WASHINGTON – The MSRB released its guide to help dealers and municipal advisors adjust to the new complaint process requirements for their clients before the changes become effective on Oct. 13.
The MSRB guide contains a list of product and problem codes that both dealers and municipal advisors are expected to use as they keep complaint logs in line with the revised standards under MSRB Rule G-8 on books and records.
The guide follows rule changes that the MSRB proposed last year and the Securities and Exchange Commission approved in January. The MSRB made its changes to Rules G-8, G-10 on investor brochure deliveries, and G-9 on preservation of records. The changes amend the current complaint process for dealer customers and then extend that process to municipal advisor clients.
The amendments to Rule G-8 require dealers and MAs to keep an electronic log of all written complaints from customers or municipal advisory clients as well as any person acting on behalf of the customers or MA clients. The log will have to include: the identities of the dealer customer or MA client; the date the complaint was received; the date of the activity that gave rise to the complaint; and the person whom the customer or client names in the complaint. The log will also have to include a description of the complaint and the action, if any, the dealer or MA has taken in response.
The MSRB announced six product codes and 52 problem codes for use in those logs. The codes are based on the Financial Industry Regulatory Authority’s complaint codes and were created in coordination with FINRA, though they are tailored to municipal securities and municipal advisory activities, the MSRB said.
The product codes cover standard municipal debt and also include identifications for 529 plans and auction rate securities. The problem codes cover possible complaint topics like unauthorized trading, suitability, poor advice, and fees and commissions.
Dealers and MAs considering which codes to select for a given complaint should choose the most prominent product and the most egregious problem discussed in the written complaint, according to the MSRB.
Rule G-10 currently requires dealers to send complaining customers a brochure with information about how to file a complaint. The rule changes would eliminate the need to send a brochure and instead require other disclosures for dealer customers and MA clients. The dealer and MA requirements would mandate the firms give notification of: their registration with the MSRB and the SEC; the MSRB’s website address; and the brochure available on the MSRB’s website that describes the protections available under MSRB rules and how to file a complaint with financial regulatory authorities. The MSRB plans to create a separate brochure specifically for MAs.
Dealers will be required to notify customers annually, and MAs will have to share the information “promptly”after the establishment of a municipal advisory relationship and no less than once a calendar year, according to the MSRB.
MAs will be allowed to include their notifications along with the conflicts of interest and disciplinary disclosures required under MSRB Rule G-42 on core duties of municipal advisors.
The changes to Rule G-9 will require both dealers and MAs to retain their complaint records for six years. MAs would have otherwise only had to keep records for five years. They had urged the MSRB to keep the MA requirement at five years. The MSRB defended its proposed amendments by saying the changes would level the playing field and help regulators with their inspections and surveillance of MAs.