WASHINGTON — The Municipal Securities Rulemaking Board plans to soon file rule changes with the Securities and Exchange Commission to eliminate the current practice of allowing a dealer-financial adviser to resign and then underwrite the same transaction.
The proposed changes to Rule G-23 will be essentially the same as draft changes to the rule that the board floated in August to ban role switching for both negotiated and competitive transactions, MSRB general counsel Ernesto Lanza told reporters in a conference call to discuss the highlights of the board’s meeting last week at its Alexandria, Va. headquarters.
In May, SEC chairman Mary Schapiro called on the board to alter the rule, deriding such role-switching as a classic conflict of interest. But many dealer-FA firms and bond attorneys had asked the MSRB for an exemption from any role-switching ban for small, competitively priced transactions.
MSRB chairman and First Southwest Co. vice chairman Michael Bartolotta, who led the call, said the board decided a full ban was “the best approach for market integrity” and would “eliminate what could be perceived as a conflict of interest for dealers.”
Bartolotta also said the board — which has been reconstituted as a majority-public self-regulator — agreed to several administrative rule changes that will apply to municipal advisory firms, which the MSRB began to oversee Oct. 1. In addition, he said it will establish a registration system for advisers by about the middle of next month.
The registration system for advisers comes on top of an initial system already established by the SEC.
