On Christmas Eve’s eve, the SEC approved, without change, the MSRB’s proposed conduct rule for municipal advisors. Broadly, the Rule imposes:
- Fiduciary duty (care and loyalty) to municipal entity clients but only a duty of care to obligated persons;
- Written engagement-letter and conflict-disclosure regime;
- Suitability and KYC requirements;
- A list of prohibited practices, including a wide-ranging (but not absolute) ban on principal transactions with municipal entity clients.
New Rule G-42 has been in the works since January, 2014 and the MSRB filed two amendments with the SEC since. I discussed the latest changes (now adopted) making a narrow exception for particular fixed-income securities (after disclosure and consent) to the controversial principal-transaction ban, here.
And the Rule proposal in greater depth here.
New Rule G-42 will become effective in June 2016.
The Adopting Release, No. 34-76753, SR-MSRB-2015-03 (SEC Dec. 23, 2015) is here.