Law and regulation

The Municipal Securities Rulemaking Board failed to address concerns that its proposed municipal advisor supervision rule will be too costly and burdensome, non-dealer MAs told the Securities and Exchange Commission this week.

The Securities and Exchange Commission's new credit rating agency reforms seem to make some positive strides for the muni market by creating parity between municipal and corporate bond ratings and increasing rating methodology transparency, sources said.

Non-dealer municipal advisors are concerned that the Municipal Securities Rulemaking Board's draft core MA rule contains an exemption for "inadvertent advice," while broker-dealers say certain aspects of the rule are too vague and too broad.

Municipal bond broker-dealer groups have spent nearly $5 million trying to influence federal lawmakers in recent months, using in-house lobbyists as well as outside firms and campaign contributions to promote their positions on securities laws, tax reform, and regulation.

Municipal Market Advisors' recent research on ratings seems to counter recently raised concerns that Standard & Poor's ratings for some local governments may be too high and out of step with current credit conditions.

Dealers are objecting to new provisions added to the best execution standard the Municipal Securities Rulemaking Board filed with the Securities and Exchange Commission for approval that would increase the information customers have to provide to be considered sophisticated municipal market professionals who are exempt from the standard.

The Municipal Securities Rulemaking Board has asked the Securities and Exchange Commission to approve its proposal to require municipal securities dealers to seek the most favorable price possible when executing transactions for most investors.

The Puerto Rico Electric Power Authority's decision in its forbearance agreement to disclose certain information to only some its bondholders could put both PREPA and those investors at an increased risk of committing securities law violations, disclosure experts said Wednesday.

The Government Finance Officers Association has issued a new alert on the Municipalities Continuing Disclosure Cooperation initiative, offering guidance to issuers on how to make use of the extra time they were granted to participate in the program and explaining problems state and local governments face in performing due diligence.

The Municipal Securities Rulemaking Board's proposal to extend its dealer pay-to-play rule to include municipal advisors contains provisions that would affect both dealer and non-dealer MAs, market participants said Tuesday.

The Securities and Exchange Commission's Office of Compliance Inspections and Examinations has launched a program to scrutinize newly-regulated municipal advisors, the SEC announced Tuesday.

The Municipal Securities Rulemaking Board is proposing to extend its pay-to-play rule to cover municipal advisors -- a move dealer-affiliated MAs have long called a key step in creating a level playing field among them and non-dealer MAs.

Beginning Aug. 20, the Securities Industry and Financial Markets Association's Municipal Swap Index will use only data that has been reported to the Municipal Securities Rulemaking Board in its weekly benchmark calculation.

The Financial Industry Regulatory Authority censured and fined Greenwich, Conn.-based Interactive Brokers, Inc. was censured and fined $7,500 municipal securities trade reporting failures.

The Securities and Exchange Commission is investigating West Contra Costa, Calif. United School District and its general obligation bond financings dating back to 2009.

The Municipal Securities Rulemaking Board is asking for comment on proposed changes to its G-14 trade reporting rule, including whether to require dealers to identify conditional trade commitments, which differ from newly issued bonds but are reported at the same time.

Many municipal market professionals are concerned that the Municipal Securities Rulemaking Board's proposed best execution rule would not be functionally different from the fair pricing obligations that the MSRB and Financial Industry Regulatory Authority already impose on dealers.

The Municipal Securities Rulemaking Board announced Tuesday that it will rebate $3.6 million to broker-dealers because it has collected more money in technology fees than the board needs to maintain its systems.

The Securities and Exchange Commission has charged the state of Kansas with violating federal securities laws by failing to disclose in bond documents that the state's pension system was significantly underfunded, creating a repayment risk for investors.

A lawsuit challenging the Securities and Exchange Commission's pay-to-play rules could have implications for the Municipal Securities Rulemaking Board's effort to write such rules for muni advisers, as well an existing rule for dealers.