WASHINGTON — The Municipal Securities Rulemaking Board has received approval from the Securities and Exchange Commission to consolidate interpretive guidance on dealers' time-of-trade disclosure obligations into three new rules and amendments to an existing rule.
The package approved by the SEC includes a proposed new Rule G-47 on time-of-trade disclosures that would consolidate existing requirements for dealers to disclose material information to customers in connection with muni purchases and sales, as well as a proposal to consolidate dealers' fair dealing obligations to experienced investors, called sophisticated municipal market professionals, with new Rules D-15 and G-48. The change will be effective July 5.
Under the change, the MSRB will codify into G-47 the existing requirement under Rule G-17 on fair dealing that dealers disclose material information to customers, at or prior to the time of the trade. The new time-of-trade disclosure rule does not substantively change the current obligations. The board will also establish two new rules to consolidate guidance for dealers who deal with experienced investors called sophisticated municipal market professionals, who require less protection. MSRB Rule D-15 defines an SMMP and Rule G 48 provides the regulatory obligations of dealers to SMMPs, underscoring the differences in dealers' obligations to the more sophisticated professionals in the market as opposed to retail investors.
The MSRB revised MSRB Rule G-19 on suitability to more closely align with the Financial Industry Regulatory Authority's suitability provisions and consolidate existing MSRB interpretive guidance on the subject. The revised rule makes clear the specific factors that dealers must consider when recommending a transaction or investment strategy to municipal securities investors.
"As part of the MSRB's ongoing efforts to enhance regulatory efficiency, the MSRB examined the many interpretations that have been issued primarily under MSRB Rule G-17, its central fair-dealing rule, and identified opportunities to better facilitate compliance," said MSRB executive director Lynnette Kelly. "Creating stand-alone rules on key principles of fair dealing serves to highlight their importance and ensure that dealers understand and comply with these obligations."
