The Municipal Securities Rulemaking Board (MSRB) proposes to amend its Rule A-3 on the composition of its governing board to comply with the Dodd-Frank Reform Act.  The Act contains a provision that, for the first time, requires the MSRB to establish a board with a majority of public members.  It also requires the MSRB's board to include at least 1 municipal advisor representative.  Municipal advisors, who provide financial advice to municipal entities or solicit business from municipal entities on behalf of others, will be regulated by the MSRB beginning 10/1/10. 

The MSRB’s proposal creates a transitional 21-member board, composed of 11 public members and 10 industry members - including 7 B/D and bank dealer members, and 3 municipal advisor members.  Dodd-Frank provides that the number of public representatives of the Board shall at all times exceed the total number of regulated representatives and that the membership must be as evenly divided in number as possible between public and regulated representatives. 

    As For The Public Members.   At least one must be representative of institutional or retail investors in municipal securities;  at least one must be representative of municipal entities;  at least one must be a member of the public with knowledge of or experience in the municipal industry.  

    As For Regulated Representatives.   At least one must be associated with and representative of broker-dealers;  at least one must be associated with and representative of bank dealers;  at least one must be associated with a municipal advisor. 

    In order to achieve this composition, the Board will elect 11 new members - 8 public representatives and 3 muni advisor reps - prior to the start of the 2011 fiscal year.  Although the Board had previously published a notice under the existing provisions of paragraph (a)(iii)(c) of Rule A-3 soliciting nominations of Board candidates for fiscal year 2011, in order to ensure a fair nomination process, the Board determined that it should re-advertise for Board candidates after the passage of the Dodd-Frank Act.  Hence, the transition rule provides for a second publication, on or after enactment of the Dodd-Frank Act, of a notice in a national financial journal soliciting nominations for municipal advisor candidates, with the Nominating Committee accepting recommendations pursuant to such notice for a period of at least 14 days from the date of publication.  For further details, refer to:  [MSRB Notice 10-33, 8/27]