MSRB Proposes Supervisory and Compliance Obligations for Municipal Advisors (with Lofchie Comment)

The MSRB filed with the SEC a proposed rule change to establish supervisory and compliance obligations for municipal advisors.

The MSRB proposed new rule G-44 to establish the supervisory and compliance obligations of municipal advisors, new amendments to Rule G-8 ("Books and Records to Be Made by Brokers, Dealers and Municipal Securities Dealers") and new amendments to Rule G-9 ("Preservation of Records").

The proposed new Rule G-44 draws on aspects of existing supervision and compliance framework from other programs and consists of a new supervisory system complemented by the designation of a chief compliance officer. The new rule would require:

• a supervisory system reasonably designed to achieve compliance with applicable securities laws;
• written supervisory procedures;
• the designation of one or more municipal advisor principals to be responsible for supervision;
• compliance processes reasonably designed to achieve compliance with applicable securities laws;
• an annual certification regarding those compliance processes;
• the designation of a CCO to administer those compliance processes; and
• at least annual reviews of compliance policies and supervisory procedure.

Lofchie Comment: The new rules are very closely based on the FINRA Rules and thus, it is likely that many firms are already in near-compliance, assuming that they comply with FINRA's rules as to their municipal securities activities.

See: Text of Proposed Rule Change; Press Release.See generally: Lofchie's Guide to Broker-Dealer Regulation, Supervision.