WASHINGTON — At a meeting in Colorado Springs last week, the Municipal Securities Rulemaking Board voted to file with the Securities and Exchange Commission four final rules governing conduct by municipal advisers.
The MSRB expects to file the final rule proposals with the SEC later this month, according to spokeswoman Jennifer Galloway.
The proposals, which the board floated for public comment earlier this year, include: draft Rule G-42, which prohibits certain pay-to-play practices; draft Rule G-36, which outlines a fiduciary duty for municipal advisers; draft Rule G-44, which governs supervision of municipal advisers; and an interpretive guidance on Rule G-17, which governs fair dealing.
The final rule proposals must be approved by the SEC, which will release them for another round of public comment.
“The MSRB has fulfilled the first phase of the mission it was given by Congress under the Dodd-Frank Wall Street Reform and [Consumer] Protection Act,” MSRB chair Michael Bartolotta said in a statement.
“Since the effective date of the Dodd-Frank Act, the MSRB has diligently developed a core set of rules of conduct for municipal advisers that will fundamentally change the municipal market for the better.”
Some of the board’s municipal adviser rules could become effective late this year, if the SEC issues a final muni adviser-registration scheme and definition of MAs before the end of the year, Galloway said.
The SEC has received more than 1,000 comment letters on its proposed muni adviser-registration rule, which it released for public comment late last year.
In a telephone call Monday briefing reporters on the three-day quarterly board meeting, MSRB executive director Lynnette Hotchkiss said the pay-to-play rule could become effective six months after the commission releases its final muni adviser rule.
The MSRB plans to release, later this week, more information about the effective dates of its rules.
During the call, Bartolotta said the board and MSRB officials are monitoring the municipal securities market as Congress maneuvers for an agreement on the federal debt ceiling. If necessary, he said, the board would issue guidance on pricing municipal debt to ensure an orderly and transparent market.
“It’s certainly something we’re watching,” said Galloway.
Separately, in response to a question from a reporter, Bartolotta said the MSRB is working on a memorandum of understanding with the Financial Industry Regulatory Authority for risk-based broker-dealer compliance examinations, which are keyed to the risk, scale and nature of a broker-dealer’s operations and business, according to information on FINRA’s web site. Any such agreement between the self-regulators could be complete within the next month or so, he said.
FINRA enforces rules written by the MSRB, which lacks its own enforcement authority. Under Rule G-16, municipal securities dealers must be examined “at least once each two calendar years.”
At the meeting, the 21-member board also approved publishing for public comment a new rule proposal that would require municipal advisers to provide written documentation about their engagements, including information about compensation, the scope of their services, conflicts of interest and affiliates who provide related advice or services.
The board also approved releasing for public comment an extension of Rule G-21, which governs advertising. The proposal would bar muni advisers from engaging in false or misleading advertising of their skills and services.
In addition, the board approved amendments to Rule G-20, which governs gifts and gratuities. The MSRB expects to file the G-20 proposal, which extends the rule to muni advisers, with the SEC later this month, Galloway said.
Finally, the board voted to elect new officers and five new board members, whose names will be released later this month.