WASHINGTON — The Municipal Securities Rulemaking Board, within the next few weeks, plans to issue a concept release seeking public input on whether it should require underwriters and municipal advisors to disclose over EMMA any third-party payments they make or receive in connection with municipal or municipal-related transactions, an MSRB official said Monday.
Ernesto Lanza, the MSRB’s deputy executive director and chief legal officer, talked about the concept release at the Financial Industry Regulatory Authority’s annual conference here.
He also said the MSRB is having “ongoing very active discussions” about whether it should go further than simply requiring broker-dealers to disclose any contributions they make to bond ballot campaigns seeking voter approval of bond issues. The board, he said, is discussing whether it should require more detailed or additional disclosures.
On another issue, Lanza said that during the next few months, “We plan to tackle some of the difficult issues surrounding continuing disclosure.”
As a first step, the MSRB will issue an educational release designed to help issuers understand their secondary market disclosure obligations, he said.
Then the board also will try to help issuers better understand the process for filing disclosures with EMMA, with the aim of improving the filing process, he said.
Lanza said that there are some 15 different profiles of muni bond issuers, including small issuers with filing exemptions, current issuers of variable-rate demand obligations and past issuers of variable-rate demand obligations, among others, each of which may want to consider certain disclosures.
“It won’t be a question of changing the rules,” he said. Rather, it will be an effort to improve the understanding of obligations and filing procedures for secondary market disclosures.
Meanwhile, Mac Northam, FINRA’s director of fixed-income, member regulation, cites “key risk areas” that “FINRA examiners will be focused on in examining firms doing muni business.
These include underwriters’ obligations, financial advisors’ obligations, pay-to-pay practices, suitability practices — for firms with a large retail sales business — disclosure obligations with regard to material information, underwriters’ due diligence requirements for new muni issuers, how firms with large priority positions price their bonds, and whether underwriters meet issuers’ retail order sales requirements.
