"As the foundation of the MSRB's regulatory framework for municipal advisors, MSRB Rule G-42 will play a central role in achieving the MSRB's mandate to protect municipal entities that engage the services of a municipal advisor," said MSRB Executive Director
Specifically, the initial draft prohibition on principal transactions has been revised to apply only to transactions with municipal entity clients, not with obligated persons. In addition, to clarify the narrow scope of the prohibition, the revised draft rule defines principal transactions as limited to those directly related to the subject of the municipal advisor's engagement with the municipal entity client. The definition also specifies the types of transactions that are covered.
Among the other key changes to the draft rule is elimination of specified requirements that municipal advisors review the official statement in a new issue transaction, disclose information about professional liability insurance and estimate in relationship documentation their expected total compensation in dollars. These changes reflect commenter feedback, including the view that the client primarily should control the scope of the engagement with its municipal advisor.
The revised draft rule also clarifies a municipal advisor's suitability and related obligations when making recommendations to municipal entity and obligated person clients or reviewing the recommendations of others.
To address potential practical and operational issues, the revised draft rule provides relief from certain disclosure and documentation requirements for anyone who inadvertently provides advice that would be considered municipal advisory activity. However, the new provision does not offer a safe harbor from potential violations of
Comments are due no later than
The MSRB continues to develop additional rules for municipal advisors.
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