MSRB Rulemaking Program
The federal government passed legislation that will affect how financial advisory firms like Ehlers provide advisory services. The legislation requires a fiduciary responsibility to you by Ehlers - which is how we have always viewed our relationship. There are certain processes Ehlers will need to follow as a regulated "municipal advisor".
One such process is the Municipal Securities Rulemaking Board (MSRB) Rulemaking Program. The following is intended to give you a high-level understanding of the Program, and we'll focus on specific rules that will have an impact on you in future newsletters.
The Municipal Securities Rulemaking Board (MSRB) is monitored by the Securities and Exchange Commission (SEC). Both are federal agencies responsible for federal securities laws and regulating the securities industry. The MSRB writes rules and operates market information systems for municipal securities dealers, banks, and municipal advisors, and regulates agents in the municipal market through an array of programs aimed at protecting issuers, investors, state and local government entities, and others whose credit stands behind municipal securities. These rules are to protect you and your communities, and they will impact the public finance industry.
MSRB Rulemaking Program
The Municipal Securities Rulemaking Board (MSRB) maintains a body of rules designed to prevent fraud and manipulation in the market, to promote the mechanisms of a free and open market, to promote just and equitable principles of trade and to serve various other specific purposes described in the Securities Exchange Act.
Timely and well-informed rulemaking and interpretive guidance responsive to changing market conditions are critical to the MSRB's mission to protect investors. The MSRB frequently publishes rule interpretations providing guidance on the application of MSRB rules in the context of typical situations that may occur in the market.
The Dodd-Frank Wall Street Reform and Consumer Protection Act granted the MSRB regulatory authority over municipal advisors. The MSRB is adopting a comprehensive set of rules for municipal advisors, click here.
General Rules
The MSRB's General, or "G", rules create a number of specific responsibilities for dealers (a person or entity who buys and sells shares, securities, or other financial assets as a principal, rather than as a broker or agent) affecting municipal securities transactions. These include requirements to ensure that the material facts about a proposed transaction are disclosed to investors, to ensure that recommended transactions are suitable for investors, and to ensure that transaction prices are fair and reasonable.
Several rules address dealer behavior with respect to potential conflicts of interest that may arise in the underwriting, sales and trading of municipal securities. These include rules relating to political contributions made to officials of issuers of municipal securities, gifts or gratuities made to persons with which the dealer is engaging in business, and dealers acting as financial advisors to municipal securities issuers. Other MSRB rules specify disclosure and other responsibilities of dealers underwriting municipal securities.
The rules will change parts of how we do business, but Ehlers' remains committed to serving you and your community's best interest.
To read more about the MSRB rules, click here.
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