Letters

MSRB Form G-45 under Rule G-45, on Reporting of Information on Municipal Fund Securities; regarding 529 college savings plans and ABLE Programs

Summary

SIFMA provides comments to the Municipal Securities Rulemaking Board’s (MSRB) in response to the Request for Comment on Draft Amendments to MSRB Form G-45 under Rule G-45, on Reporting of Information on Municipal Fund Securities.  The MSRB is proposing to amend Form G-45 to clarify an existing data element and add three additional data elements about Investment Option information in 529 college savings plans and Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE programs).

Also, see: MSRB Reg. Notice 2017-17, Request for Comment on Draft Amendments to MSRB Form G-45 under Rule G-45, on Reporting of Information on Municipal Fund Securities(Aug. 22, 2017)

PDF

Submitted To

MSRB

Submitted By

SIFMA

Date

21

September

2017

Excerpt

September 21, 2017

Via MSRB Request for Comment Portal

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

Re: Regulatory Notice 2017-17 – Request for Comment on Draft Amendments to MSRB Form G-45 under Rule G-45, on Reporting of Information on Municipal Fund Securities _

Dear Mr. Smith:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates this opportunity to respond to the Municipal Securities Rulemaking Board’s (“MSRB”) Request for Comment on Draft Amendments to MSRB Form G-45 under Rule G-45, on Reporting of Information on Municipal Fund Securities (the “Notice”). 2 The MSRB is proposing to amend Form G-45 to clarify an existing data element and add three additional data elements about Investment Option information in 529 college savings plans and Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (“ABLE programs”). The proposed amendments would purportedly allow the MSRB to “make more accurate comparisons across 529 plans and ABLE programs, enhancing [its] ability to understand and monitor the market.”3

While we are supportive of the MSRB’s transparency efforts that are effective tools for regulatory oversight or investors, we have concerns, many of which are not new and shared with the Investment Company Institute (“ICI”) and other market participants, including the College Savings Foundation and College Savings Plans Network, about the proposed amendments. Chiefly, we have always maintained the position that municipal securities dealers who underwrite 529 plans should only be required to submit the information required by Form G-45 to the extent it is within their possession, custody, or control. The new data elements, namely the benchmark return percent and performance data by asset class, that the MSRB is proposing to collect are not within underwriters’ possession, custody, or control. In fact, this data is held by entities outside the jurisdiction of the MSRB. Obtaining such information directly from underwriters is misplaced, would impose substantial costs on them and negatively impact the dealer-sold 529 plan and ABLE programs market vis-à-vis direct-sold programs, not to mention the increased costs passed on to investors. At the outset, we question whether the additional data elements would achieve their intended purpose.

I. The Draft Amendments Would Not Demonstrably Enhance the MSRB’s Ability to Understand the 529 Plan and ABLE Program Markets

Ostensibly, the MSRB maintains that the proposed amendments will enhance its ability to understand the 529 plan and ABLE program market, and the additional data collected will allow it and other regulators to monitor the market for potential risks and wrongful conduct. However, we question whether this is possible when the MSRB is only looking at a fraction of the market. By statute, the MSRB only has the authority to regulate advisor-sold 529 plans and ABLE programs, not issuer direct-sold programs. Because of the limited scope of its authority, the MSRB is not obtaining the full picture of the market, and it is simply imposing a greater standard of disclosure, administrative burdens and costs on underwriters that even the SEC does not require of mutual funds. In addition, our members believe that, at least with respect to performance data by asset class, the MSRB would be employing imprecise methodologies to analyze subjective data; investment managers, who hold this data, use asset classes differently, for example. As a result, the MSRB would be analyzing and making judgments based on inaccurate data. For these reasons, as well as the cost of reporting additional information, we do not believe that any other information is necessary on the Form G-45 for the MSRB to fulfill its role.

Continue Reading >

1 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $20 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.

2 Request for Comment on Draft Amendments to MSRB Form G-45 under Rule G-45, on Reporting of Information on Municipal Fund Securities, MSRB Reg. Notice 2017-17 (Aug. 22, 2017), http://msrb.org/~/media/Files/Regulatory-Notices/RFCs/2017-17.ashx?n=1.

3 Press Release, MSRB Seeks Comment on Refining Data Collected About 529 Plans and ABLE Programs (Aug. 22, 2017), http://www.msrb.org/News-and-Events/Press Releases/2017/MSRB-RFC-Refining-DataCollected-About-529-Able-Programs.aspx.