What MSRB wants to give dealers for free on markup disclosure

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PHOENIX - The Municipal Securities Rulemaking Board will make its online learning course on markup disclosure and prevailing market price available for free until the May 14 effective date of its markup disclosure rules.

The course, available on the MSRB’s MuniEdPro platform, is available now and is intended to teach broker-dealers about the soon-to-be effective markup disclosure requirements and equip them to make effective decisions. The rule changes will require dealers to disclose their markups and markdowns on certain transactions in the confirmations they send retail customers, and there is considerable hand-wringing in the dealer community about whether many firms will be prepared for the May 14 compliance date.

“There are clearly challenges and concerns with respect to the implementation of the markup rule,” said MSRB Executive Director Lynnette Kelly.

Kelly said courses on MuniEdPro are developed in conjunction with volunteer experts from the industry who spend a lot of time developing outlines and hypothetical scenarios for the courses.

“We don’t develop these classes in a vacuum,” she said.

The markup course contains five different trading scenarios in addition to the information about the rules, and then finishes with a test. Completion of the MuniEdPro test generates a certificate of completion that can often be applied toward continuing education requirements, Kelly said. The inclusion of the trading scenarios has been found to be a very effective teaching tool, she said.

“We discovered that having a number of different real-world scenarios really helps drive it home,” said Kelly.

Courses are not particularly expensive to begin with because they are subsidized by the MSRB, with bulk subscriptions being less than $35 per course per user. But Kelly said it made sense to offer this course for free until the effective date, at which time it will remain in the MSRB’s online course catalog and be available at the regular price.

“This checked every box, and we’re thrilled that we’re going to be able to be able to provide this resource for free,” Kelly said.

There are a total of eleven tests currently listed in the MSRB’s online course catalog, including two additional complimentary courses intended to educate investors and issuers. Several more classes are scheduled to become available in the next four months, beginning with a class on Rule G-37 on political contributions due out next month.

Dealers are hoping they will be given an opportunity to extend the compliance date for the markup disclosure requirements.

Last week the Bond Dealers of America submitted a letter to the Securities and Exchange Commission proposing that firms be permitted to commit to a “business plan” containing certain steps showing that they are working toward putting systems in place to comply with the rule changes. If a firm does so, the BDA proposes, then the SEC and the Financial Industry Regulatory Authority should agree not to enforce the markup disclosure requirements through the remainder of 2018.

Kelly said that new guidance on the markup disclosure requirements should be available in the next couple of weeks.

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Securities law Municipal disclosure MSRB Washington DC