ICI: Reject MA Test Content

WASHINGTON — The Investment Company Institute is urging the Securities and Exchange Commission to refrain from approving the Municipal Securities Rulemaking Board's outline for a municipal advisor exam, warning it takes an inappropriate "one-size-fits-all" approach.

The ICI criticized the Municipal Advisor Representative Qualification Examination outline in a letter sent to the SEC.

In the letter, authored by associate general counsel Tamara Salmon, the ICI takes issue with the MSRB's approach to the Series 50 examination, which is under development, because it would test municipal advisors who provide advice to municipal issuers regarding 529 college savings plans on knowledge unrelated to those activities.

The MSRB plans to administer the test in a pilot program this year and to all MAs next year.

The SEC posted a notice of the filing and immediate effectiveness of the proposed outline of the specifications for the Series 50 examination on May 1, just a few days after the MSRB published an outline of its proposed contents.

According to the outline, the exam will contain 100 multiple choice questions on five subjects. Twelve questions will test knowledge of MSRB and SEC rules governing MAs. Thirty-five will cover the understanding of muni finance, 12 will be related to credit analysis and due diligence, 31 will touch on structuring, pricing, and executing muni debt products, and 10 will test the understanding of the requirements for issuing municipal debt.

"Importantly, of these five sections, arguably, only the first would appear to have any application to those municipal advisor representatives whose advice relates exclusively to municipal fund securities," Salmon wrote. "As this section will consist of twelve of the one hundred examination questions, 88% of the examination contents appear to have no relevance whatsoever to advice relating to municipal fund securities."

Salmon reiterated an argument from previous letters on the MSRB's MA qualification rule that the MSRB should develop tests tailored to different types of muni advisors, an approach the MSRB has declined to take. Salmon told the SEC that all MAs should have to pass the section testing knowledge of the MA rules, but that advisors who only give advice on muni fund securities should be able to take the Financial Industry Regulatory Authority's Series 6 examination on investment companies and variable contracts or a new narrowly-tailored MSRB exam in lieu of the rest of the Series 50.

The SEC should either reject the content or allow the MSRB to withdraw the filing in favor of amending it to be consistent with ICI's proposal, Salmon said.

Bond Dealers of America chief executive officer Mike Nicholas did not formally file comments, but released a statement arguing that the MSRB should have worked to include MA knowledge in existing tests for broker-dealer representatives.

"In the end, the result for broker-dealer firms is having to manage two registration regimes which will be disproportionately expensive to structure and maintain relative to the public benefit achieved," Nicholas said.

The MSRB has scheduled a webinar on June 11, to review the content outline, provide more information about participating in the pilot and discuss the administration of the exam.

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Law and regulation Washington
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