August 19, 2014

Muni ComMUNIcations - Legislative, regulatory and tax news for municipal securities


Our next edition of Muni ComMUNIcations will be published on Tuesday, September 9th – after the congressional recess (August 2 – September 7).

Bloomberg to take over calculation and distribution of SIFMA Municipal Swap Index
SIFMA has been working on several changes to the way our Municipal Swap Index is calculated and distributed. We are now ready to implement those changes. To that effect, we have contracted with Bloomberg to take over as calculation agent for the Index beginning with the August 20, 2014 calculation.

Under the direction of our Municipal Swap Index Committee, we are making two changes to the Index. First, beginning with the Index calculation scheduled for Wednesday, August 20, we are changing the Index criteria so that only VRDO reset rates reported to the MSRB’s Short-term Obligation Rate Transparency (“SHORT”) System will be eligible for inclusion in the calculation. Our calculation agent will derive the calculation from SHORT-reported rates. This will be the only change to the Index criteria.

Second, we are stopping the existing subscription system for accessing the Index on the calculation day. Beginning on August 20, users of the Index will be able to obtain the weekly Index value on Wednesdays, the same day it is calculated, at approximately 4:00 p.m. through our Web site (, through the Bloomberg Web site, through the Bloomberg Professional service and through other outlets that choose to publish it.

The SIFMA Municipal Swap Index is a 7-day high-grade market index comprised of tax-exempt VRDOs. SIFMA established the Index in the early 1990s.

These changes to the Index are consistent with the Global Financial Markets Association’s (GFMA’s) “Principles for Financial Benchmarks.” The GFMA, SIFMA’s global affiliate, produced the best practices for financial indexes, available here, as a guide for market participants. These changes to the Index will help ensure its continued reliability and transparency. Thank you to members of our Municipal Swap Index Committee for their work and contribution to these efforts. A copy of our public statement on these changes is attached. Please call if you have any questions.

SIFMA Submits Comments to SEC on MSRB's Proposed Changes to Continuing Education Requirements
On August 15, SIFMA provided comments to the Securities and Exchange Commission (SEC) on the Municipal Securities Rulemaking Board (MSRB) filing with the SEC on proposed changes to MSRB Rule G-3 regarding continuing education requirements.

The MSRB filed a rule change with the SEC to require that dealers provide Firm Element continuing education annually on municipal securities for registered representatives and principals who regularly engage in or supervise, respectively, municipal securities activities. The MSRB has eliminated the proposed one-hour requirement and narrowed the required participants to registered representatives and principals who are regularly engaged in or supervise municipal securities activities. However, the proposal expands those subject to continuing education requirements to non-customer facing registered representatives. While SIFMA and its members appreciate the modifications made in response to various commentors to the continuing education changes originally proposed in MSRB Regulatory Notice 2013-222, we continue to believe that the revised proposal should be further revised to the greatest extent possible to keep MSRB continuing education requirements harmonized with those of the Financial Industry Regulatory Authority (FINRA).

The MSRB’s original rule proposal
SIFMA’s comments on the original rule proposal

SEC Announces Municipal Advisor Exam Initiative
On August 19, the Securities and Exchange Commission announced that its Office of Compliance Inspections and Examinations (OCIE) is launching an examination initiative directed at newly regulated municipal advisors.

SEC rules that took effect on July 1 generally require municipal advisors to register with the SEC through the SEC’s EDGAR system under the final registration process during a four-month phase-in period by October 31.  The examinations are designed to establish a presence with the newly regulated municipal advisors.  Over the next two years, OCIE plans to examine a significant percentage of these advisors using an approach that focuses on identified risks.  Areas targeted for scrutiny may include the municipal advisor’s compliance with its fiduciary duty to its municipal entity clients, books and recordkeeping obligations, disclosure, fair dealing, supervision, and employee qualifications and training. 

Additional details about the examinations are available in a letter released today.

Starting later this year, OCIE in coordination with FINRA and the MSRB will hold a Compliance Outreach Program for newly regulated municipal advisors where they will learn more about the examination process and their obligations under the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules.

MSRB Requests Comment on Extending its Pay-to-Play Rule to Municipal Advisors
On August 18, the Municipal Securities Rulemaking Board (MSRB) requested comment on draft amendments to Rule G-37, the MSRB’s landmark pay-to-play rule for municipal securities dealers, that would extend the rule to municipal advisors. The Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the jurisdiction of the MSRB to include the regulation of municipal advisors and the protection of state and local governments that often rely on these professionals for advice.

