MSRB Notice 2018-12 MSRB Answers Frequently Asked Questions Regarding MSRB Rule G-42 and Making Recommendations
On February 15, 2018, the MSRB sought public input on draft answers to frequently asked questions and related scenarios regarding MSRB Rule G-42, on duties of nonsolicitormunicipal advisors, and the making of recommendations. The MSRB received eight comment letters and revised the draft FAQs to reflect these comments as well as insight gained from the MSRB’s ongoing engagement with the industry regarding compliance with Rule G-42. FAQs Regarding MSRB Rule G-42 and Making Recommendations, has been published as a compliance resource for municipal advisors, provides further explanation of Rule G-42, particularly with respect to making a recommendation and the obligations for municipal advisors that result therefrom. Access the FAQs and other compliance resources in the Compliance Center on MSRB.org. It should be noted that the FAQs do not create new legal or regulatory requirements, or new interpretations of existing requirements and should not be interpreted by municipal advisors or examining authorities as establishing new standards of conduct
On Friday, June 8, 2018, the MSRB filed a proposed rule change with the SEC to modify its professional qualifications program. The amendments to MSRB Rule G-3 reflect the MSRB’s intended plan to revise the Municipal Securities Representative Qualification Examination (Series 52) into a specialized knowledge examination and recognize the FINRA Securities Industry Essentials (SIE) Examination as a prerequisite for the Series 52 examination. The amendments also harmonize certain MSRB professional qualification requirements, under Rule G-3, with FINRA’s approved rules restructuring its professional qualification and registration requirements. The amendments to Rule G-3 were filed for immediate effectiveness with an implementation date of October 1, 2018.
MSRB Regulatory Notice 2018-10 Request for Comment: Retrospective Review of 2012 Interpretive Notice Concerning the Application of MSRB Rule G-17 to Underwriters of Municipal Securities
As part of its ongoing review of its rules and published interpretations, the MSRB is requesting comment on interpretive guidance it issued in 2012 on the application of MSRB Rule G-17, on conduct of municipal securities and municipal advisory activities, to underwriters of municipal securities (“2012 Guidance”). The 2012 Guidance established duties underwriters owe to issuers pursuant to their fair-dealing obligation. As part of its regulatory mission, the MSRB periodically revisits its rules and their interpretations over time to help ensure that they continue to achieve their intended purposes and reflect the current state of the municipal securities market. After receiving informal feedback from various market participants concerning the effectiveness and operation of the 2012 Guidance in practice, the MSRB now formally seeks comment from all interested parties on the benefits and burdens of, and possible alternatives to, the 2012 Guidance and the potential need for changes. The comments will assist the MSRB in determining whether and, if so, how to amend the 2012 Guidance and thereby modify underwriters’ duties to issuers pursuant to their fair-dealing obligation. The primary purpose of any potential amendments would be to improve market practices and address any unnecessary burdens on market participants. Comments should be submitted no later than August 6, 2018.
The SEC is adopting new rule 30e-3 under the Investment Company Act of 1940. Subject to conditions, new rule 30e-3 will provide certain registered investment companies with an optional method to satisfy their obligations to transmit shareholder reports by making such reports and other materials accessible at a website address specified in a notice to investors. We are also adopting amendments to rule 498 under the Securities Act of 1933 and our fund registration forms to require that during a certain transition period funds that choose to implement the new delivery method for shareholder reports provide prominent disclosures in prospectuses and certain other shareholder documents that will notify investors of the upcoming change in transmission format for a period of two years. New rule 30e-3 and the amendments to rule 498 and our registration forms address the fact that some investors may wish to receive shareholder reports in paper. This rule will become effective January 1, 2019
FINRA Information Notice Enhancements to FINRA’s Disclosure Review Process Relating to Public Financial Records
FINRA is making enhancements to its disclosure review process that will permit firms to rely on FINRA’s verification process for purposes of compliance with the requirement to conduct a search of public records relating to bankruptcies, judgments and liens. Specifically, beginning on July 9, 2018, FINRA will conduct a public records search within fifteen calendar days from the date of an applicant’s Form U4 (Uniform Application for Securities Industry Registration or Transfer) and provide member firms any information resulting from such a search if such information is different from what was reported in the applicant’s Form U4. These enhancements are likely to: (1) reduce the costs to firms associated with conducting these public records checks, which often involve finding and hiring a vendor; (2) result in more timely reporting of disclosure information to the benefit of regulators, investors and firms; and (3) result in a significant reduction of late disclosure fees related to judgments and liens.
