On October 24, 2014, the Municipal Securities Rulemaking Board (“MSRB”) announced that it had received approval from the SEC to adopt its first dedicated rule (MSRB Rule G-44) for municipal advisers regarding supervisory and compliance obligations along with related amendments to already existing rules on books and records to be made by brokers, dealers and municipal securities dealers (MSRB Rule G-8) and the preservation of records (MSRB Rule G-9).
MSRB Rule G-44 employs a primarily principles-based approach to supervision and compliance and is modeled after existing broker-dealer and investment adviser standards. In general, the new rule requires all municipal advisors to establish, implement and maintain a system to supervise their municipal advisory activities and those of their associated persons that is reasonably designed to achieve compliance with all applicable securities laws and regulations, including applicable MSRB rules. In addition, the new rule and related changes to existing rules require, among other things, that municipal advisers maintain written supervisory procedures, keep books and records and designate an individual to serve as the chief compliance officer who will have responsibility for and perform the compliance functions required by MSRB Rule G-44. Further, each municipal advisor (unless subject to substantially similar FINRA certification requirements) is required to have its chief executive officer certify in writing annually that the municipal advisor has in place processes to establish, maintain, review, test and modify written compliance policies and written supervisory procedures reasonably designed to achieve compliance with applicable rules.
The new rule and related rule amendments will become effective on April 23, 2015, except for the new rule’s annual certification requirement, which will become effective April 23, 2016. MSRB Rule G-44 is the first of several proposed rules covering municipal advisers to gain SEC approval and is largely unchanged from the MSRB’s proposal.