Advisors, dealers seek tweaks to MSRB requalification proposal
3 min read
Municipal advisory and broker-dealer firms broadly support the Municipal Securities Rulemaking Board’s proposal to ease the process by which a former muni advisor can rejoin the profession, though both groups of stakeholders seek clarification from the MSRB.
That was the message broadly relayed by two major groups responding to the MSRB’s request for comment on proposed amendments to its Rule G-3 on professional qualifications. The MSRB published the request for comment in December, proposing to allow previously qualified muni advisors, who have been out of the profession for two or more years, a one-time exemption from having to requalify by examination under certain conditions. The current rule requires individuals whose registrations have lapsed to take and pass the Series 50 exam again, except in certain “extraordinary cases.”
“NAMA is supportive of the proposed amendments to Rule G-3 and believes they will achieve the MSRB’s goals to allow professionals greater flexibility with their MA status and alleviate the MSRB of conducting the waiver process,” National Association of Municipal Advisors Executive Director Susan Gaffney wrote in the group’s comment letter.
The Securities Industry and Financial Markets Association, which represents a number of broker-dealer firms that also maintain municipal advisory businesses, also broadly agreed with the MSRB’s aims.
“SIFMA members appreciate the goal of the proposed amendments to allow for registered professionals to be able to step away from the industry for a time and requalify without examination,” wrote Leslie Norwood, SIFMA’s head of municipals. “This exemption is beneficial for firms to retain talent and beneficial for professionals who may want to spend a few years in an unregulated role or otherwise away from the industry.”
The proposal would allow individuals to avoid having to retake the exam if they previously passed it, were registered for at least three consecutive years, have not had their registrations lapse for more than three years, have not participated in unregistered advisory activity in the interim, and have stayed out of regulatory trouble. Upon rejoining a muni advisor firm, the individual would have to complete all continuing education requirements, review firm written policies and procedures, and resubmit their registration form to the Securities and Exchange Commission.
Gaffney told the MSRB her members had some questions and concerns regarding certain scenarios that might arise under the proposal, such as in the cases of sole practitioners returning to work.
“We do call into question the burdens on small and single practitioner firms that could accompany the new amendments,” Gaffney wrote. “Without greater clarification, there could be unnecessary burdens and costs associated with implementation and compliance with the rule. This is especially true for those individuals who may want to establish their own firm while utilizing the exemption. We strongly request that the MSRB engage in discussing with market participants and developing guidance on the application of the amendments and include how they will apply especially when an individual establishes/reestablishes their own firm.”
Norwood told the MSRB that SIFMA would like to see relief similarly extended to muni advisor principals, not just representatives. SIFMA also stressed that MSRB’s approach should match what the Financial Industry Regulatory Authority prescribes for broker-dealers.
“We feel having two completely different sets of rules for municipal advisors and broker dealers, in this instance, is unduly complicated, expensive, and burdensome both for firms and individuals seeking to requalify,” Norwood wrote. “For these reasons, SIFMA members do not feel it is necessary to have a different requalification process for municipal advisors and broker dealers, but instead seek to have the process be uniform to reduce the regulatory burden and increase the likelihood of compliance.”
The MSRB could choose to submit the proposal as-is for SEC approval, or could choose to make changes based on comments.
