MSRB - Request for Comment on Concept Proposal to Strengthen Account Opening and Supervisory Practices of Dealers Effecting Online Municipal Securities Transactions with Individual Investors

The MSRB is requesting comment on a concept proposal intended to strengthen protections for individual investors by establishing new account opening and supervision requirements for broker-dealers effecting online transactions in municipal securities with individual investors, which for purposes of this notice would be any natural person other than a sophisticated municipal market professional ("SMMP"). A dealer that effects transactions in municipal securities with individual investors solely through electronic means, such as a web portal where individual investors could purchase and sell municipal securities online without any direct contact with a registered representative of the dealer, is referred to as an "electronic brokerage."

The MSRB is issuing this concept proposal due to the growth of online trading of municipal securities by individual investors. The intent of the proposal outlined in the concept release is to improve the likelihood that individual investors who trade online would understand the features and risks of municipal securities and purchase securities that are appropriate based on their financial condition and risk tolerance.

Comments Due: September 21, 2012

[SL Comment: This proposal has potential significance far beyond municipal securities. Were it to be adopted, it seems to me that FINRA would regard the proposal as having relevance to transactions in corporate securities. Accordingly, firms would be well advised to study the proposal carefully to consider how much difficulty or expense there would be in implementation, and whether the rule would materially increase litigation risk.]

View notice in full here (links externally to MSRB website).Additional Materials: Submit comments electronically to the MSRB.