April 29, 2020

VIA ELECTRONIC SUBMISSION

Ronald W. Smith
Corporate Secretary
Municipal Securities Rulemaking Board
1300 I Street NW, Suite 1000
Washington, DC 20005

Re: MSRB Notice 2020-02 – Amendments to MSRB Rule A-3: Membership on the Board

Dear Mr. Smith,

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates this opportunity to comment on the Municipal Securities Rulemaking Board’s (“MSRB”) proposed amendments to MSRB Rule A-3 governing membership on the MSRB’s Board. We welcome the MSRB’s review of its governance with a view to better protecting investors, issuers, and the public interest. This goal can be achieved by a Board that is truly representative and knowledgeable of the municipal securities market.

I. Board Composition

We strongly object to the proposal to reserve two seats on the Board for municipal advisors and to further qualify the type of municipal advisor that can fill a seat. This proposal not only gives municipal advisors outsized representation compared to other regulated categories, but it also favors certain types of municipal advisors over others. First, reserving two seats for municipal advisors on a smaller Board reflects neither the MSRB’s membership nor the municipal securities market. Dealers firms, for example, employ tens of thousands of individuals who are licensed to transact in municipal securities (including Series 51, 52, and 53 holders) engaged in municipal securities-related activities and those that support them, while the number of licensed municipal advisors (Series 50 and 54 holders) and those that support them represent are a mere fraction of that number. Like municipal advisors, dealers engage in a broad range of activities too, but they have just one reserved seat per category. Dealers are also subject to the whole gambit of the MSRB’s rulebook for the broad range of activities they engage in and they pay the majority of the MSRB’s regulatory fees, unlike municipal advisors. Equal representation on the Board is vital to ensure that all regulated entities have a fair say in their regulation. This results in better regulation and more effective compliance that ultimately benefits the municipal securities market.

Second, placing qualifications on the type of municipal advisor that may serve on the Board, like the proposal to limit a seat to advisors with a related non-underwriting dealer, favors certain advisors over others and it is very targeted. In practice, less than a handful of advisors fit that profile, in contrast to the multitude of dual-registrant municipal advisors who are affiliated with full-service dealers. It limits the perspectives of municipal advisors as well as ignores the MSRB registrants that are dually-registered and for whom municipal advisory services represent a significant part of their overall business. We believe that any individual  who holds a Series 50 or 54 should be able to serve in the municipal advisor slot regardless of the type of municipal advisor they are associated with.

Above all, as a matter of good governance, the Board should exercise its flexibility to consider and solicit Board participation by an individual’s area of expertise, not their association with a regulated class. We believe that the Board should be composed of members that have different backgrounds and experiences and represent various functions within the municipal securities market. We suggest that, on the industry side, the Board could benefit from having with members with public finance banking, compliance, operations, institutional and retail trading, or underwriting experience; whereas, on the public side, the Board could benefit from members from the issuer community, a buy-side investor, or a municipal analyst, for example.