional customers. The MSRB first defined SMMP in 2002.  Since then, information available about municipal bonds has increased substantially, including information provided through the MSRB’s Electronic Municipal Market Access (EMMA) website and other information vendors.  These sources have made the material facts about municipal bonds more readily available. As Revised, SMMP is defined as ... an institutional customer of a dealer that:

• the dealer has a reasonable basis to believe is capable of evaluating investment risks and market value independently, both in general and with regard to particular transactions in municipal securities, AND,
• affirmatively indicates that it is exercising independent judgment in evaluating the recommendations of the dealer.

• OR is ... a natural persons with at least $50 million of assets who is permitted to be considered an institutional customers, which eliminates the previous $100 million minimum investment in municipal securities required to qualify as an institutional customer.

For further details, go to:  [MSRB Press Release, 5/29/12] and [MSRB RegNote12-27, 5/29/12].