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.”

“Documents amendments to the msrb's amended and restated articles of incorporation became operative on october 1, 2020 to provide that the board of directors shall be comprised of the number of directors specified in the by-laws of the corporation and to permit a board member filling a vacancy to serve for any part of an unexpired term, rather than requiring such a board member to serve for the entire unexpired portion. Msrb rules a-2 through a-10 are reproduced in the bylaws as articles 2 through 10. Amendments to the msrb's bylaws became operative on october 1, 2020 to reflect amendments that were made to msrb rules a-3, on board membership: composition, elections, removal, compensation; a-4, on meetings of the board; and rule a-6, on committees of the board. Additionally, a cross reference in article 16 of the bylaws to msrb rule a-4(c) was updated because the relevant provision of msrb rule a-4(c) was moved into a new subsection, a-4(e).”

“All proposed rule changes adopted by the board of directors of the msrb must be approved by the securities and exchange commission prior to effectiveness, unless otherwise allowed by law.”

“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 01/25/2021 and the board of directors conducted its review on 01/27/2021.”

“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 (increased to five years effective october 1, 2020) 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 and changes were approved by the board effective may 1, 2020. 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 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. External relations.”

“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 the 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 rules 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.”

“Enhancing overall board governance practices was one of the most important rulemaking initiatives the msrb embarked on in fy 2020. As a result of this year-long initiative, the msrb began fy 2021 with a smaller board and tightened standards of independence for public members. Key features of the amendments to the msrbs governance rules include: - tightening the eligibility requirement for public board members by increasing the separation period from a regulated entity to at least five years; - reducing the size of the 21-member board, initially moving to 17 members in fy 2021 before ultimately shrinking to 15 members thereafter; and - establishing a lifetime service limit of six years for board members. Regulatory, compliance and professional qualification initiatives during fy 2020: pandemic-related temporary regulatory relief as msrb-regulated entities confronted the effects of the covid-19 pandemic, the msrb pivoted toward providing temporary regulatory relief to market participants while continuing to focus on investor protection and market transparency goals. This included providing regulated entities an extension of time to: - prepare to submit additional data related to primary offerings of municipal securities under amendments to msrb rule g-32; - prepare to comply with amended and restated guidance regarding the fair dealing obligations underwriters owe to issuers of municipal securities under msrb rule g-17; - take and pass certain qualification exams and continuing education modules required by msrb rule g-3; - conduct the annual needs analysis and the delivery of continuing education content pursuant to msrb rule g-3; - conduct the annual compliance meeting and branch inspections pursuant to msrb rule g-27; - provide the annual report related to the dealers review of the firms supervisory controls under msrb rule g-27; and - provide the annual certification related to the municipal advisor firms compliance policies and procedures under msrb rule g-44. The msrb also temporarily waived late fees for any annual and market activity-based fees, and temporarily waived market activity fees for municipal market transactions related to the federal reserves new municipal liquidity facility established to purchase certain short-term municipal securities of states, cities and counties and other governmental entities to help them better manage cash flow pressures as they grappled with the effects of the pandemic. Additionally, the msrb temporarily suspended price variance alerts for dealers and reminded regulated entities of the application of supervisory requirements in light of the coronavirus pandemic. Retrospective rule review the msrb regularly reviews our rules and guidance to streamline and modernize them so they more efficiently achieve the intended purpose and reduce the burdens of compliance. This review process produced two outcomes in fy 2020: - implementation of previously amended and restated interpretive guidance on fair dealing obligations underwriters owe to municipal securities under msrb rule g-17 (first implemented in 2012). - this was due to take effect november 30, 2020 but in light of the pandemic, the msrb extended the compliance date to march 31, 2021. - the amended guidance streamlines disclosures by underwriters to focus more narrowly on the risks and conflicts most relevant to a given transaction. - harmonizing msrb rules with the secs regulation best interest - in june 2020, the msrb harmonized certain of our rules to facilitate compliance with the secs regulation best interest, which requires broker-dealers to act in the best interest of retail customers when making a recommendation of any securities transaction or investment strategy involving securities. Regulated entity compliance resources and activities with the recommendations and insights of our compliance advisory group, the msrb continued our sustained emphasis on providing compliance assistance to regulated entities through tools and reso”

“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 redisseminating 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 2020, the msrb offered five principal data products with approximately 155 active subscription agreements. Migrating the msrbs market transparency systems to the cloud to keep pace with the technology needs of our evolving market, the msrb board of directors designated a total of $8.5 million of reserves in fy 2018 and fy 2019 to evaluate and undertake an enterprise cloud migration. By the end of fy 2020, all the msrbs market transparency systems were successfully running in the cloud. In addition to delivering efficiencies and freeing up resources by eliminating physical data centers, being in the cloud ensures the long-term reliability, quality, and security of the msrbs market transparency systems. Emma enhancements in fy 2020 while much of the msrbs it resources were dedicated to supporting the cloud migration in fy 2020, the msrb continued our work to enhance the emma user experience. Important enhancements the msrb made to the emma website in fy 2020 include: - the emma submission calculator - this new feature, which provides greater transparency around the timing of financial issuer's disclosures, a concern that had been raised by the sec and other market stakeholders, went live in july 2020 after a period of stakeholder beta testing. - the submission calculator helps shed light on the timing of disclosures by displaying the number of days that have elapsed between an issuer's fiscal period end date for audited financial filings and the date a financial disclosure submission was made to the emma website. - disclosure modification process improvement - to address stakeholder feedback, the msrb also made improvements to the process for issuers to modify a previously submitted disclosure filing in the emma system. - new form for primary offering data - the msrb began work on a new electronic form g-32 for underwriters to submit data on prim”

“Engaging in education and outreach: the msrb engages with municipal market participants, regulators, policymakers and others to build understanding of the municipal market and help further protect investors, municipal entities, obligated persons and the public interest. During fy 2020, the msrb connected with stakeholders and offered education resources virtually. Muniedpro online learning: the msrb continued to provide online municipal securities market education through our free, award-winning muniedpro platform. With more than 20 on-demand interactive courses, muniedpro offers municipal bond professionals a turnkey solution for compliance training that they can easily access from their home or office. Webinars: as part of our effort to increase transparency around the continuing disclosure process, the msrb offered two webinars to help emma users find continuing disclosures and identify the timing of issuers annual financial disclosures on the emma website. Msrb education center: the msrb updated a number of existing educational resources on msrb.org to make them more accessible to readers and made progress toward our goal of making the msrb education center a more guided, integrated learning experience. Digital outreach: the msrb produces a free podcast featuring board and staff views on msrb initiatives and market topics. The msrb also engages with stakeholders on social media platforms, including twitter and linkedin.”

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