Why the MSRB is temporarily reducing fees for dealers

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WASHINGTON – Gary Hall, an executive with Siebert Cisneros Shank & Co., is slated to become the Municipal Securities Rulemaking Board’s next chair on Oct. 1 and Edward Sisk, with Bank of America Merrill Lynch, will become its vice chair.

MSRB President and Chief Executive Officer Lynnette Kelly announced the new leadership in a conference call on Monday, briefing reporters about the MSRB’s meeting on Wednesday and Thursday of last week.

She also said the board decided to temporarily reduce its fee assessments for dealers by one-third for underwriting, technology, and transactions during the months of October, November and December of this year to reduce its excess reserves by $2.6 million.

Hall, the first African-American to chair the MSRB, is senior managing director and national head of investment banking and equity partner at Siebert. He has been at the MSRB since 2015 and currently heads its finance board. His professional career spans more than 25 years and includes posts in government, law and investment banking.

He said his perspective on the muni market has been shaped by his personal experiences.

“Growing up in public housing, attending public schools and receiving public grants to fund my college and law school education, I am a huge beneficiary of the public sector and public assistance,” Hall said. “Serving as the next MSRB Chair is so personally gratifying and a way for me to pay homage to the public sector that has served me so well.”
Sisk is managing director and head of public finance at BAML.

The MSRB plans to file changes to its Rule A-13 on assessments with the Securities and Exchange Commission on Monday. They will be immediately effective. The underwriting assessment for certain primary offerings for the three months will be .00185% of the par value, a reduction from .00275% of the par value. The transaction assessment will be .00067% of the par value, a reduction from .001%. And the technology assessment will be $0.67 per transaction, a reduction from $1.00 per transaction.

Kelly said industry officials thought the temporary fee reductions might be preferable to the board’s rebating fees to transaction participants. The MSRB has rebated more than $9 million in fees to dealers since 2014, she said.

“Temporary fee reductions may be more efficient than rebates,” Kelly said, adding, “We will hear how it goes.”

The board also agreed to a $40 million budget for fiscal 2019, which will be essentially flat from the previous year.

In addition, the board approved providing $5 million to explore and possibly move toward storing MSRB data on “the cloud” as opposed to the hard data center. The cloud would provide delivery of on-demand computing resources over the Internet on a pay-as-you-go basis.

Part of that money also would be used to improve the resilience of MSRB technology and data systems as well as to ensure that appropriate levels are being spent on technology architecture.

The board reaffirmed its selective disclosure advisory that had warned market participants against disclosing information to certain parties on a selective basis rather than putting out to the entire public at the same time.

Some institutional investors had complained that the advisory had made it harder for them to get information from issuers.

But Kelly said, “The board continues to believe that selective disclosure is an important issue in the market” and that market participants need to be aware of this issue and of the importance of disclosing information on the MSRB’s EMMA website so everyone has access to it at the same time.

The board also talked about enhancing its support of examination and enforcement activities by doing more to make sure its rules are consistently interpreted.

The MSRB writes muni rules but the rules are enforced by the Financial Industry Regulatory Authority and the Securities and Exchange Commission. Board members discussed enhancing training and training materials as well as a website called RegWeb that provides information to the enforcement agencies and is not publicly available.

Asked about the success of dealers’ implementation of the MSRB’s markup disclosure rules, Kelly said that, while it “was not without some bumps in the road,” some “headaches” and some “sleepless nights,” it went fairly well and “overall the industry did an exceptional job.” The rules require broker-dealers to disclose their markups and markdowns from certain transactions with retail customers in the confirmations to those customers.

She also said the MSRB expects to monitor muni security spreads and will release another report next year, along the lines of the one it published last week showing spreads were down in dealer-to-customer trades in the secondary market, primarily because of electronic trading systems and MSRB rules.

In addition, Kelly said the MSRB is “looking at our subscription products and whether the subscription agreements and prices still make sense.”

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Bond pricing Municipal disclosure Budgets Broker dealers MSRB Washington DC