WASHINGTON ‑ Under a proposal filed with the Securities and Exchange Commission Wednesday, the Municipal Securities Rulemaking Board would require municipal advisors to determine that a transaction or product is "suitable" for state and local governments, including public pension funds.
The proposed Rule G-17 interpretive notice, on fair dealing, refines a draft notice floated in February. The earlier draft notice would have required municipal advisors to decide if a transaction were "appropriate."
As filed with the SEC, the board’s proposal would require that when a muni advisor recommends a transaction or product to a state or local government, the advisor must have “reasonable grounds for believing” the transaction or product is suitable, “based on the client’s financial circumstances, objectives, tax status and other material information.”
“Today’s proposal would provide obligated persons and state and local government entities that are solicited by municipal advisors many of the same safeguards provided under the MSRB’s fiduciary duty initiatives,” said MSRB executive director Lynnette Hotchkiss. “We believe these regulations are key in fulfilling the MSRB’s mission to protect these market participants.”
