Update: BDA Sends Joint Letter with NAMA and SIFMA to SEC on MSRB’s Proposed Advertising Rule Change

On May 4, 2018, the BDA, along with the National Association of Municipal Advisors and the Securities Industry and Financial Markets Association, sent a letter to the SEC requesting that they disapprove proceedings with respect to the MSRB’s proposed amendments to Rule G-21 and new Rule G-40 until the MSRB further clarifies and addresses key issues within the text of the rules themselves.

  • A copy of the letter can be viewed here.

The SEC is expected to move forward on the proposed rule change very soon. We will keep you updated as it advances.

Background

On April 30th, the MSRB published a comment letter to the SEC requesting the Commission to approve its proposed new rule, MSRB Rule G-40, on advertising by municipal advisors, and amendments to MSRB Rule G-21, on advertising by municipal securities dealers.  The MSRB’s comment letter can be viewed here.

Despite opposition of almost all broker-dealer groups, the MSRB recommends for the SEC to approve both Rule G-40 and G-21 with no changes.
  • In April, the BDA met with the Office of Municipal Securities to restate our opposition to the MSRB’s proposed rule change.
  • If the SEC approves the proposed rule change, the MSRB would provide guidance nine months before proposed Rule G-40 and amended Rule G-21 would become effective.

In February, the BDA submitted a comment letter to the SEC in response to the MSRB’s proposed new rule, MSRB Rule G-40, on advertising by municipal advisors, and amendments to MSRB Rule G-21, on advertising by municipal securities dealers.

  • You can view BDA’s final comment letter here.

BDA’s comment letter focused on the following topics:

  • The BDA disagrees with several aspects of the harmonization of the MSRB Rules and FINRA Rules.
  • The BDA does not think MSRB’s inclusion of a principal approval requirement in Rule G-40 makes sense given the context of the municipal advisory relationship.
  • The BDA is concerned that correspondence and institutional communication should be exempt from the pre-approval requirements.
  • The BDA believes that investor roadshows, responses to RFPs/RFQs and similar materials not intended as advertisements should be excluded from the scope of Rule G-21.
  • The BDA does not think MSRB’s prohibition on testimonials in both Rule G-21 and Rule G-40 are warranted.