MSRB Submits A-3 Amendments to SEC PFM Request Not Included

As we reported on Friday, the MSRB has sent to the SEC for final approval changes to MSRB Rules A-3 and A-6 related to board membership. The amendments will, among other things, reduce the board size from 21 to 15 and specify that anyone seeking a public board seat who previously worked for a regulated entity must have been separated from their firm for five years, as opposed to two years currently specified in the Rule. The MSRB’s SEC filing will also reduce the number of dedicated MA seats from three to two.

The BDA comments can be viewed here

The MSRB’s SEC filing is available here

One key provision from the January request for comment did not make it into the final rule:

The January release requested comment on a proposal to amend the qualifications for board seats reserved for non-dealer municipal advisors. Currently municipal advisors who are affiliated with a broker dealer are not eligible for one of the two MA slots on the board. The MSRB proposed a rule change that would have specified that an employee of a MA affiliated with a BD who does not underwrite municipal securities would be eligible for a MA slot. 

The vast majority of dually registered MAs/BDs underwrite municipal securities. We are aware of only a very small handful that do not, including PFM.

In our April comment letter to the MSRB on this issue, we said about the MA/BD provision that “a rule change of this nature, which would exclude dealer MAs who also underwrite, appears targeted” because of the small number of firms to which it would apply.

We are pleased that the MSRB rejected the proposal inspired by a small handful of dealer-affiliated MAs. We will continue to press this and similar issues with the regulators.

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