Municipal Securities Rulemaking Board
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The Municipal Securities Rulemaking Board (MSRB) writes investor protection rules and other rules regulating broker-dealers and banks in the United States municipal securities market, including tax-exempt and taxable municipal bonds, municipal notes, and other securities issued by states, cities, and counties or their agencies to help finance public projects or for other public policy purposes. Among its investor protection rules, the MSRB is best known for adopting the first nation-wide Pay to Play rule, known as Rule G-37, designed to eliminate the use of political contributions to obtain municipal underwriting business from state and local governments. The MSRB's investor protection rules also apply to state-operated 529 plans marketed by broker-dealers, as well as to the underwriting, sales and trading of Build America Bonds and other taxable municipal obligations. In addition, the MSRB operates the Electronic Municipal Market Access (EMMA) system (http://emma.msrb.org), which provides free on-line access to comprehensive municipal securities disclosure documents, trade prices, interest rate information, and market statistics.
The MSRB was originally established in 1975 by Congress to develop rules regulating security firms and banks involved in underwriting, trading, and selling municipal securities. The MSRB is composed of members from regulated broker-dealers and banks as well as from the public. Like the Financial Industry Regulatory Authority (FINRA), the MSRB is a self-regulatory organization that is subject to oversight by the Securities and Exchange Commission (SEC).
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law by President Barack Obama on July 21, 2010, the U.S. Congress broadened the MSRB's rulemaking authority to also regulate so-called municipal advisors, which include financial advisors, swap advisors, brokers of guaranteed investment contracts and other market participants that advise on the issuance of municipal securities and provide certain other types of advice to state and local governments, public pension funds and other municipal entities on municipal derivatives, investment strategies and other financial matters. As of March 2013, since the SEC has not released the definition of "municipal advisor", the MSRB's rules in this regard are suspended and there is considerable concern in the industry as to whether underwriters and/or other regulated professionals may be viewed as municipal advisors, thereby having the related fiduciary duties. The MSRB's investor protection rules will be extended to protect municipal entities as well. Beginning on October 1, 2010, the MSRB will be recomposed to consist of a majority of independent public members and to include representatives of municipal advisors.
MSRB rules are enforced by various other federal regulatory organizations, including the SEC, FINRA, the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). In addition, while the MSRB sets standards for broker-dealers, banks, and municipal advisors, MSRB rules do not apply to issuers of municipal securities or other municipal entities, which Congress generally exempted from most provisions of the federal securities laws (such as the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940) otherwise applicable to private-sector issuers of corporate and other types of securities.
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- Financial Industry Regulatory Authority, another U.S. regulatory organisation.