On September 8, the MSRB issued a request for comment on a revised draft rule covering the activities of broker’s brokers, revised amendments to existing rules, and a draft notice covering the activities of dealers that use the services of broker’s brokers. Broker’s brokers act as financial intermediaries between selling and bidding dealers. Comments must be submitted by November 3. MSRB Release.
MSRB
MSRB Proposed Rule on Supervision of Municipal Advisory Activities
On August 22, the MSRB filed with the SEC proposed Rule G-44, which would require municipal advisors to establish and maintain systems to supervise the municipal advisory activities of associated persons to ensure compliance with MSRB and SEC rules. The MSRB also proposed amendments to Rule G-8 with respect to books and records and Rule G-9 with respect to preservation of records to correspond with the new rule requirements. MSRB Release.
MSRB Request for Comment on Disclosure Rules
On August 10, the MSRB requested comment on: (i) extending its rule on advertisements to cover municipal advisors and (ii) requiring municipal advisors to evidence their engagements in writing and make certain required disclosures. Comments must be submitted by September 14. MSRB Release.
MSRB Warning on Application of Federal Securities Laws to Private Placements
On August 3, the MSRB urged financial advisors to state and local government issuers to determine whether certain actions, such as introducing potential investors to issuers or negotiating with potential investors for transaction-based compensation, would cause them to be placement agents and require registration with the SEC as brokers. The MSRB also warned that certain financings called “bank loans” may in fact be private placements of municipal securities. MSRB Release.
Application of MSRB Rules to Underwriters of Municipal Securities
On August 2, pursuant to Section 975 of the Dodd-Frank Act, the MSRB requested approval from the SEC for an interpretive notice relating to the application of MSRB Rule G-17 to underwriters of municipal securities. The notice would set forth requirements for underwriters regarding representations and disclosure to issuers. The MSRB anticipates the proposed notice will be effective 90 days after approval by the SEC. MSRB Release. MSRB Notice.
MSRB Report on Municipal Variable Rate Securities
On July 21, the MSRB published its second annual report summarizing interest rate, trading, and other data on municipal variable rate securities reported to the MSRB between early 2009 and April 2011. The report includes information on the size of the market for auction rate securities, variable rate demand obligations and associated liquidity facilities, trading volume and interest rates, and the number of rate resets. MSRB Release. MSRB Report.
MSRB Draft Municipal Advisor Survey
On July 26, the MSRB issued a draft survey seeking information from municipal advisors on the nature of the municipal advisory activities they undertake as well as the manner and level of compensation received for such advisory activities. Comments on the draft survey must be submitted by September 12. MSRB Notice.
MSRB Proposal to Establish Municipal Advisor Assessment
On July 26, the MSRB filed a proposed rule change with the SEC to establish a new interim municipal advisor assessment program under Rule A-11 and a Form A-11-Interim to be used in connection with such an assessment. The MSRB has requested that the SEC approve the proposed interim assessment for effectiveness on October 1. Assuming an effective date of October 1, a municipal advisor would be required to submit a completed Form A-11-Interim and to remit payment for the interim assessment by November 30. MSRB Notice.
MSRB Dealer Role-Switching Prohibition
On May 27, the MSRB adopted amendments to Rule G-23 prohibiting a municipal securities dealer from acting as a financial adviser to a municipal entity for a new bond issue and subsequently acting as an underwriter for the same issue. Rule G-23 previously allowed a dealer to resign as a financial adviser for a new issue and serve as underwriter for the same issue if certain disclosure and consent requirements were met. The amended rule also prohibits a dealer serving as a financial adviser for a particular issue from serving as the initial remarketing agent for the same issue unless the dealer’s financial advisory relationship has been terminated for at least one year. The amendments will be effective November 27. MSRB Release and Revised Rule.
MSRB Optional Disclosure of Pre-Sale Documents to EMMA
On May 23, MSRB announced that municipal securities issuers may provide pre-sale documents for new bond issues directly to the public through the Electronic Municipal Market Access (EMMA) system. Issuers and other obligated persons may also voluntarily provide information concerning the timing and accounting standard used to prepare annual financials. Voluntary submissions will not relieve issuers from any submission obligations under MSRB rules. MSRB Release.