The Securities Industry and Financial Markets’ Association is urging the Municipal Securities Rulemaking Board to withdraw its draft broker’s brokers rule and leave the existing regulatory and enforcement scheme intact.

In a rare move, SIFMA filed two eight-page comment letters with the MSRB Friday, one representing the views of its broker’s brokers and one reflecting the concerns of its broker-dealers. Together, both missives blasted the board’s draft Rule G-43, saying it would have a “significant unintended negative impact” on the municipal securities market, to the detriment of retail investors and owners of thinly traded munis.

“SIFMA hopes that by submitting both of these letters the breadth and seriousness of the concerns in the securities industry regarding the proposed rule will be clearly demonstrated,” wrote Leslie Norwood, managing director and associate general counsel.

Specifically, SIFMA said the Securities and Exchange Commission and the Financial Industry Regulatory Authority can already avail themselves of existing MSRB rules, such as Rule G-17 on fair dealing, to police misconduct by broker’s brokers.

The MSRB in February released G-43, which outlines what broker’s brokers must do to comply with pricing, fair-dealing and transaction rules.

In its request for comments, the board noted that the SEC and FINRA had brought several enforcement actions pegged to broker’s brokers activities that ran afoul of MSRB rules. Given the nature of the violations, the board said, rulemaking is warranted.

SIFMA disagreed, noting that the board’s rule proposal did not cite any conduct that regulators had been unable to sanction under current rules.

“We do not believe that finding a number of rule violations of existing rules at a single point in time should serve as justification for additional rulemaking, in the absence of evidence that the conduct has continued,” Norwood wrote in the broker’s brokers’ letter.

Draft G-43 would require broker’s brokers to make reasonable efforts to obtain prices for dealers that are fair and reasonable under prevailing market conditions. They would have to use the same level of care and diligence as if executing transactions for their own accounts and would be barred from taking any action that undermines the client’s interest in receiving advantageous pricing.

In offerings, broker’s brokers could represent both the potential seller and the bidders.

However, in a bid-wanted — where the selling dealer asks the broker’s broker to obtain the best bid that it can find for certain municipal securities without specifying a desired price or yield — the rule would prohibit a broker’s broker from representing both parties unless it disclosed its dual role and both sides agreed to it in writing.

SIFMA also objected to a G-43 bid-wanted provision that would require broker’s brokers to disclose to a client, or both clients in a dual agency, if the highest bid does not reflect a “fair and reasonable price” under prevailing market conditions.

For the broker’s broker to proceed with the trade, the client or clients would have to acknowledge the disclosure in writing.

Calling this the “most problematic” provision in draft G-43, SIFMA said in its broker-dealer letter that such a “pre-trade bid-wanted price review” would “substantially impact the trading of retail-size orders and transactions in thinly traded securities.”

The result, Norwood added, would be fewer executions in areas of the market already beset by illiquidity.

Finally, in both letters, SIFMA asked the MSRB not to adopt more permissive rules for electronic trading platforms than for traditional broker’s brokers, saying such an approach would be “anti-competitive.”

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