Municipal Securities Rulemaking Board

“No officer, director, trustee, or key employee has a family relationship or business relationship (as such terms are defined for purposes of Form 990) with any other officer, director, trustee, or key employee. As contemplated by the Congressionally mandated structure of the MSRB's Board of Directors (which serves as the organization's governing body), and with the MSRB being a self-regulatory organization under the federal securities laws, the employers of some members of the Board of Directors, and such members in their capacities as employees of their employers, from time to time transact business with one another in the ordinary course of their business as participants in the municipal market on the same terms as are generally offered to others in the same line of business.”

“All proposed rule changes adopted by the Board of Directors of the MSRB are subject to the filing and approval or review requirements by the Securities and Exchange Commission under Section 19(b) of the Securities Exchange Act of 1934. FORM 990, PART VI, SEC. B, LINE 11B - FORM 990 REVIEW PROCESS: The Board of Directors of the MSRB has an Audit and Risk Committee that is charged with reviewing with management the organization's completed form annually prior to the filing of such form and reporting any findings or conclusions to the Board of Directors in connection with the Board's review of such form. The Audit and Risk Committee conducted its review on 01/22/2020 and the Board of Directors conducted its review on 01/23/2020.”

“The MSRB maintains for its Board of Directors and its staff: a code of ethics and business conduct policy; a conflicts of interest policy; and a whistleblower policy with complaint handling procedures, which are available on msrb.org. All Board members and staff are trained annually on these policies and must sign various acknowledgments. The MSRB has a policy requiring that officers, directors and key employees disclose annually interests that could give rise to conflicts, and subsequently disclose updates. In connection with the election of new members of the Board of Directors, each candidate provides information to the MSRB concerning potential conflicts of interest. In addition, certain organizational conflicts are effectively prohibited under Section 15B(b) of the Securities Exchange Act of 1934 due to the statutory requirements regarding qualification for membership on the Board of Directors. In particular, public representatives must be independent of any municipal securities broker, municipal securities dealer or municipal advisor. MSRB Rule A-3 defines "independent" as having no material business relationship with any municipal securities broker, municipal securities dealer or municipal advisor, including at a minimum not currently or at any time within the last two years being associated with a municipal securities broker, municipal securities dealer or municipal advisor and not having a relationship with any municipal securities broker, municipal securities dealer or municipal advisor, whether compensatory or otherwise, that reasonably could affect the independent judgment or decision making of the individual. The MSRB's General Counsel reviews the conflicts of interest acknowledgement and disclosure forms and determines what actions, if any, need to be taken, including asking a Board member to recuse him or herself from deliberations or voting on an action.”

“Under the MSRB written compensation strategy and program, the Finance Committee (comprised of members of the Board of Directors) is responsible for making recommendations and the Board of Directors is responsible for approving the organization-wide compensation strategy. The annual salary budget is approved by the Board of Directors. At least once every four years, the compensation strategy and structure are reviewed and approved by the Finance Committee based on information received from an external salary consultant. Such review was completed in July 2016. The external salary consultant compares the MSRB with comparable peer organizations in the local geographic market and within the industry as appropriate. The full Board approves the compensation of the Chief Executive Officer, and the Chief Executive Officer establishes the compensation of the key employees within the parameters and philosophy of the approved compensation strategy. Additionally, the Chief Executive Officer annually provides to the Board the salary, benefits, and total compensation of the senior management.”

“The organization's website (www.msrb.org) contains the following: Securities Exchange Act of 1934 Section 15B (statute creating the MSRB), Restated Articles of Incorporation, By-Laws, Governance-Related Administrative Rules, Board Committee Charters, Code of Ethics and Business Conduct, Conflicts of Interest Policy, Risk Management Program, Whistleblower Policy, audited financial statements, annual budget, most recent IRS Form 990 and certain financial policies.”

“The MSRB did not have any direct or indirect unrelated taxable business activities during FY 2019. However, as a result of a provision in 2018 tax reform that was subsequently retroactively repealed in December 2019, tax-exempt organizations were subject, prior to the repeal, to unrelated business taxable income ("UBTI") tax for qualified transportation fringe benefits ("QTF") paid to employees under IRC Section 512 (A)(7), effective January 1, 2018. Due to the December 2019 retroactive repeal, the MSRB is not reporting QTF provided to its employees from October 1, 2018 to September 30, 2019 on 2018 Form 990, Part I Line 7b and 2018 Form 990-T as was disclosed in the prior 2017 Form 990, Part I line 7b and 2017 Form 990-T. The MSRB paid the 2017 UBTI obligation of $42,000 and made estimated tax payments for the 2018 UBTI obligation of $54,000 prior to the repeal, and now has an estimated refund receivable of $96,000.”

“The mission of the msrb is to protect investors, state and local government issuers, other municipal entities, and the public interest by promoting a fair and efficient municipal market through: 1. The establishment of rules for dealers and municipal advisors, 2. The collection and dissemination of market information, and 3. Education, outreach and market leadership.”

