Why MSRB is seeking Institutional, retail investors for its board

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WASHINGTON – Institutional and retail investors have a brief window to put themselves in the running for spots on the Municipal Securities Rulemaking Board’s board of directors, with applications accepted until July 13 in hopes of finding these and other new public representatives.

The MSRB announced Monday that it will be accepting applications from public members generally and investor representatives specifically for this week before closing the process again.

The board is not seeking applications from broker-dealers or municipal advisors.

The renewed effort comes less than three months before the new board is set it to take its seats on Oct. 1.

The Dodd-Frank Act mandated that the MSRB's board of directors have a majority of public members, meaning that they are not affiliated with a broker-dealer or municipal advisory firm. The board is still considering candidates who previously applied, but MSRB president and chief executive officer Lynnette Kelly said the board doesn't feel it has yet received the quantity and quality of public member applications that it was hoping for. Once selected, members serve four-year terms.

“The board occasionally needs to supplement its applicant pool to ensure it has an adequate number of candidates from which to select new members,” said Kelly. “This year, as it continues to actively consider all existing candidates, the board is seeking additional applications from institutional and retail investors in municipal securities, and members of the public with knowledge of or experience in the municipal industry.”

The MSRB in 2015 attempted to change its rules to make the required investor slot easier to fill. The proposal would have allowed an investor representative to be qualified as a public member even if they belonged to a firm under the same corporate umbrella as a regulated dealer or muni advisory firm. The proposal failed to gain traction, and the MSRB is not proposing any such change now.

The announcement comes on the heels of a slight shakeup in the board’s membership. Last week the MSRB announced that former board member Rita Sallis was briefly rejoining the board following the departure of former Atlanta chief financial officer Jim Beard. The board simultaneously announced that it was extending retired banker Ronald Dieckman’s term as a public member through the 2020 fiscal year.

The MSRB, whose mission is in part to protect investors, has faced criticism for years that it has under-represented investors on its board. The board’s rules require at least one public board member to be an investor representative, though the National Federation of Municipal Analysts has suggested in the past that the 21-member board should maintain at least three investor members. The rules also require that public board members include at least one issuer representative and at least one “member of the public with knowledge of or experience in the municipal industry.”

The board also has faced scrutiny for naming retired bank or broker-dealer officials as public members. Dieckman, for example, is retired but was formerly at JJB Hilliard, WL Lyons LLC (now Hilliard Lyons) for 34 years, most recently as senior vice president and director of the public investment banking and municipal bond divisions. Donna Simonetti, another public member whose term runs through the 2021 fiscal year, retired in 2015 following many years as a compliance executive at JPMorgan and Bear Stearns as well as a 25-year stretch at First Albany Capital.

The MSRB’s rules specify that a public member must have “no material business relationship” with any regulated firm, and must not have been associated with a regulated firm within the previous two years.

Interested parties mat apply through the MSRB board of directors application portal, which will close at 5:00 pm Eastern time on July 13.

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