What MSRB decided at its first meeting of fiscal 2019

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WASHINGTON – The Municipal Securities Rulemaking Board has agreed to collect new data from muni issuances and to seek further comment aimed at producing new guidance on underwriters’ disclosures to issuers under the board’s fair-dealing rule.

The MSRB announced those decisions Monday following its quarterly board meeting at its offices here last week. The meeting was the first for new Chairman Gary Hall and the first of the board’s 2019 fiscal year. The board made no major or controversial decisions, but made clear that additional actions regarding primary offering practices are likely to come in the future.

The board decided to collect new data from muni issues on its Form G-32, which will be automatically populated from data underwriters already have to submit to the New Issue Dissemination Service. Form G-32 is submitted to the MSRB by underwriters and provides information about a new issuance, such as the underwriting spread, maturity date, initial offering price, minimum denomination, and more.

The NIIDS system, developed by the Depository Trust Company, collects information about a new muni issue from underwriters or their representatives in an electronic format and then makes that data immediately available to vendors that provide such information to market participants.

The board had asked earlier this year whether to auto-populate that data as well as whether to require new data dealers would have to enter manually. Dealer groups opposed requiring additional manual entry of data on Form G-32, but didn’t raise objections to simply filling it with NIIDS data.

MSRB President and Executive Director Lynnette Kelly said the board may not immediately file for that change with the Securities and Exchange Commission because the board is continuing to consider other potential revisions to its new offering rules. The SEC would have to approve any new requirements or other rule changes.

The board also discussed comments it received from a June request for comment on a retrospective review of its 2012 interpretive guidance on duties owed by underwriters to their issuer clients. That guidance established obligations for underwriters to disclose information to issuers such as the nature of their relationship, the risks of transactions recommended by the underwriters, and conflicts of interest.

These “G-17 disclosures,” so-called because the guidance arose out of an interpretation of Rule G-17 on fair dealing, have become voluminous and boilerplate according to a near consensus of both issuers and dealers. Dealers told the MSRB that the disclosures could be simplified by requiring the disclosure only of actual, rather than potential conflicts of interest. Issuers said that the MSRB should hold dealers to the existing requirement that such disclosures be made with clarity.

The board decided to direct staff to prepare a second request for comment on proposed amendments to the G-17 guidance, which could be out in the next few weeks.

The board discussed data collected under MSRB Rule G-45, on the reporting of information on municipal fund securities and decided not to seek public comment at this time regarding the possibility of making such information publicly available in the future.

“We feel like the public availability of that information is already served,” Kelly said.

The MSRB plans to make the Securities Industry and Financial Markets Association Swap Index and the U.S. Treasury Yield Curve available on its EMMA website, but it may take some months.

The board discussed the MSRB’s data strategy and data plan and received a staff update on a demonstration project regarding data analytics, as well as a staff overview of the sources and limitations of third-party data used by the MSRB.

The board also met with SEC Chairman Jay Clayton and Rebecca Olsen, director of the SEC’s Office of Municipal Securities. It also met separately with Financial Industry Regulatory Authority President and Chief Executive Officer Robert Cook and Senior Director of Fixed Income Regulation Cynthia Friedlander. The regulators discussed oversight of the municipal securities market and coordination on cross-market initiatives.

The board also met with members of Bond Dealers of America to discuss current MSRB initiatives.

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Securities law Primary bond market MSRB rules Munis MSRB SEC FINRA SIFMA BDA Washington DC
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