The SEC has approved amendments to the Municipal Securities Rulemaking Board’s (MSRB) Rule G-21 on advertising requirements for brokers, dealers and municipal securities dealers, as well as new MSRB Rule G-40 on advertising requirements for municipal advisors. The rules are designed to enhance fair practice to prevent fraud, and ensure consistent advertising regulation among related municipal securities market entities. Also, the dealer amendments, new advisor rule and previously announced municipal advisor principal examination (Series 54) complete the core of the Dodd-Frank Act-mandated comprehensive regulatory framework for municipal advisors.
To promote understanding of the dealer amendments and advisor rule, which take effect on February 7, 2019, the MSRB will host a q/a-formatted virtual compliance workshop to discuss key provisions on November 8, 2018 from 3:00 p.m. to 4:00 p.m.
Dealer advertising enhancements. MSRB Rule G-21’s amendments do the following:
- Provide more specific content standards for broker, dealer and municipal securities dealer advertisements;
- Revise Rule G-21’s general advertising standards; and
- Reconcile Rule G-21’s "form letter" definition with FINRA Rule 2210’s "correspondence" definition.
Municipal advisor advertising. MSRB Rule G-40, similar to Rule G-21, defines an advertisement, provides general provisions, addresses professional advertisements, and requires written principal approval of municipal advisor advertisements before they are first used. G-40, however, does not address product advertisements as the term is defined in Rule G-21.
The MSRB will help municipal advisors comply with Rule G-40 before the February 7, 2019 effective date by guiding them on:
- A municipal advisor’s use of case studies and municipal advisory client lists;
- Rule G-40’s content standards; and
- A municipal advisor’s social media use.
MSRB President and Chief Executive Officer, Lynnette Kelly, stated that "preventing misleading advertisements is an important component of a comprehensive regulatory framework for financial service professionals. The implementation of the new advertising rule is an important piece of the MSRB’s foundational work to create standards of fair practice for municipal advisors. We took this opportunity to revisit and enhance our long-standing dealer advertising rules to build on our fair practice provisions and to align more closely our advertising rules with rules of other financial regulators."
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