Regulators to host outreach event amid MA concerns

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PROVIDENCE, R.I. – As municipal advisors prepare to comply with new advertising and testing requirements about to become effective, federal and self-regulatory organizations will hold an outreach event in San Francisco early next year.

Municipal Securities Rulemaking Board Chief Compliance Officer Gail Marshall and Financial Industry Regulatory Authority Director of Fixed Income Regulation Bonnie Bowes announced the event during a Friday morning panel at the National Association of Municipal Advisors annual conference here. The event will be Feb.7 at the Hyatt Regency in San Francisco, the two said, and will be co-hosted by the MSRB, FINRA, and the Securities and Exchange Commission.

The event will be free to attend and will be webcast for those who cannot be there in person. It comes as municipal advisors prepare for another wave of new rules and requirements that many firms, particularly smaller ones, are anxious about.

One of those MSRB proposed new requirements, awaiting SEC approval, is the requirement that MA principals pass a new Series 54 test on top of the existing Series 50 test that all muni advisors have to pass.

Marshall said the content outline for the principal exam will be available next month and the enrollment period for the pilot exam will run from February to June. MAs will have two weeks to enroll and then 120 days to take the pilot exam, she said.

The board will use the results of the pilot exam to determine the passing score for the eventual final exam. When a permanent version of the Series 54 becomes available, all municipal advisor principals will have one year to take and pass it.

The MSRB’s supervision rule for principals requires that at least one person at a firm be designated a principal and be responsible for supervising the firm’s other professionals. Marshall told MAs attending the panel that the test would be focused on supervision and would test the taker’s understanding of the regulatory framework.

“You really have to read the rules and memorize,” Marshall said.

MAs attending the conference had some anxiety about the test, particularly smaller firms where the principal is typically a working manager whose supervisory duties are stacked on top of his or her full-time work advising municipal clients. One MA at a small firm said that two of the three professionals at her firm were planning to take the principal exam in the hopes that one of them would pass it.

MAs also took the opportunity to raise concerns to Marshall and Bowes about broker-dealers performing unregistered muni advisor work. One MA in attendance told the two regulators that the SEC doesn’t seem particularly responsive to the problem and had told her that she could submit a formal complaint if she chose.

Bowes said that FINRA, which examines broker-dealers for compliance with MSRB rules, conducts risk-based assessments of whether broker-dealers not registered as MAs are crossing the line into advisory activity. Marshall said that while the MSRB can’t dictate enforcement activity, she hopes MAs will call the board if they see a problem.

“You can call us,” Marshall said. “That informs us.”

The NAMA conference concluded Friday. The group’s annual meeting will next take place Oct. 2-4, 2019, in Chicago.

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Municipal advisors Munis Securities law MSRB rules Enforcement NAMA SEC FINRA Washington DC