Proposed Professional Qualification Requirements for Municipal Advisors
On March 17, 2014, the MSRB proposed draft amendments to Rules G-2 and G-3 which would, among other things, establish professional qualification requirements for municipal advisors and their associated persons, with conforming draft amendments to Rules G-1 and D-13 (the Draft Amendments). The MSRB is seeking comments on the Draft Amendments by May 16, 2014, and the text can be viewed here: http://www.msrb.org/~/media/Files/Regulatory-Notices/RFCs/2014-08.ashx?n=1
The Draft Amendments would prohibit a municipal advisor from engaging in municipal advisory activities unless it and every individual associated with such municipal advisor is qualified in accordance with MSRB rules. Notable aspects of the Draft Amendments include the following:
Registration: The Draft Amendments would create new registration classifications for a municipal advisor representative, which is a natural person who is an associated individual of a municipal advisor and who engages in municipal advisory activities; and a municipal advisor principal, which is a natural person associated with a municipal advisor who is directly engaged in the management, direction or supervision of municipal advisory activities.
Examination: Municipal advisor representatives would be required to take and pass the Municipal Securities Advisor Qualification Examination prior to being qualified. Individuals who do not pass the examination would be able to retake it after 30 days; however, anyone failing the examination three or more times in a row would be prohibited from taking it again for six months. The MSRB will decide at a later date whether municipal advisor principals will be required to pass any qualification examinations.
Grace Period: Municipal advisor representatives would be given a one-year grace period from the effective date of the Draft Amendments to pass the examination.
No Apprenticeship Requirement: Rule G-3 currently requires a municipal securities representative to serve an apprenticeship period of 90 days before transacting business with any member of the public or receiving compensation for such activities. The Draft Amendments do not include this requirement for municipal advisor representatives, and would delete this requirement in Rule G-3 for municipal securities representatives.
Designation of Municipal Advisor Principal: Each municipal advisor would be required to designate at least one municipal advisor principal to be responsible for the municipal advisory activities of the municipal advisor.
New Consolidated Registration Form
On February 27, 2014, the MSRB released Regulatory Notice 2014-5 (the Notice) announcing that it received approval from the Securities and Exchange Commission for a consolidated MSRB registration rule, process and form for brokers, dealers, municipal securities dealers and municipal advisors. Among other things, the Notice includes revised Rule A-12 and new Form A-12, which requires various updates, including the requirement to provide the MSRB with several new contact persons. The Notice can be viewed here: http://www.msrb.org/~/media/Files/Regulatory-Notices/Announcements/2014-05.ashx?n=1
The new registration rule requires all MSRB regulated entities (including municipal advisors who are currently registered with the MSRB and temporarily registered with the SEC) to access and update their new Form A-12 between the effective date, May 12, 2014, and the deadline, August 10, 2014. The MSRB will pre-populate certain data on the form for currently registered entities, which will need to access, verify and complete the form by the deadline. Up until May 12, 2014, municipal advisors (and others) may register under the existing regime, but will need to complete the new Form A-12 between May 12 and August 10. After May 12, all new registrations will be completed using new Form A-12.