WASHINGTON – The Municipal Securities Rulemaking Board is proposing rule changes that would outline minimum standards for municipal advisors' continuing education requirements.
The amendments to MSRB Rule G-3 on professional qualification requirements would create a "single-pronged approach" similar to one of the two current prongs that dealers are currently required to satisfy with their continuing education (CE). All associated persons of MAs who engage in municipal advisory activities as well as those who manage, direct, or supervise the firm's municipal advisor activities and its associated persons would be required to participate.
The new CE requirements would complement both the MSRB's existing professional qualification exam for MAs, which was rolled out on Sept. 12. MAs will have one year to take and pass the exam. The MSRB is also planning an exam for MA principals. The CE requirements are another step in the MSRB's compliance with the Dodd-Frank Act, which charged the board with setting professional standards and CE requirements for MAs.
The MSRB will hold a webinar on Oct. 20 between 3:00 and 4:00 p.m. on the proposed changes. Comments on the proposal will be due by Nov. 14.
"Creating appropriate CE requirements for municipal advisors will ensure that firms provide minimum levels of training to individuals whose advice can have such a long-lasting impact on the financial health of states, cities, and other municipalities across the country," said MSRB executive director Lynnette Kelly. "This is an important next step in the development of a comprehensive regulatory framework for municipal advisors."
Susan Gaffney, executive director of the National Association of Municipal Advisors, said NAMA "believes that MAs should be held to a high professional standard which includes continuous education and adherence to MSRB rules."
"This proposal, following the implementation of the Series 50 exam, look as though they meet those expectations," she said.
The MA CE requirement would have MAs: annually complete a needs analysis that evaluates and prioritizes their applicable training needs; develop a written training plan; and document that the firm provided the training to the covered individuals, according to the MSRB. The plan should be developed in a way that is appropriate for the MA's business and, at a minimum, covers training on applicable regulatory requirements as well as an MA's fiduciary duty obligations, it added.
"By developing a single-pronged approach, a municipal advisor would have the flexibility to develop training for its covered persons based on the firm's size, organization structure, scope of business activities, and other factors," the MSRB said in its request for comment.
The board added that the minimum requirements should not be the only thing taken into account when MAs are considering training. Having established requirements will "ensure a standard of training that is appropriate in the public interest and for the protection of investors and municipal entities or obligated persons," it said.
The MA requirements also recognize that some dealer-MAs could give certain training that would meet the needs analysis for both dealers and MAs. A firm could do that as long as it: completes a separate needs analysis for both its MA and dealer activities; develops a separate written training plan for both the MA and dealer activities based on the needs analysis; delivers training that is consistent with the written training plans of both the MA and dealer; and maintains records documenting that such covered persons completed the applicable training.
