municipal securities

The Federal Reserve Board Finalizes Rule Regarding Investment-Grade General Obligation State and Municipal Securities

On April 1, 2016, the Federal Reserve Board finalized a rule to include certain U.S. general obligation state and municipal securities in the type of assets that financial institutions may use to satisfy requirements designed to ensure that such institutions have the capacity to meet liquidity needs during a period of financial stress.  The final rule allows investment-grade, U.S. general obligation state and municipal securities to be counted as high-quality liquid assets (HQLA) up to certain levels if such securities meet the same liquidity criteria that apply currently to corporate debt securities.  ReleaseFinal Rule.

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.

SEC Issues Interpretive Guidance on New Municipal Advisors Registration Rule

On January 10, the SEC announced that its Office of Municipal Securities has issued interpretive guidance to address questions from market participants regarding the implementation of new final SEC rules requiring municipal advisors to register with the SEC.

State and local governments frequently use paid advisors to help them decide how and when to issue municipal securities and how to invest proceeds from the sales.  The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act required these advisors to register with the SEC like other market intermediaries.  The SEC’s final rule was adopted in September 2013 and becomes effective on January 13, 2014.  Among the issues addressed in the guidance are:  (i) the advice standard, including the general information exclusion and the treatment of business promotional materials used by underwriters; (ii) the exemption for independent municipal advisors; (iii) the exclusion for registered investment advisers; (iv) the underwriter exclusion, including engagements as underwriters; and (v) the effective date of the final rules and the compliance period for using the final registration forms.  Interpretative Guidance.

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 Amendments to Underwriter Fair Dealing Proposal

On November 3, the MSRB filed amendments to its proposal regarding the duties of underwriters of municipal securities to state and local governments. The amendments would enhance certain disclosure requirements for underwriters as well as clarify the risk disclosure requirements of the proposal. Comments on the proposal should be submitted to the SEC. MSRB Release. MSRB Amendments.

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 Proposal to Prohibit Dealers from Acting as Financial Advisors and Underwriters

On February 9, the MSRB filed with the SEC a proposed rule change 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. MSRB Release. MSRB Notice.