New MSRB fair-pricing rule effective July 7, 2014

Abstract

Purpose

To summarize revised MSRB Rule G-30, which governs municipal bond dealer fair-pricing obligations.

Design/methodology/approach

Discusses background of previous MSRB fair-pricing rules and interpretive guidance. Outlines the basic dealer obligations arising under revised MSRB Rule G-30. Discusses three key aspects of the new rule and recent rulemaking effort: the obligation of dealers to exercise “diligence” in assessing a municipal security’s market value and reasonableness of compensation, the distinction between fair security pricing and reasonable dealer compensation, and previous MSRB guidance that is superseded by the rule change. Also discusses similar rule changes related to fair-pricing, mark-ups, markdowns and commissions that have been proposed by FINRA that would apply to non-municipal securities if adopted.

Findings

Revised MSRB Rule G-30 generally preserves existing municipal bond fair-pricing obligations while consolidating obligations that previously existed in multiple MSRB rules and interpretive guidance.

Practical implications

The MSRB generally sought to preserve the substance of existing dealer fair-pricing obligations in revised MSRB Rule G-30 but dealers should evaluate their existing compliance frameworks in light of the recent revisions. The recent changes include deletion of prior MSRB Rule G-18 and superseding of certain interpretive guidance.

Originality/value

Practical explanation by experienced financial services lawyer.

Citation

R. Anderson, S. (2014), "New MSRB fair-pricing rule effective July 7, 2014", Journal of Investment Compliance, Vol. 15 No. 3, pp. 47-50. https://doi.org/10.1108/JOIC-08-2014-0032