On Thursday, January 9, the MSRB re-proposed new Rule G-42 promulgating standards of conduct for Municipal Advisors (“MA’s”) subject to the almost-newly-effective SEC MA Rule, 17 CFR § §240.15Ba1-1 to 15Ba1-8 (now delayed until July 1, 2014).  MSRB Notice 2014-01 covers the following principal objectives:

I. It establishes an MA’s fiduciary duty to Municipal-Entity (“ME”) clients, but merely a duty of care to “Obligated Person” (“OP”) clients (consistent with Dodd-Frank).

II. It moves the “engagement letter” regulatory trend forward by imposing a detailed disclosure regime – similar to that for underwriters under existing Rule G-17 – upon MA’s.

III.  It imposes suitability requirements.

IV.  It flatly prohibits an MA or any control affiliate from acting as a counterparty to ME or OP clients in principal transactions.

The no-principal-transactions prohibition seems to far-surpass its fiduciary-duty underpinnings and spurred swift opposition from the broker-dealer community, with SIFMA issuing an opposing statement early the next morning, Friday, January 10.