MSRB Regulatory Notice 2018-09 Request for Comment on Draft MSRB Rule G-36, on Discretionary Transactions in Customer Accounts, and Related Draft Amendments
The MSRB is requesting comment on draft MSRB Rule G-36, on discretionary transactions in customer accounts, and related draft amendments. Draft Rule G-36 would re-establish a standalone rule to govern discretionary transactions by brokers, dealers and municipal securities dealers and their associated persons in customer accounts by consolidating and explicitly articulating existing requirements for such transactions. Additionally, draft Rule G-36 would establish limited, new requirements for discretionary transactions in customer accounts effected by individuals other than dealers and their associated persons. The MSRB is considering these rule changes to provide clarity to all dealers, securities firms and banks, on their obligations related to discretionary transactions in customer accounts, to improve consistency with similar rules of other regulators and to fulfill its previously-stated intention to address these types of transactions in a separate rule. The MSRB believes this potential rulemaking is consistent with its current strategic goal to assist dealers and other regulated entities with compliance with MSRB rules, as it would streamline, and bring consistency and uniformity to, the rules relating to discretionary transactions in customer accounts, which the MSRB believes would, in turn, assist dealers and their associated persons in complying with these requirements and improve regulatory efficiency, while imposing a relatively small burden on them to achieve compliance.
MSRB Regulatory Notice 2018-08 SEC Approves Advertising Rule Changes for Dealers and Municipal Advisors
The MSRB received approval from the SEC on May 7, 2018 to amend MSRB Rule G-21, on advertising by brokers, dealers or municipal securities dealers, and to adopt new MSRB Rule G-40, on advertising by municipal advisors. The SEC also approved a technical amendment to MSRB Rule G-42, on duties of non-solicitor municipal advisors. With these rule changes, as well as the previously announced development of the municipal advisor principal examination (Series 54), the MSRB, in the exercise of authority granted by the Dodd-Frank Wall Street Reform and Consumer Protection Act, has completed the core of its Congressionally mandated comprehensive regulatory framework for municipal advisors. The rule changes will become effective on February 7, 2019.
FINRA Regulatory Notice 18-18 FINRA Extends Effective Date of Margin Requirements for Covered Agency Transactions
In June 2016, the SEC approved FINRA’s rule change amending FINRA Rule 4210 to establish margin requirements for Covered Agency Transactions. FINRA is extending, to March 25, 2019, the effective date of the requirements pursuant to the rule change that otherwise would have become effective on June 25, 2018.
FINRA Regulatory Notice 18-19 FINRA Amends Rule 3310 to Conform to FinCEN’s Final Rule on Customer Due Diligence Requirements for Financial Institutions
FINRA has filed for immediate effectiveness amendments to FINRA Rule 3310 (Anti-Money Laundering Compliance Program) to reflect the Financial Crimes Enforcement Network’s (FinCEN) adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions (CDD Rule). The implementation date is May 11, 2018. This implementation date aligns with the compliance date for FinCEN’s CDD Rule.
FINRA is revising its Sanction Guidelines to instruct adjudicators in the disciplinary process to consider customer-initiated arbitrations that result in adverse arbitration awards or settlements when assessing sanctions. Thus, when a respondent’s disciplinary history, and history of arbitration awards and arbitration settlements together with the violation found in a disciplinary case, form a pattern, the Sanction Guidelines advise that adjudicators should consider imposing more stringent sanctions.
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