Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The Board of Directors of the Municipal Securities Rulemaking Board, or MSRB, held a special meeting on May 19-20, 2011 where it advanced major rule proposals governing fiduciary duty, conflicts of interest and fair dealing requirements for firms and individuals that provide financial advisory and underwriting services for municipal entities.

At its meeting, the Board amended earlier draft rule proposals based on public comments received and its intent to protect municipal entities and maintain an efficient market. Once approved by the Securities and Exchange Commission, MSRB rules have the force of federal law and apply to municipal advisors and dealers that provide municipal advisory and underwriting services to municipal entities, including state and local governments, public pension funds and obligated persons.

The MSRB Board of Directors agreed to seek SEC approval on the rule proposals covering the fiduciary duty responsibilities of municipal advisors toward municipal entity clients, including interpretive guidance on the duty of loyalty and care; the giving of gifts by municipal advisors in relation to their municipal advisory activities; and the application of the MSRB’s existing “fair dealing” rule to both municipal advisors and underwriters with respect to their work on behalf of municipal entities and obligated persons, as well as the solicitation of municipal entities on behalf of others. The MSRB expects to file all the rule proposals with the SEC during the month of June.

Since October 2010, the MSRB has been working to establish a regulatory framework for municipal advisors based on a set of principles-based rules consistent with provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The MSRB has also been reviewing dealer regulations to ensure that it is fulfilling its mission to protect municipal entities, in addition to investors and the public interest.

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.

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