MSRB Requests Comment on Revisions to Draft Rule on Municipal Advisor Standards of Conduct (Notice 2014-12)
The MSRB released for public comment a revised draft rule to establish the core duties of municipal advisors when providing advice on municipal securities transactions and related products. The revised draft MSRB Rule G-42 addresses a number of issues raised by commenters on the initial draft rule published in January 2014.
Specifically, the initial draft prohibition on principal transactions has been revised to apply only to transactions with municipal entity clients, not with obligated persons. In addition, to clarify the narrow scope of the prohibition, the revised draft rule defines principal transactions as limited to those directly related to the subject of the municipal advisor's engagement with the municipal entity client. The definition also specifies the types of transactions that are covered.
Among the other key changes to the draft rule is the elimination of specific requirements that municipal advisors must (i) review the official statement in a new issue transaction, (ii) disclose information about professional liability insurance, and (iii) estimate in relationship documentation their expected total compensation in dollars. These changes reflect commenter feedback, including the view that the client primarily should control the scope of the engagement with its municipal advisor.
The revised draft rule also clarifies a municipal advisor's suitability and related obligations when making recommendations to a municipal entity and obligated person clients, or reviewing the recommendations of others.
Comments are due by August 25, 2014.