New MSRB Rule G-44, as proposed, would require municipal advisors to adopt a basic supervisory structure to ensure compliance with applicable MSRB and SEC rules.  Comments are due by 6/24/11.  

MSRB Rule G-44 would require ... municipal advisors to establish and maintain a system to supervise the municipal advisory activities of associated persons, and would set minimum requirements for this system - including the establishment and maintenance of WSP's.  Ultimate responsibility for appropriate supervision would rest with the municipal advisor.

The rule also would require municipal advisors to adopt, maintain and enforce WSP's to ensure municipal advisory activities are conducted in accordance with applicable MSRB and SEC rules.  Again, the rule would set the minimum requirements for these procedures - including those relating to the manner in which municipal advisory activities will be monitored and supervised for compliance.

Current MSRB Rule G-27 ... requires supervision of brokers, dealers and municipal securities dealers to ensure compliance with MSRB rules and also covers the financial advisory activities of dealers.  New supervisory Rule G-44 would cover municipal advisory activities not subject to MSRB Rule G-27.  The MSRB is developing a set of rules for municipal advisors based on its expanded jurisdiction under the Dodd-Frank Reform Act.  

• Draft Rule G-44(a) sets forth the obligation of municipal advisors to supervise the municipal advisory activities of the municipal advisor and its associated persons to ensure compliance with applicable MSRB and SEC rules (“applicable rules”).
• Draft Rule G-44(b) would require a municipal advisor to establish and maintain a system to supervise the municipal advisory activities of each associated person designed to achieve compliance with applicable rules.  The minimum requirements of a municipal advisor’s supervisory system include:

• establishing and maintaining written procedures;
• designating one or more municipal advisor principal(s) based on experience or training;
• maintaining a written record of the designation of the municipal advisor principals and their responsibilities regarding supervision; and
• conducting an annual compliance interview or meeting to discuss compliance matters relevant to the municipal advisory activities of associated persons.

• Draft Rule G-44(c) would require municipal advisors to adopt, maintain and enforce WSP's designed to ensure that the conduct of the municipal advisory activities of the municipal advisor and its associated persons are in compliance with applicable rules.  The minimum requirements of the WSP's include procedures relating to:
  • the manner in which a designated principal shall monitor compliance and supervise municipal advisory activities;
  • the periodic review by a designated principal of each office that engages in municipal advisory activities;
  • the maintenance and preservation of books and records; and
  • the maintenance of the written supervisory procedures, a copy of which must be made available in each office of the municipal advisor and in each office where supervisory activities with respect to municipal advisory activities are conducted.

• Draft Rule G-44(d) would require an annual review of the municipal advisory activities of the firm.  The purpose of the review is to assist in detecting and preventing violations of, and achieving compliance with, applicable rules.
• Draft Rule G-44(e) addresses the requirements of municipal advisors with regard to the review and recordkeeping of correspondence.

For further details, go to:   [MSRB News Release, 5/25/11, "MSRB Reuests Comment .."]   and    [MSRB Notice 11-28, 5/25/11]