“Establishing regulations and supporting guidance for municipal advisors and dealers: the msrb was created by congress to regulate securities firms, banks and municipal advisors that engage in municipal securities and municipal advisory activities (collectively "regulated entities") with the goal of protecting investors, municipal entities, obligated persons and the public interest. Msrb rules seek to prevent manipulation and fraud in the municipal market, promote fair and efficient transactions, and support a free and open market in municipal securities and municipal financial products. Msrb rules generally are developed with extensive input from the public and the municipal securities industry, with an economic analysis to enhance the effectiveness and efficiency of the msrb's rulemaking, and to meet the approval standards of the u.s. Securities and exchange commission (sec). Once developed, all msrb rules must be approved by the sec prior to effectiveness, unless otherwise allowed by law. The msrb also provides ongoing education, training and compliance support to ensure understanding of and compliance with msrb rules by regulated entities. The msrb operates programs that support the qualification of professionals employed by regulated entities. The msrb does not enforce its rules but follows established procedures for coordinating with enforcement agencies charged with enforcing msrb rules. Information regarding the msrb's rules-including rule interpretations, requests for comment, notices to regulated entities, rule filings submitted to the sec and compliance resources developed in conjunction with new rules or to clarify the application of existing rules-is displayed on the msrb's website at www.msrb.org. Regulatory, compliance and professional qualification activities during fy 2019: to keep pace with accelerating developments in technology and evolving market practices, the msrb formalized its process for revisiting its existing rules and interpretations to help ensure that they continue to achieve their intended purposes. The msrb developed a set of criteria to help prioritize rules for review and has used the public comment process and other means to engage with stakeholders and consider a broad range of perspectives before proceeding with a proposed rule change. These criteria include: - whether the rule is clear and understandable or a subject of common stakeholder questions; - whether the rule is consistent with market practices and/or consistent with the relevant rules of other regulators or other requirements for the relevant regulated entity; - whether there is a continued need for the rule; - whether the rule has a substantial body of historical interpretive guidance; - whether commenters have previously expressed (whether in a formal comment letter or otherwise) a desire for the msrb to reconsider a particular rule requirement; - the age of the rule and the length of time since it was reviewed holistically; - the level of relevant enforcement activity; and - whether the benefits of the rule are commensurate with its burdens. Dealer and municipal advisor-related regulatory activity 2019: rules modernized in accordance with criteria established in 2019 to prioritize msrb rules for retrospective review, the msrb reviewed and determined to modernize the following rules: - rescinded msrb rule g-29, which required dealers to maintain a copy of the msrb rulebook in all offices that conducted municipal securities activities. This rule became obsolete due to the public accessibility of the rules on the msrb website. - amended msrb rule g-11 on primary offering practices to improve regulatory transparency and equalize information dissemination in primary offerings. - amended msrb rule g-32 on disclosures in connection with primary offerings to collect additional data from underwriters for primary offerings through msrb form g-32. Guidance: - updated existing guidance on msrb rule g-18, which requires dealers to seek the”

“- joined with the sec and financial industry regulatory authority (finra) to host a free compliance outreach program for more than 300 municipal advisors to discuss regulatory and compliance issues with regulators; - published a compliance resource to help municipal advisors evaluate their supervisory controls in the implementation of msrb rule g-40, on advertising by municipal advisors; - published a compliance resource to enhance market understanding of the limited scope of permissible "business entertainment" under rule g-20, including information on gifts that generally qualify as a "normal business dealing," clarification on the appropriate frequency of gifts that may qualify as such, and related scenarios and sample supervisory considerations; - updated the compliance resources page on msrb.org, enhancing how compliance resources are organized; - published a compliance resource highlighting select msrb rules, interpretive guidance and resources related to 2019 municipal securities examination priorities of the sec's office of inspections and examinations (ocie) and finra; - published a compliance resource on requesting interpretive guidance from the msrb to help market participants understand the process and provide guidelines for asking for assistance from the msrb; - published a q&a summary of questions addressed during the msrb's compliance workshop on msrb rule g-37, which covers political contributions and prohibitions on municipal securities and municipal advisory business; - published a guide to assist individuals preparing to take the municipal advisor principal qualification examination (series 54), including information about the voluntary series 54 pilot; - published a compliance resource to answer frequently asked questions and provide sample close-out calendars to enhance understanding of provisions under the uniform practice code; - published a compliance resource to answer frequently asked questions about price variance alerts on reported trades to the msrb's real-time transaction reporting system (rtrs).”

“Rules advanced - amended msrb rule g-3 on professional qualification requirements to require municipal advisor principals to pass the series 54 examination to become appropriately qualified to directly engage in the management, direction or supervision of municipal advisory activities as a municipal advisor principal; and - conducted series 54 pilot exam to set passing score and validate test questions for this new professional qualification examination.”

