In its first board meeting this calendar year, the Municipal Securities Rulemaking Board will discuss board size, supervision rules, and also plans to meet with the Securities and Exchange Commission Chair Jay Clayton.
The MSRB board will meet January 22-23 at its offices in Washington D.C. along with Clayton and Financial Industry Regulatory Authority CEO Robert Cook to discuss regulatory coordination between the groups and oversight of the municipal securities market.
Clayton has taken a considerable interest in municipal securities, and for over a year has been pushing for more timely financial disclosures.
Clayton and Cook also attended an MSRB board meeting in October 2018, where they met with the MSRB on the same topic of oversight and coordination between the groups.
The MSRB also plans to discuss its own governance practices including reviewing the size of its board and its selection of public and regulated members.
Lawmakers have criticized the size of the board, and Sen. John Kennedy, R-La., has proposed shrinking the size of the board and changing its composition. Kennedy doesn’t think the board is truly a majority public body as required by federal law because its members who represent the public are frequently retired investment bankers. The board’s public membership requirements state that individuals may not be “associated” with a regulated firm for at least two years or “employed by” a regulated firm for at least three years.
By reviewing its board, the MSRB has said it may lead to amendments to MSRB Rule A-3 on membership of the board, which could entail reducing the size of the board or changing its composition.
The board will also discuss public comments submitted by over 30 market participants on the SEC’s proposed exemptive order to allow municipal advisors to participate in some private placement activities without registering as a broker-dealer.
The MSRB was among the groups to comment and supported the SEC’s goal to provide clarity for MA activity, but said it was concerned that the order as drafted could impact market transparency and could potentially hurt retail investors.
The MSRB is also gearing up for the SEC’s Regulation Best Interest, which is set to be put in place by June 30, 2020. RegBI is a rule that would strengthen the broker-dealer standard of conduct beyond suitability obligations and make it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail investor. It also requires broker-dealers and investment advisers to state clearly key facts about their relationships with their customers, including financial incentives.
In preparation for RegBI, the MSRB will discuss amendments to Rules G-19 on suitability and G-20 on gifts and gratuities.
“The board will discuss proposed amendments to its rules concerning suitability and gifts and gratuities to address inconsistencies with the Securities and Exchange Commission’s Regulation Best Interest and to mitigate potential confusion over which standards will apply with respect to recommendations to retail customers,” the MSRB said in its press release.
The MSRB will also continue with its retrospective rule review and will consider seeking public comment on Rule G-27 on supervision to better align with current FINRA supervision rules.
During the board meeting, the MSRB will be updated on its enterprise-scale migration to the cloud, which they say could evolve its EMMA system to facilitate the use of data for comparison, regulatory compliance and market analysis.
The board will also continue to review comments at its meeting on a proposed
