SIFMA Says MSRB Overcharges Dealers, Undercharges Advisors

SIFMA addressed several troubling concerns raised by the rule changes proposed in the MSRB's Notice 2015-13 (MSRB Adjusts Fees to Align Revenues with Operational and Capital Expenses).

In a comment letter to the SEC, SIFMA argued that making the Technology Fee permanent, proposed in MSRB Rule A-13, contradicts the MSRB's characterization of the Fee in 2010. The Technology Fee was initially designed solely to raise a capital reserve, a technology renewal fund, to finance needed technology investments and was not intended to be a permanent source of revenue to fund both capital and operating expenses. SIFMA contended that the MSRB has provided little justification for the change in the Technology Fee beyond stating that revenue generated . . . excluding the technology fee . . . would be inadequate . . .

SIFMA argued that MSRB's claims that the rule changes are effectively revenue neutral, is only true in relation to revenue collected with the Technology Fee in place. Assuming the Technology Fee would be phased out as capital reserves met targeted levels, the rule changes impose an additional $8 million per year tax.

Additionally, SIFMA asserted that the overall fee changes announced in the MSRB Notice fail to balance the burdens of funding the MSRB between dealers and non-dealer municipal advisors (MAs). Although the MSRB previously stated that dealer members of the MSRB provide well over 90 percent of the MSRB's revenue, SIFMA argued that the MSRB's failure to address this disparity between dealer and non-dealer MA fees over five years after the enactment of Dodd-Frank cannot be justified. SIFMA suggested that the most sensible approach would be to devise a new-issue advisory fee that would apply to MAs when they advise on new bond transactions.

Finally, SIFMA urged the SEC to encourage the MSRB to be more transparent in its finances, budget reporting and allocation of MSRB costs in relation to market participation.