WASHINGTON — Municipal advisors are surprised and concerned at the Municipal Securities Rulemaking Board’s almost 67% increase in the annual fees that MA professionals will have to pay starting in April of next year.

The MSRB announced late Friday that it had filed proposed changes to its Rule A-11 with the Securities and Exchange Commission that would raise the annual fee that municipal advisor professionals must pay to $500 from $300. A-11 covers assessments for MA professionals.

The fee increase takes effect immediately, but the first payment at the new rate will not be due until April 30, 2018. The first invoice at the new fee level will be sent to firms in April 2018 for payment by April 30, 2018, MSRB executive director said in a release.

“We believe the fee assessment of $500 per municipal advisor professional is an important step toward supporting the organization’s long-term financial sustainability and ability to fulfill its congressionally-mandated mission to protect the integrity of the $3.8 trillion municipal securities market,” she said.

In its filing, the MSRB told the SEC, that the fee increase “is reasonable as well as necessary and appropriate to help defray the costs of operating and administering the MSRB.” The board also said it is a “step towards achieving the MSRB’s strategic goal of promoting long-term financial stability by assessing fair and equitable fees, and diversifying funding sources.”

The board noted municipal advisors are prohibited from charging, or passing the fees onto, municipal issuers.

Municipal advisor professionals and their representatives said the higher fee represents a significant percentage increase and that they would like to know more about what the new funds will be used for by the MSRB.

“While $200 may not seem like such a large amount it represents almost a 67% increase, which is quite noticeable,” said Susan Gaffney, executive director of the National Association of Municipal Advisors. “This significant percentage increase lends itself to raise broader discussions about the MSRB’s budget and efforts.”

NAMA executive director Susan Gaffney
Susan Gaffney, executive director of the National Association of Municipal Advisors

“We’ll pay it, of course, but it is quite a bump,” said Kathleen Aho, a principal at Springsted, Inc. in St. Paul, Minn.

“I have reservations about raising the fee because I’d like to know what it’s going to be used for,” said Hill Feinberg, chair and CEO of Hilltop Securities, Inc., in Dallas. “I’m all for encouraging accountability and monitoring of the municipal advisory business if that’s what the fee is for.” But he added that the MSRB “has no power or ability to take disciplinary actions for any violations of its rules.”

Another source who did not want to be named, said, “I think there’s increasing concern that the MSRB is spending money on things it doesn’t need to be spending and then raising costs for regulated entities,”

The board said that under its proposed rule changes, a municipal advisor firm would have to pay a recurring annual fee of $500 for each person associated with it who is qualified as a municipal advisor firm and has filed a Form MA-1 with the SEC as of Jan. 31 of that year. To become qualified, the MA professional must have passed the MSRB’s Series 50 exam.

The proposed rule changes also require that if an MA firm does not pay the total fee that is due on time, it will have to pay a $25 monthly late fee.

PFM appears to be the largest advisory firm in the muni market in terms of staff, with 226 individuals registered with the MSRB as municipal advisor professionals. The fee increase would require the firm to pay an extra $45,200 or a total of $113,000 to the MSRB per year.

Hilltop Securities has 143 registered MAs, according to the MSRB, and would have to pay an extra $28,600 for a total of $71,500 per year.

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