The MSRB Board of Directors has advanced several proposed rules for municipal advisors and municipal securities dealers. 

    Proposed "Pay to Play" Rule.   Proposed Rule G-42 would address potential “pay to play” activities of municipal advisors.  If approved, MSRB’s rule would, for the first time, regulate pay to play activities of firms and individuals that advise municipal entities on municipal securities and municipal financial products, including derivatives.  The rule also would cover municipal advisor firms and individuals that solicit certain business from municipal entities, such as state and local governments, and public pension plans, on behalf of others.

Municipal advisors would be prohibited from engaging in municipal advisory business with municipal entities for compensation for 2 years if they make certain political contributions to state or local government officials with authority to hire such municipal advisors.  A similar ban on compensation resulting from such political contributions would apply to municipal advisors that solicit certain types of state and local public sector business on behalf of 3rd parties.

    Draft of Supervisory Structure Rule.   MSRB will publish for public comment a draft rule governing the supervision of municipal advisory activities and compliance with MSRB rules.  The draft rule would require all municipal advisors to adopt a basic supervisory structure, including the designation of a municipal advisor principal qualified by training and experience, to supervise compliance with MSRB rules.  It also would require municipal advisors to adopt WSP's for compliance with MSRB rules, annual compliance training and review of the firm’s municipal advisory activities, and review of correspondence and maintenance of the advisor’s books and records.

    Fee Assessments to Muni Advisors.   MSRB Directors discussed potential assessments for municipal advisors with the goal of providing for adequate regulatory oversight and ensuring that all MSRB-regulated entities are fairly assessed.  The MSRB assumed regulatory jurisdiction for muni advisors on 10/1/10, as mandated by Dodd-Frank.  The MSRB is developing an interim plan to assess fees on municipal advisors as it begins to collect data from municipal advisors to establish the basis for a fair and equitable permanent assessment structure. The interim plan will take into account the Dodd-Frank Act requirement that the MSRB not create a burden for smaller municipal advisory firms.

The Board also will begin to consider rebalancing assessments paid by different categories of entities regulated by the MSRB. This could entail potential reductions in existing dealer assessments, such as the underwriting assessment, transaction assessment, or technology fee, as new revenues are realized through municipal advisor assessments.

    Proposed Amendment to Underwriting Rule.  The MSRB will file a partial amendment to its existing proposal on MSRB Rule G-23, which seeks to prohibit a broker, dealer, or municipal securities dealer from acting both as a financial advisor to an issuer of municipal securities and as an underwriter for the same new issue of municipal securities. The partial amendment would modify an interpretive guidance included in the original proposal to further clarify the role of the underwriter and its provision of issue-related advice in its capacity as an underwriter.   [MSRB Release, 4/18]