Municipal advisors would be required, like dealers under the existing rule, to disclose their political contributions to officials and bond ballot campaigns for posting on the MSRB’s Electronic Municipal Market Access (EMMA®) website. Public availability of this information would facilitate enforcement of the rule and promote public scrutiny of political giving and municipal advisory business.

Read the request for comment to view all proposed changes to the existing rule. Comments are due no later than October 1, 2014.

The MSRB will host a webinar on the proposed changes on September 11, 2014 at 3 p.m. ET.

The MSRB recently filed its proposed municipal advisor supervision and compliance rule for Securities and Exchange Commission (SEC) approval, with comments due to the SEC by August 26, 2014. The MSRB plans to file a proposal for SEC approval to set baseline professional qualification requirements for municipal advisors. The MSRB is continuing to solicit input on its revised draft rule to create core standards of conduct for non-solicitor municipal advisors through August 25, 2014. Additionally, the MSRB plans to seek comment on amending its existing gifts rule for dealers, MSRB Rule G-20, to establish limitations on gifts given by municipal advisors in their professional capacity.

MSRB Requests Comment on Expanding Municipal Securities Trade Data on EMMA
On August 13, the Municipal Securities Rulemaking Board (MSRB) requested comment from municipal market stakeholders on a proposal to enhance the public availability of municipal securities trade data on the MSRB’s Electronic Municipal Market Access (EMMA®) website.

The MSRB is seeking input on proposed changes to the current system of collecting and disseminating trade data that would expand the data made available on EMMA. Among the proposed new data elements is information about trades in new issues that result from conditional allocations by dealers, information regarding sale transactions by dealers that have long-term marketing agreements with underwriters and information about transactions executed through alternative trading systems. Additionally, the proposed changes include a new indicator for customer trades involving non-transaction-based compensation arrangements.

Comments are due no later than September 26, 2014.

SIFMA submitted the following comment letters on this matter:

MSRB Publishes Second Quarter 2014 Municipal Market Statistics
On August 14, the Municipal Securities Rulemaking Board (MSRB) released municipal market statistics for the second quarter of 2014, including data on trading patterns, interest rate resets and continuing disclosure submissions made to the MSRB for the $3.7 trillion municipal bond market.

Among the second quarter 2014 highlights:

  • Trading activity in the municipal market decreased significantly in the second quarter of 2014 both in terms of par amount and number of trades.
  • Par amount traded of fixed rate securities decreased to $398.9 billion in the second quarter of 2014 from $463.1 billion traded in the second quarter of 2013.
  • Trading activity totaled 2.24 million trades in the second quarter of 2014, compared to 2.72 million trades in same period one year ago.
  • Trading of revenue securities accounted for approximately 66 percent of the total par amount traded and 62 percent of the number of trades in the second quarter of 2014. 
  • The number of variable rate demand obligation rate resets continued to decline, totaling 157,219 in the second quarter of 2014 compared to 179,572 rate resets in the same period one year ago.
  • General obligation bonds accounted for 24 percent and 34 percent of trading activity by par and number of trades in the second quarter.

The MSRB’s quarterly statistical summaries include aggregate market information for different types of municipal issues and trades, and the number of interest rate resets for variable rate demand obligations and auction rate securities. The data also include statistics pertaining to continuing disclosure documents received through the MSRB’s EMMA website. Daily and historical summaries of trade data based on security type, size, sector, maturity, source of repayment and coupon type are displayed in EMMA’s Market Statistics section.

SIFMA Announces Cybersecurity Resources for Small Firms
Cyber attacks, a real threat to our economic and national security, do not discriminate based on firm size: cybersecurity firm Symantec reports that in 2012, 31% of all cyber attacks targeted businesses with fewer than 250 employees, up from 18% in 2011. Every market participant bears the responsibility to vigilantly protect our financial markets from these very real threats. SIFMA has prepared this resource guide to assist small financial firms in efficiently and effectively taking on proper cybersecurity measures, complementing the significant work already undertaken by the financial industry. Building upon the National Institute of Standards and Technology's (NIST) Cybersecurity Framework, these best practices protect all computing devices, networks and information to ensure business data remains secure.

