SIFMA Letter to the MSRB on Online Municipal Securities Trades for Retail (with Lofchie Comment)

SIFMA Managing Director submitted a comment letter on the MSRB's Concept Proposal to strengthen protections for individual investors by establishing new account opening and supervisory requirements for online municipal securities transactions with individual investors. SIFMA discussed its reservations (the four principal reservations are summarized on the first two pages) as to the MSRB's proposal.

Lofchie Comment: From a policy standpoint, the most interesting issue is the discussion of the term "recommendation." SIFMA objects to the broad definition of the term given by the MSRB (to see the MSRB discussion of the term, go into the SIFMA letter and link from footnote 2 to the MSRB notice). It seems to me that there is a tension between (i) the ratcheting up of fiduciary obligations and the defining down of the term "recommendation," on the one hand and (ii) allowing some flow of information to retail investors. Ultimately, the policy question is whether regulators will, by sterner regulation, (i) improve the quality of information provided to retail investors or (ii) shut down any information flow because the risks of providing information as a "fiduciary" are just too great. I don't have any strong view myself, but this is one of those important questions where I would worry that the political soundbites of declaring everyone a fiduciary may overwhelm any other policy trade-offs.

View letter in full here (links externally to SIFMA website).