WASHINGTON — At a meeting in Nashville last week, the Municipal Securities Rulemaking Board voted to further amend a proposed rule that would prohibit dealer-financial advisers from switching roles and acting as an underwriter and muni adviser on the same transaction.

The latest amendments will address complaints raised by some market participants that the rule would not go far enough to eliminate conflicts of interest, and the rule will be refiled with the Securities and Exchange Commission in the next few weeks.

The MSRB also pressed forward with an interim plan, which it will file with the SEC in the next month or two, to collect fees from muni advisers to help defray the self-regulator's increasing operating costs.

In a telephone call Monday briefing reporters on the meeting, MSRB chair Michael Bartolotta said the board also decided to release for public comment a draft rule establishing supervisory guidelines for muni advisers, comparable to existing Rule G-27 for broker-dealers. It requires dealer firms to establish and maintain supervisory systems reasonably designed to ensure compliance with securities laws and regulations, including MSRB rules.

The board also voted to seek SEC approval of draft Rule G-42, prohibiting pay-to-play practices by muni advisers.

The board's actions come amid lingering criticism, especially among independent FAs, that the MSRB's proposed muni-adviser rules create confusion and fail to police broker-dealer FAs.

"We are very mindful on the question of being clear as to whom those rules apply," Ernesto Lanza, MSRB deputy executive director and general counsel, said during the call.

At the two-day quarterly meeting, the 21-member board agreed to further amend its existing Rule G-23 proposal on role-switching.

In February, the MSRB filed its interpretive notice and proposed amendments with the SEC, which released the proposal for a second round of public comments.

Specifically, the MSRB's latest G-23 amendment would modify interpretive guidance — first floated by the board with its February SEC filing — that said a dealer would not be considered an FA for purposes of the role-switching ban if it clearly identified itself as an underwriter from "the earliest stages of its relationship with the issuer."

In comment letters filed with the SEC, non-dealer FAs and issuer groups complained that role-switching was riddled with conflicts of interest and the MSRB's proposed rule and guidance did not go far enough to eliminate them.

Last year, SEC chairman Mary Schapiro prodded the MSRB to revamp the existing rule, saying such role-switching was "a classic example of a conflict of interest."

During the call, Lanza declined to shed further light on how the MSRB would clarify the scope of its G-23 proposal, saying the board is still finalizing the language.

But Lanza noted the board is responding to some comment letters in which market participants asked for guidance about when a broker-dealer might be acting as an adviser on a new issue that it is also underwriting, subjecting the firm to the role-switching ban.

An independent FA group, the National Association of Independent Public Finance Advisers, welcomed news of the MSRB's decision.

"NAIPFA had concerns years ago about how [G-23] is being applied to real-life situations," said NAIPFA president Colette Irwin-Knott, a partner at H.J. Umbaugh & Associates in Indianapolis.

In addition, Bartolotta noted, the board is developing an "interim plan" to levy assessments on muni advisers.

Currently, the MSRB only collects such assessments from broker-dealers. Municipal advisers pay an initial $100 fee and a $500 annual registration fee. According to Bartolotta, the MSRB is beginning to collect data from municipal advisers to establish a "fair and equitable permanent assessment structure."

The board will consider reducing underwriting, transaction, and technology fees paid by broker-dealers as it reaps new revenue from muni-adviser assessments, he said.

The interim plan also will heed a requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring the MSRB to avoid creating unnecessary burdens for small municipal advisory firms, he said.

As for supervision, the board agreed to publish for public comment a draft rule that would require all muni advisers to adopt a supervisory structure and designate a principal to oversee compliance with MSRB rules.

It also would require muni advisers to implement and follow written procedures, including annual compliance training and review of the firm's muni-adviser activities, correspondence, and books and records.

The MSRB will release the supervisory rule for public comment in the next few weeks, Lanza said.

Finally, the board voted to file its draft G-42 with the SEC, seeking approval of the ban on pay-to-play practices by muni advisers.

"This proposal is fundamental to preserving the integrity of the municipal market," Bartolotta said.

The MSRB will also file draft G-42 with the SEC in the next few weeks, according to Lanza.

In other matters, the MSRB will hold a special meeting next month to ponder a set of controversial proposals, draft Rule G-36, which would require municipal advisers to act in their muni clients' best interests, and two separate draft interpretative notices that would extend Rule G-17's fair-dealing requirements to muni advisers and underwriters.

The comment period on all three ended earlier this month.

Independent FAs have blasted the draft G-36, saying in comment letters that its fiduciary duty provisions, and corresponding disclosure requirements governing compensation and conflicts of interest, largely exempted dealer FAs.

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