MSRB Rule G-23 Concerning the Activities of Financial Advisors Effective November 27, 2011
The Municipal Securities Rulemaking Board (MSRB) reminds brokers, dealers, municipal securities dealers (“dealers”) and municipal advisors of amendments to MSRB Rule G-23, on activities of financial advisors, which are effective on November 27, 2011. The Securities and Exchange Commission (“Commission” or “SEC”) on May 27, 2011 approved the MSRB’s proposed rule change to Rule G-23 concerning activities of financial advisors. The proposed rule change consists of: (i) amendments to Rule G-23 (on activities of financial advisors) and (ii) an interpretive notice concerning Rule G-23, as described below.
In general, Rule G-23 has been amended to prohibit a dealer that serves as financial advisor to an issuer for a particular issue sold on either a negotiated or competitive bid basis from switching roles and underwriting the same issue. The amendments to Rule G-23 will, subject to the exceptions described below:
- prohibit a dealer financial advisor with respect to the issuance of municipal securities from acquiring all or any portion of such issue directly or indirectly, from the issuer as principal, or acting as agent for the issuer in arranging the placement of such issue, either alone or as a participant in a syndicate or other similar account formed for that purpose;
- apply the same prohibition to any dealer controlling, controlled by, or under common control with the dealer financial advisor; and
- prohibit a dealer financial advisor from acting as the remarketing agent for such issue.
The amendments to Rule G-23 will not prohibit:
- a dealer financial advisor from placing an issuer’s entire issue with another governmental entity, such as a bond bank, as part of a plan of financing by such entity for or on behalf of the dealer financial advisor’s issuer client;
- a dealer financial advisor from serving as successor remarketing agent to an issuer for the same issue with respect to which it provided financial advisory services if the financial advisory relationship with the issuer has been terminated for at least one (1) year; or
- a dealer financial advisor from purchasing such securities from an underwriter, either for its own trading account or for the account of its customers, except to the extent that such purchase is made to contravene the purpose and intent of the rule.
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