The Municipal Securities Rulemaking Board, or MSRB, has filed a proposed rule change with the SEC to establish a new interim municipal advisor assessment under new Rule A-11, on municipal advisor assessments, and a new Form A-11-Interim to be used in connection with such interim municipal advisor assessment.  In addition, the MSRB is seeking comment on a draft survey seeking information from municipal advisors on the nature of the municipal advisory activities they undertake as well as the manner and level of compensation received by municipal advisors for such municipal advisory activities.

The proposed interim assessment is designed to defray a portion of the increased costs and expenses associated with the operation and administration of the MSRB attributable to the MSRB’s regulation of municipal advisors.  The proposed interim assessment would consist of an annual assessment equal to $300 for each assessable professional reported or required to be reported by a municipal advisor to the MSRB on new Form A-11-Interim for each fiscal year pursuant to new Rule A-11. 

For purposes of the interim assessment, an assessable professional of a municipal advisor would, pursuant to proposed Rule A-11(b)(i), consist of any natural person who is an associated person of the municipal advisor who has received compensation or other payments from the municipal advisor (excluding reimbursement for out-of-pocket expenses) includable in such person’s gross income for federal income tax purposes in the amount of $10,000 or more and who provides services in connection with the municipal advisor’s municipal advisory activities.  Such services include, but are not limited to:

  • engaging in municipal advisory business with a municipal entity or obligated person;
  • soliciting municipal advisory business with a municipal entity or obligated person on its own behalf or soliciting third-party business;
  • providing research or analytical services to other personnel of the municipal advisor engaged in the services described above or to clients of the municipal advisor above;
  • acting as supervisor of any person described above, those person’s supervisors and the Chief Executive Officer;
  • serving as a member of the municipal advisor’s executive or management committee or similarly situated officials, if any.  

The MSRB expects the interim assessment to remain in effect for a limited period of time during which the MSRB, by means of a survey, would examine the nature of the municipal advisory activities undertaken by municipal advisors as well as the manner and level of compensation received by municipal advisors for such municipal advisory activities.  Based on the MSRB’s findings, the MSRB would then consider whether to replace the interim assessment with a permanent form of assessment on municipal advisors that would, together with other MSRB assessments payable by municipal advisors, brokers, dealers and municipal securities dealers, provide for reasonable assessments that are fairly and equitably apportioned among all market participants subject to MSRB regulation and that do not impose an undue burden on small municipal advisors.

The MSRB has requested that the SEC approve the proposed interim assessment for effectiveness on October 1, 2011, which is the first day of the MSRB’s fiscal year.  Municipal advisors would be required to submit completed Form A-11-Interim and to make payment of the interim assessment by November 30, 2011 based on information for the period from October 1, 2010 through September 30, 2011.  If in any subsequent fiscal year the MSRB has not yet replaced the interim assessment with a permanent form of assessment as described above, municipal advisors would be required to submit completed Form A-11-Interim and to make payment of the interim assessment by November 30 of such fiscal year based on information for the prior fiscal year.

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