Municipal Securities Rulemaking Board ("MSRB") Provides Relief in Face of COVID-19 Pandemic
The Situation: The novel coronavirus (COVID-19) pandemic has impacted participants in the municipal securities market, creating operational challenges.
The Result: The Municipal Securities Rulemaking Board ("MSRB") has proposed certain relief to brokers, dealers, municipal dealers, and municipal advisors as a result of the challenges and disruptions to normal business operations.
Looking Ahead: Municipal market participants should review their policies and procedures in light of the proposed guidance and modify processes as necessary to meet the proposed relief deadlines.
In light of the impact of COVID-19 on participants in the municipal securities market, on April 9, 2020, the MSRB filed a proposed rule change with the Securities and Exchange Commission ("SEC") to provide temporary regulatory relief to market participants by extending the compliance and testing deadlines of certain MSRB rules and temporarily waiving MSRB late fees. The MSRB filed the proposed rule change for immediate effectiveness.
Extension of Time to Complete Certain Supervisory Functions
Under the proposed rule change, certain annual supervisory obligations under MSRB Rule G-27, on supervision, and Rule G-44, on supervisory and compliance obligations of municipal advisors, may be completed on or before March 31, 2021, and will be deemed to have been timely completed for compliance in calendar year 2020. This extension applies to the following supervisory functions:
- Rule G-27(d)(i)(A)-(C)—inspection of an office of municipal supervisory jurisdiction, branch office or non-branch location;
- Rule G-27(b)(vii)—annual compliance interview or meeting to discuss municipal securities matters of the representative(s) and principal(s);
- Rule G-27(f)(i)—submission of a report regarding the review of the firm’s supervisory controls from the designated principal(s) to senior management; and
- Rule G-44(d)—completion of the annual certification by the chief executive officer of a municipal advisor certifying in writing that the municipal advisor has processes to establish, maintain, review, test, and modify written compliance polices and written supervisory procedures.
Extension of Time to Complete Certain Professional Qualification Standards
In light of the extended closing of centers that provide testing for certain professional qualifications, the MSRB also is proposing to allow firms and individuals additional time to fulfill certain professional qualification standards as follows:
- Rule G-3(b)(ii)(D), G-3(b)(iv)(B)(4) and G-3(c)(ii)(D)—compliance deadlines would be extended 120 days from the time the MSRB announces that testing centers are open for those individuals acting as a principal without having passed the relevant examination;
- The date by which an individual is required to complete his or her Firm Element component of continuing education, under Rule G-3(i)(i)(A)(1), would be extended for 120 days from the time the MSRB announces that testing centers are open, provided the individual is unable to complete training remotely;
- Rule G-3(i)(i)(B) and G-3(i)(ii)—requirements to complete a needs analysis and deliver continuing education would be deemed as timely completed for 2020 if the needs analysis and delivery of continuing education are completed on or before March 31, 2021; and
- Persons acting as municipal advisor principal would have until March 31, 2021, to become qualified with the Series 54 (Municipal Advisor Principal Qualification Examination) instead of the original date of November 12, 2020.
In addition, the MSRB is proposing to extend until March 31, 2021, previously announced compliance dates for compliance with the amended and restated guidance under Rule G-17, on conduct of municipal securities and municipal advisory activities, and compliance with amendments to Form G-32 for the collection of new data elements from underwriters in primary offerings of municipal securities.
Finally, the MSRB proposes to suspend the charging of late fees related to regulatory fees assessed by the MSRB between March 1, 2020, and July 31, 2020. Late fees would incur on unpaid balances beginning on August 1, 2020.
Two Key Takeaways
- Regulators, such as the MSRB, are aware of the operational struggles of market participants and are working to provide necessary relief to prevent avoidable disruptions.
- Municipal market participants should review existing policies and procedures in light of the proposed relief and prepare to comply with the proposed extensions and relief with proper documentation and recordkeeping.
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