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Weston Patrick, P.A.

A Professional Association Since 1897

New Supervisory Rule for Municipal Advisors

By Mark A. Chapleau

The Dodd-Frank Wall Street Reform and Consumer Protection Act granted authority to the Municipal Securities Rulemaking Board (MSRB) to develop a comprehensive regulatory framework for municipal advisors. Dodd Frank was enacted into law in the wake of the 2008 financial crisis. Dodd Frank continues to this day to reshape the financial services industry regulatory landscape, rule-by-rule.

In late October, the Securities and Exchange Commission approved the first rule dedicated to municipal advisors, MSRB Rule G-44. The Rule establishes supervisory system requirements for municipal advisors similar to MSRB and FINRA requirements currently in place for broker-dealers.
New MSRB Rule G-44 requires municipal advisors to:

  • Establish and maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations;
  • Establish and maintain written supervisory procedures;
  • Designate one or more municipal advisor principals to be responsible for the supervision;
  • Establish and maintain compliance processes reasonably designed to achieve compliance with applicable securities laws and regulations;
  • Have the municipal advisor’s CEO certify in writing annually that the municipal advisor has the required compliance processes, written compliance policies, and written supervisory procedures (with an exception from the annual certification requirement for municipal advisors who are subject to a substantially similar FINRA requirement);
  • Designate a Chief Compliance Officer to oversee the required compliance processes;
  • At a minimum, conduct annual reviews of compliance policies and supervisory procedures.

The rule changes will become effective on April 23, 2015, except for the annual certification requirements, which will become effective on April 23, 2016.

updated: 1 year ago

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