FINRA and MSRB Release Proposals to Provide Pricing Reference Information for Investors in Fixed Income Markets

On November 17, the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB) released companion proposals that would require disclosure of pricing reference information on customer confirmations for transactions in fixed income securities. The proposals are substantially similar, but seek input on factors unique to the corporate and municipal bond markets.

Under the two proposals, bond dealers in retail-sized fixed income transactions would be required to disclose on the customer’s confirmation the price of certain same-day principal trades in the same security, as well as the difference between this reference price and the customer’s priceNews Release.

MSRB Creates Supervision and Compliance Requirements for Municipal Advisors

On October 23, the Municipal Securities Rulemaking Board received approval from the SEC to create the first new rule for municipal advisors since the SEC released its final registration rule for these professionals in September 2013.

The new supervision requirements take effect April 23, 2015, providing firms six months to implement the required policies and procedures. By April 23, 2016, the chief executive officers (or the equivalent) of municipal advisor firms must make the first of their annual certifications in writing that the municipal advisor has in place processes to establish, maintain, review, test and modify written compliance procedures and written supervisory procedures reasonably designed to achieve compliance with applicable rules.  MSRB Rule.

MSRB Proposed Amendment to NRO Designation Rule

On June 28, the MSRB sought approval from the SEC for a proposed amendment to Rule G-34 limiting the use by municipal securities dealers of the designation “not reoffered” or “NRO” without also including price or yield information in written communications about new issues of securities. The MSRB has requested that the proposed amendment be made effective 28 days after the date of SEC approval. MSRB Release. MSRB Proposed Amendment.

MSRB Regulation of Broker’s Brokers

On June 25, the SEC approved (i) MSRB Rule G-43 establishing obligations for municipal securities dealer firms that act as “broker’s brokers” and (ii) interpretative guidance on the duties of dealers that use such firms. The rule and interpretive guidance will be effective on December 22. MSRB Release. MSRB Rule. MSRB Guidance.

MSRB Concept Release on Disclosure of Financial Incentives

On May 31, the MSRB published a concept release seeking comment on a possible proposal to require underwriters and municipal advisors to disclose whether they have made or received certain payments in connection with new issues of municipal securities. Comments must be submitted no later than July 31, 2012. MSRB Concept Release.

MSRB Request for Comment on Trade Size Information

On June 1, 2012, the MSRB published a request for comment on a proposal to provide for more rapid public dissemination of trade size information for large municipal securities transactions through the MSRB Real-Time Transaction Reporting System. Comments must be submitted no later than July 2, 2012. MSRB Request for Comment.

SEC Approves MSRB Interpretive Notice on Duties of Underwriters to State and Local Government Issuers

On May 4, the SEC approved the MSRB’s proposed interpretive notice on the application of MSRB Rule G-17 to underwriters of municipal securities. According to the notice, underwriters of municipal securities will be required to make certain disclosures to their state and local government clients, including risks about complex financial transactions, potential conflicts of interest, and compensation received from third-party providers of derivatives and investments. The notice will become effective on August 2. MSRB Release.  MSRB Notice.  SEC Release.

MSRB Request for Comment on Underwriter Submission Requirements

On April 10, the MSRB requested comment on proposed changes to rules that would allow underwriters of municipality securities to satisfy certain of their obligations to submit information about new issues with their data submission to the New Issue Information Dissemination Service, which is operated by the DTCC. Comments must be submitted by May 8.  MSRB Release.

MSRB Seeks Approval of “Sophisticated Municipal Market Professional” Definition

On March 26, the MSRB requested approval from the SEC to revise the definition of “sophisticated municipal market professional” (SMMP) so that it is consistent with the new FINRA suitability rule for institutional customers. The proposal defines “SMMP” as an “institutional customer of a dealer 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) affirmatively indicates that it is exercising independent judgment in evaluating the recommendations of the dealer.  Request for Approval.  MSRB Release.

MSRB Publication of Inter-Dealer Yield Data for Municipal Securities Transactions

On March 21, the MSRB received approval from the SEC to display price and yield data from inter-dealer municipal securities transactions on the EMMA website, which currently only displays yield data for municipal securities transactions between dealers and customers.  Data from inter-dealer municipal securities transactions will be published on the EMMA website beginning April 30.  MSRB Release.