SIFMA’s Cybersecurity Guidance for Small Firms
SIFMA’s Cybersecurity Resource Center:

Announcing the New 2015 Edition of "Sources: A Resource Directory"
SIFMA is pleased to announce the upcoming publication of a new 2015 edition of "Sources: A Resource Directory.” Compiled by SIFMA, Sources is an easy-to-use guide of products and services for the securities and financial industry. Service providers in financial services are invited to submit information for publication; SIFMA’s Associate Members are included at no cost as a benefit of membership.
View: Sources

Registration Now Open: SIFMA’s 2014 Industry-Wide BCP Testing Initiative
As part of the ongoing securities industry testing initiative, on October 25, 2014, SIFMA will lead the 2014 industry-wide business continuity test where firms submit test orders and transactions to markets and utilities. The exercise will involve test transactions for equities, options, fixed income, foreign exchange, commercial paper, settlement, payments, Treasury auctions and market data. The test is supported by all major exchanges, markets and industry utilities. Registration is open until Friday, October 17.
Register Today
SIFMA Blog: Pennsylvania + Wall

Table Top Exercise (TTX)
A new addition in this year’s test is a Table Top Exercise (TTX).  If your firm is interested in participating in this TTX please register and the registrant will then receive details regarding the remote, self-paced exercise that will make use of the crisis scenario being applied to this year’s exercise.  The TTX will be executed in Friday, October 24. There will also be more information on the TTX as we move into the summer.
Table Top Exercise Scenario

Pandemic Influenza Continuity Exercise Series: Multiple Dates, Sep. – Dec., 2014
SIFMA is coordinating with government and private organizations to sponsor a two year series of pandemic influenza continuity exercises to mitigate vulnerabilities during a pandemic influenza outbreak; identify gaps or weaknesses in pandemic planning or in organization pandemic influenza continuity plans, policies, & procedures; and encourage public and private organizations to jointly plan for, and test, their pandemic influenza plans.
FEMA Pandemic Exercise

Join SIFMA to Invest It Forward this September
Invest it Forward™ is a new program from SIFMA and the SIFMA Foundation that connects teachers and classrooms with financial industry professionals and firms. If you are a financial industry professional or a financial services firm wanting to volunteer, and to discover specific ways you can bring your passion and expertise into classrooms and youth-serving nonprofits in the coming school year, sign up to join us today.




Earn Ethics CLE Credits: SIFMA Ethics Seminar – Oct. 28, NYC or Webinar
Join SIFMA and SIFMA's Compliance & Legal Society at an Ethics Seminar for financial services lawyers. Top industry professionals will discuss a range of topics, including: the SEC and CFTC ethics rules, internal investigations, privilege issues, client relationships, and much more. Whether you are in-house and outside counsel, learn more about the current ethical issues impacting the industry and satisfy all your ethics credit at this half-day event! If you are unable to attend in person, register for the webinar and still be eligible for CLE Ethics credits.
Register Today

SIFMA Annual Meeting: Program Sneak Peeks – Nov. 10, NYC
SIFMA's 2014 Annual Meeting once again gathers the leaders of the financial services industry together with prominent policymakers and financial media. Join us to explore the role of capitalism in creating opportunity across America. In one-on-one conversations and on in-depth panels, today’s foremost thought leaders – including former Mayor of the City of New York and Founder of Bloomberg LP, Michael Bloomberg, and Co-Founder and Co-CEO of the Carlyle Group, David Rubenstein, and Stephen Luparello, the new Director of Trading and Markets for the Securities and Exchange Commission – will share their perspectives on how the financial services industry will best serve tomorrow's economy.
Register Today

Announcing SIFMA's Diversity Conference 2014: Nov. 13-14, St. Louis
Join SIFMA to discuss global Diversity and Inclusion, including the trends that are shaping the future workplace, how to effectively manage and monitor the impact of your Diversity & Inclusion programs, why diversity matters on corporate boards, and much more! Confirmed featured speakers include: Barney Frank, U.S. Congressman (1981-2012) and Chairman of the House Financial Services Committee (2007-2011); and Bonnie St. John, Olympic Athlete, Best-Selling Author, Fortune 500 Business consultant, and former White House Official.
Early bird rates are now available!

NAST Annual 2014 Conference
The National Association of State Treasurers (NAST) will be hosting its 2014 annual conference in Mackinac Island, Michigan on September 6 through September 10. The conference features a session on “Lessons Learned from Financially Distressed Municipalities,” among other municipal topics. James E. Spiotto, Managing Director of Chapman Strategic Advisors LL is scheduled to provide insights on municipalities fiscal stability. NAST is a non-profit organization comprising U.S. state treasurers, financial service experts, and other finance officials.
NAST’s Preliminary Agenda

SIFMA Bookstore Spotlight: The Fundamentals of Municipal Bonds
Reuters has called this text "an excellent general primer on the market." This informative volume is the newly revised and updated sixth edition of the long-heralded classic text on the municipal securities market. The text provides a basic understanding of the market for a wide range of readers, including experienced professionals – such as investment bankers, traders, brokers, and professional investors – as well as public officials, academicians, students, and sophisticated individuals.
Read More and Purchase Book

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