“Collecting and disseminating market information: the msrb collects municipal market documents and data from regulated entities, municipal entities, obligated persons and/or their agents and makes the information publicly available. The collection and dissemination of this information serves a critical role in promoting fairness and efficiency of the municipal market. The msrb ensures that the market operates transparently and efficiently by re-disseminating this information to municipal market participants and others, to regulators charged with examining for compliance with and enforcing msrb rules, and to other regulatory and policymaking bodies. Under its rulemaking authority, the msrb maintains "information facilities" that provide the legal foundation for the collection and dissemination of municipal market information. These facilities support the msrb's authority to collect municipal transaction prices (with respect to customer and inter-dealer transactions in municipal securities); official statements, preliminary official statements and advance refunding documents (in connection with new issues of municipal securities); continuing disclosure documents (in connection with outstanding issues of municipal securities); interest rate information and related documentation for certain short-term obligations (in connection with outstanding variable rate demand obligations and auction rate securities); information regarding 529 savings plans and able programs (in connection with dealer underwriting of municipal fund securities); and information regarding business undertaken by, and certain political contributions made by, dealers and municipal advisors or their professionals and certain related political action committees (in connection with the msrb's pay-to-play rule). The msrb provides most of this information to the public, free of charge, on its electronic municipal market access (emma) website at emma.msrb.org. In addition, access to most information collected by the msrb is available in bulk or by automatic feed to subscribers through paid subscription services. As of the end of fy 2019, the msrb offered five principal data products with approximately 152 active subscription agreements. During fy 2019, the msrb made enhancements to the emma website to better serve the information needs of municipal securities investors and other market participants. Enhancements included: - rolled out an enhanced quick search functionality aimed at facilitating access to data and disclosures by introducing predictive searching for issuer names and issue descriptions; - modified emma dataport, the user interface used by issuers and obligated persons to file disclosures, and the emma website to accept and display two new event disclosures to coincide wth amendments to sec rule 15c2-12, which took effect in february 2019; - enhanced the disclosure submission process through emma dataport to introduce a guided submission "wizard," allow issuers to download exportable reports of past submissions, and seamlessly navigate between emma dataport and the emma website. - enhanced the process for creating and managing a free customized issuer homepage on emma to enable issuers to provide links to additional websites and contacts; and - expanded the availability of yield curves and indices on the emma website by adding the u.s. Treasury yield curve to the existing third-party market indicators. The msrb also published the following market data and analysis reports: - msrb fact book 2018, a comprehensive reference for historical trade statistics; - mark-up disclosure and trading in the municipal securities market, a report that examined the impact of msrb mark-up regulations and whether there were any unintended consequences on municipal bond trading activities; - dealer participation and concentration in the municipal bond market, a report that analyzed changes and trends in the customer trading activity of municipal securities dealers in 2018, updat”

“Engaging in education, outreach and market leadership: the msrb engages with municipal market participants, regulators, policymakers and others to build understanding of the municipal market and to promote practices, policies and problem-solving that protect investors, municipal entities, obligated persons and the public interest. The msrb also engages in education and outreach activities that support the understanding of the municipal market and help further protect investors, municipal entities, obligated persons and the public interest. During fy 2019, highlights in this area include: - expanded access to high-quality municipal securities market education by making available free of charge all courses on muniedpro, a suite of interactive, online courses about msrb rules and municipal market transactions; - launched the msrb podcast, a new series of interviews with msrb experts discussing municipal securities regulation, market data and emerging market topics; - hosted a webinar with the sec to discuss frequently asked questions related to recent amendments to sec rule 15c2-12, as well as changes to the emma website to accommodate these amendments; - released a new muniedpro course on structuring a fixed-rate municipal bond transaction and continued to refresh the course catalog to meet the educational needs of dealers, municipal advisors and other market participants; - received brandon hall group bronze award for excellence in technology for the muniedpro platform, earned for best advance in learning management technology for compliance training; - supported understanding of msrb regulations by publishing supporting educational content and offering 12 webinars on msrb rules and market practices for more than 6,000 participants; - established formal academic program to further support market research, including a new visiting scholar position and the ongoing provision of multiple municipal market data sets to universities and other research institutions looking to conduct research on the municipal securities market; - presented at 76 industry events to an audience of approximately 11,800 market participants and others on topics such as continuing disclosure compliance and what to expect from municipal finance professionals; - published new educational resources for issuers and investors on how to use cusip numbers on emma and emma dataport, as well as resources for issuers regarding sec rule 15c2-12; - updated educational resources for issuers and investors regarding emma, emma dataport, and continuing disclosures; and - for the eighth year, partnered with the municipal forum of new york to host municipal finance day in washington, dc for high school graduates participating in the urban leadership fellows program, which enables new york city youth to explore careers in finance.”

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