The Municipal Securities Rulemaking Board (MSRB) has put this question out to the financial comment:  How do you define “sophisticated municipal market professional?”  The definition may impact how FINRA will implement its recent rule changes on suitability for institutional accounts.  Accordingly, MSRB asks that comments be submitted no later than 12/13/11. The proposed rule updates are a precursor to the MSRB’s evaluation of its rules regarding electronic trading systems.  The MSRB recognizes that certain sophisticated investors do not require the same protections as other investors in the municipal market.  The MSRB issued guidance in 2001 and 2002 on the electronic trading of municipal securities. [C-I Note: They traded muni securities on electronic trading platforms 10 years ago?] That guidance was intended to ensure that only the most sophisticated investors were likely to use e-trading systems.  A municipal securities dealer’s determination of whether an investor is a “sophisticated municipal market professional,” or "SMMP," under this guidance is based on factors that consider the investor’s access to material facts about a transaction and the investor’s capability of evaluating investment risk and market value of municipal securities.  These factors were modeled on those used by the NASD in its suitability rule for institutional customers. Since the MSRB issued its definition of SMMP, the information available about municipal bonds has increased substantially, including information provided through the MSRB’s EMMA website and other information vendors.  These sources have made the material facts about municipal bonds more readily available.  Since this time, FINRA has also revised its institutional suitability rule. So As to Reflect this Greater Accessibility of ... muni securities information and to promote consistency in market regulation, the MSRB requests comment on defining SMMP as a “customer with an institutional account that: (i) 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 (ii) attests that it is exercising independent judgment in evaluating the recommendations of the dealer.”   The MSRB also is proposing a safe harbor that may be used by dealers in satisfying the “reasonable basis” requirement.    [MSRB News Release, 11/8/11]