In response to an MSRB retrospective rule review, SIFMA recommended clearing up ambiguities within existing regulations concerning ethical standards for financial advisors.
As previously covered, the MSRB requested comments on whether the requirements of MSRB Rule G-23 ("Activities of Financial Advisors," or the "Rule") reflect current practices in the municipal securities market. The Rule is intended to minimize the conflict of interest that exists when a dealer acts as an advisor and an underwriter for the same issuance.
SIFMA offered recommendations to address situations where the Rule (i) is kept as a "standalone" or (ii) is incorporated into MSRB Rule G-42 ("Duties of Non-Solicitor Municipal Advisors"). SIFMA recommended:
- preserving and expanding on the exceptions to the role-switching prohibition;
- clarifying the municipal advisory framework for both dealer and non-dealer municipal advisors and, more specifically, what is and is not permitted when acting in a specific role;
- eliminating the term "financial advisor" and replacing it with "municipal advisor";
- improving the "efficiency and effectiveness" of the disclosures required under the MSRB regulatory framework;
- refraining from providing interpretive guidance on what constitutes an "issuance" for purposes of the prohibition on role switching; and
- addressing inconsistencies among the MSRB's previous guidance, Rule G-42 and the SEC's guidance.
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