The Municipal Securities Rulemaking Board has asked the Securities and Exchange Commission to approve its new proposal for a permanent 21-member board, which would have a majority of public members.
The board asked the SEC to approve the proposed amendments to its Rule A-3 on board membership in a notice filed with the SEC on Thursday.
Twenty-one members is the size of the current board, which is a transitional one, but significantly bigger than the previous 15-member board, a majority of whose members were broker-dealer and bank-dealer representatives.
This board was increased to 21 from 15 members on a transitional basis to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which required the MSRB to have a majority-public board.
Dodd-Frank stated the board should be composed of 15 or more members. The MSRB increased the board’s size in the fall of 2010 to permit then-existing members to stay on the board. The SEC approved the transitional board. But it was always a question if the MSRB would keep that many members permanently.
The MSRB told the SEC that in its filing that it decided to maintain its current size after board members indicated in a survey that it is an appropriate size for the board to carry out its mission and objectives. The board members said in the survey that they believed all constituents — from the industry and the public — are appropriately represented because they are all able to provide input into the development of agendas and participate actively in discussions.
“The MSRB’s board of directors has been very effective in carrying out its mission and representing the diversity of the municipal market,” Lynnette Hotchkiss, the board’s executive director, said in a release on the filing. “Our rulemaking initiatives have benefited from the numerous perspectives represented on the board.”
The board’s 21 members would be divided into three groups that have staggered, three-year terms and each group would be divided as even as possible between regulated and public members, the MSRB said in its notice. Only 10 of the 21 members on the board would represent regulated entities such as banks, broker-dealers and municipal advisors. The rest would be public members.
Those 10 regulated members would include at least one representative of a broker-dealer, one from a bank dealer, and at least three representatives of muni advisors that are not associated with broker-dealers or banks.
Of the 11 public members, at least one would represent municipal entities such as issuers, at least one would represent institutional or retail investors, and at least one would be a member of the public with knowledge of, or experience in, the muni market.
The MSRB also asked the SEC to approve a transitional provision that would apply to its fiscal years 2013 and 2014, which begin on Oct. 1, 2012, and end after Sept. 30, 2014.
Under the provision, board members who were elected before July 2011 and whose terms would end on or after Sept. 30, 2012, could have extended terms of up to two years, in order to transition all of the 21 members into three groups with staggered terms. Board members would be nominated for the term extensions by a special nominating committee, and then the full board would vote on each proposed extension.
