MSRB budgets for governance review, cloud migration

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After an eventful year, the Municipal Securities Rulemaking Board is focusing its attention on examining its own governance practices and also budgeting for increased revenue for fiscal year 2020.

The MSRB on Monday announced the creation of a special committee to examine the size and composition of its board, among other topics as part of its fiscal year 2020 budget release.

“We see room for continuous improvement in this area and welcome ideas from policymakers, regulators and stakeholders,” said Edward Sisk, the MSRB chair-elect who assumes the role Oct. 1. “Under the leadership of the special committee on governance, we will examine all aspects of our governance practices, including the size and composition of the board, to identify opportunities to improve fairness and transparency.”

The MSRB’s review of its governance was something they had been meaning to do for a while, Sisk told The Bond Buyer. Sisk also referenced Sen. John Kennedy’s, R- La. MSRB reform bill which would shrink the size of the board and place it under more direct SEC control.

“Sen. Kennedy has raised some terrific points and our special governance committee will be reviewing those and many other things this year,” Sisk said.

The special committee is slated to end after a year and will have seven people on it, led by Robert Brown, a public board member. It will be reviewing the corporate governance of the board such as its size and its selection process, not personnel decisions, Sisk said.

This comes as the MSRB’s longtime President and CEO Lynnette Kelly, Chief Regulatory Officer Lanny Schwartz and General Counsel Michael Post left within weeks of each other.

They plan to engage with policymakers and regulators to help inform them in their efforts, Sisk said.

The Board expects operating expenses to increase by 4% from fiscal year 2019 and to bring in $39.9 million in revenue, an increase of $3.7 million from the prior year.

The increase in revenue is due to the expiration of having a temporary fee reduction, a projected increase in bond volume and a recent announcement of increased municipal advisor professional fees which will rise gradually to to $1,000 from $500.

In fiscal 2019, the MSRB granted dealers a temporary fee reduction from April 1 to Sept. 30 as a way for the MSRB to draw down on its reserves. The move caused the MSRB to forgo about $5.2 million in revenue.

The MSRB cited several changes over the past few years that it says have created a stronger revenue base.

“The introduction, and gradual increase, of the municipal advisor professional fee, the reduction of the underwriting fee rate in FY 2016 and the implementation of a 529 plan underwriting fee in FY 2018 have helped to continue the MSRB’s diversification of revenue,” the MSRB wrote.


In fiscal year 2019, dealer fees accounted for more than 80% of the MSRB’s revenue and the MSRB has shown a concerted effort in creating more equity in its revenue model.

The FY 2020 budget also projects an operating deficit of $2.3 million, which will be funded with excess organizational reserves to reduce those reserves.

The board designated $8.5 million in its excess reserves to go towards its enterprise-wide migration to the cloud. The MSRB is increasing its expenses in cloud migration to over $4 million from $300,000.

“We’ve outsourced the migration project to a consultant and in addition, we have a lot of staff internally on the IT side supporting that migration effort,” said Nanette Lawson, MSRB CFO and interim president and CEO.

The initial spending for the cloud migration was higher not only due to the cost of a feasibility study, but was also due to beginning the actual migration in fiscal year 2019, Lawson said. The MSRB originally planned to spend $300,000 on the migration in fiscal year 2019, more as a placeholder.

“Basically, we initially planned to only study the feasibility of moving to the cloud, but once we did that and determined that it did make sense, we kicked off the migration,” Lawson said.

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