MSRB proposes delaying deadlines due to coronavirus challenges

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The Municipal Securities Rulemaking Board asked the Securities and Exchange Commission to delay several deadlines as municipal market participants face coronavirus challenges.

In a filing sent to the SEC late last week, the MSRB said it wants the SEC to extend the time to implement amended rules and interpretive guidance and more time to finish professional qualification and supervisory requirements.

“The MSRB appreciates the unusual circumstances that municipal market professionals find themselves in today,” said Gail Marshall, MSRB chief compliance officer. “Targeted regulatory relief allows dealers and municipal advisors to more effectively allocate resources to meeting the needs of their employees and clients while continuing to focus on investor protection and market transparency goals.”

Gail Marshall, MSRB chief compliance officer, sent a filing to the SEC asking it to extend several deadlines for market participants.

The MSRB said in the filing that it recognizes that dealers and municipal advisors are facing “operational challenges” such as many employees working from home and “unprecedented” municipal market conditions.

This comes as issuers are grappling with economic consequences caused by COVID-19. COVID-19-related continuing disclosures more than doubled last week to 1,020 from 506 filed between Jan. 1 and March 30.

The market also saw its first COVID-related filing in the unscheduled reserve draw event notice category, and the MSRB expects those filings to dramatically increase in the coming weeks and months.

Highlands County Health Facilities Authority in Florida filed that unscheduled reserve draw event notice on April 1. In the filing, they said it was necessary to request the funds from three of its reserve accounts to satisfy debt obligations.

“We share in your disappointment with this need and we sincerely did not anticipate that we would find ourselves in a position of needing to use funds from the reserve accounts,” the authority wrote in its filing.

In the SEC filing, the MSRB said it wants to give dealers more time to complete annual supervisory functions under MSRB Rule G-27 on supervision. Specifically, the MSRB wants to give dealers more time to inspect offices and do their annual compliance interviews.

For MAs, the MSRB said it will give them until March 31, 2021 to finish their 2020 annual certifications, required under MSRB Rule G-44 on supervisory and compliance obligations of MAs.

The MSRB also wants to temporarily waive late fees for any registration, as well as for fees billed from the period of March 1, 2020 to July 31, 2020.

The MSRB also wants to delay the compliance date for Form-32, a form under which underwriters will be required to provide more information about new offerings of bonds. The compliance date for Form G-32 was originally set for Nov. 30, 2020. The change is in association with Rule G-32 on disclosures in connection with primary offerings, which was amended to require additional data about new-issue bonds.

Last week, the Bond Dealers of America hosted a call with the MSRB sharing its concerns about filing Form G-32, suggestions for the MSRB on providing additional data and the duration of the recent temporary suspension of price variance alerts.

The MSRB also noted in its filing that temporarily closed test centers should mean more time for firms to finish their professional qualification standards under MSRB Rule G-3 on professional qualification requirements.

The Financial Industry Regulatory Authority administers MSRB tests via a vendor called Prometric. Prometric recently announced that due to COVID-19, it was temporarily closing all of its test center locations until April 15.

“While, at this time, Prometric has not announced a deviation from its planned resumption of operations effective April 16, 2020, there is no certainty as to when Prometric will resume operation of its testing centers,” the MSRB said in the filing. “Moreover, there is no certainty as to when individuals would be able to visit any open testing centers due to stay-at-home orders that may be in place.”

The filing is among other actions the MSRB has taken since the pandemic began.

MSRB temporarily suspended price variance alerts for dealers in late March due to market volatility.

The MSRB sends the alert via email to a dealer when a transaction is reported to its Real-Time Transaction Reporting System by the dealer and is at a price that is notably different than the price reported by other dealers for the same security within a specified time period. The MSRB said the price variance tool does not, under current market conditions, serve its intended purpose.

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