Event Recap: BDA Fixed Income Legal & Compliance Roundtable

On Thursday, June 6th, the BDA held its summer Fixed Income Legal & Compliance Roundtable in Washington, DC. Over 20 attendees participated in this year’s event at which BDA member firms discussed current regulatory and compliance topics, shared regulatory examination experiences, and networked at dinner. We also heard directly from senior staff at the MSRB, FINRA, and SEC. 

We want to thank our sponsors: Nixon Peabody, Lumesis, and Quarles & Brady.

A full recap of the day follows.

Roundtable Recap:

Thursday, June 6th
Nixon Peabody
Washington, DC

MSRB Rule G-23 Update

Featured Discussion Leader: Michael Decker, Consultant, Bond Dealers of America

  • To begin the discussion, the group reviewed the Rule as it stands today
  • After review, the group discussed the MSRB request for comments and BDA actions such as the recent op-ed in the BondBuyer
  • The group agreed that issuers need to be involved in the solution and staff received feedback for the future BDA comment letter and worked to develop plans to host the first conference call in late June to continue discussions on the request for comment

Featured Discussion Leader: Joey Frebes, Senior Vice President, Director Municipal Securities and Debt Capital Markets Compliance, KeyBanc Capital Markets Inc.

Request for SEC Guidance on Direct Placements

  • Group discussed a Fall 2018 letter to the SEC requesting guidance regarding direct placements
  • BDA believes that the activities in the letter must be defined as broker/dealer activities and that this is a competitiveness issue
  • SEC will provide an opportunity for formal comment in the coming months, and the BDA plans to respond


  • Update on status of MSRB request for comment on “pennying”
  • Continue to separate last look and “pennying” in an effort to further define the practice such as the FIMSAC proposal on “systematic pennying”
  • Discussed FINRA sweeps on the issue and on filtering

Flipping and Pre-Arranged Trading

  • Discussed examination experiences and issues with having exams and receiving no feedback on the practice

Retail Confirmation Rule

  • Group discussed vendor performance on PMP and the need for continued independent tests on the  systems in order to comply 
  • Shared notes on investor feedback, and lack thereof
  • Possible future exam questions were discussed

MSRB Amendments to G-17

  • Discussed the issue of “boilerplate language”
  • The group agreed amendments may cut down on the length of disclosure, but won’t be able to cut down on the number of disclosures

SEC Fiduciary Duty

  • Members discussed the impacts of the rule on the existing structure of the municipal market
  • Participants had the opportunity to address concerns with regulators and how they foresee current obligations
  • Concerns about states implementing the prior fiduciary rule and how the federal law would or would not supersede states law if there is no conflict

SEC Amendments to 15c2-12

  • The group discussed the recent implementation of the new amendments to the Rule
  •  Best practices were shared regarding compliance with the new events
  • How to best follow the requirement of reasonable diligence and how to best define material were discussed at length
  • How will the MSRB adapt technologies, in order to keep up with additions of events, was also a topic of discussion and concern

After discussion on the listed topics, we were joined by senior staff from FINRA, MSRB, and the SEC, who presented an overview of their current priority issues including the following:

FINRA– We were joined by and Cynthia Friedlander, Senior Director, Fixed Income Regulation; Alex Ellenberg, Assistant General Counsel; Joeseph Schwetz, Senior Director Market Regulation; and Cris Nanu, Market Regulation

FINRA addressed Mark-Up Disclosure as a priority for 2019 exams.  They noted that there have not been many wholesale failures to disclose, instead, small issues are widespread. They are working to ensure firms are not issues inaccurate confirms and helping firms implement correct policies and procedures.

Also discussed was the ongoing comment period regarding FINRA’s proposal to implement a pilot program to test changes in TRACE dissemination rules on corporate bond market liquidity. The BDA is currently drafting a comment letter in response to this proposal.

MSRB- We were joined by Michael Post, General Counsel

The MSRB board is currently considering all comments on G-17 and prearranged trading and the MSRB expects to have results out in the coming months.  They are continuing to review market data regarding “pennying” and plan to coordinate with FINRA in the future corporate “pennying” inquiries. The MSRB also addressed the ongoing G-23 comment period while emphasizing they welcome any and all views.

As a priority for 2019, the MSRB is continuously working to increase engagement with stakeholders in order to better their rulemaking and review processes.

SEC Office of Municipal Securities- Ahmed Abonamah, Deputy Director, Office of Municipal Securities

The SEC discussed market structure, particularly FIMSAC and the recent “pennying” recommendation.  The new events in Rule 15c2-12 and timeliness of financial information in the marketplace were mentioned as priorities for the Office of Municipal Securities and the SEC was pressed to issue guidance for the new events.

Networking Dinner After the roundtable, participants were able to continue networking over drinks and dinner at Fig & Olive in downtown Washington, DC.

BDA holds two Legal & Compliance Roundtables each year – one in the summer, and the second tied to our National Fixed Income Conference in the fall (details here.)

We encourage you to attend these events, share your experiences, and learn from other peer firms. These roundtables are a great opportunity to speak face-to-face with your regulators as well.  

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