Regulatory and Compliance Considerations
Who does what
The MSRB writes rules for dealers and municipal advisors but does not examine dealers. Enforcement falls to FINRA and the SEC for dealers (bank regulators for bank dealers); municipal advisors answer to the SEC and MSRB. Qualification: Series 52 (representative), Series 53 (principal), Series 50/54 (municipal advisor).
Rules to know
- G-17 fair dealing and antifraud; G-19 suitability; G-30 fair compensation; G-27 supervision; G-8 records.
- G-15 confirmation disclosure (description, CUSIP, price, yield, capacity, compensation, call features, tax status, accrued interest).
- G-32 official statement delivery and EMMA submission.
- G-37 pay-to-play: a two-year ban on municipal securities business with an issuer after certain contributions by the firm, its PACs or covered municipal finance professionals; de minimis $250 per election if the contributor may vote.
- G-38 prohibits soliciting municipal entities unless registered as a municipal advisor.
- G-20 caps gifts at $100 per person per year.
SEC Rule 15c2-12 requires the underwriter to obtain an official statement reasonably final 25 days before sale and a continuing disclosure undertaking: annual financial filings plus material-event notices within 10 business days.
Traps: compensation contingent on winning an issue is prohibited solicitation; the 5% markup guideline is a policy statement, not a rule; the G-37 ban runs two years, not one.
Worked example: a banker contributes $300 to a mayor empowered to award the deal - above de minimis, so the firm is barred from negotiated business with that issuer for two years.