Dealer-dealer teams help Securities and Trade Fee approval of the Municipal Securities Rulemaking Board’s multi-year charge card proposal, whereas the Nationwide Affiliation of Municipal Advisors does not oppose the MSRB’s submitting, Oct. 24 remark letters to the SEC present.
“BDA helps the proposal and we encourage the fee to approve it,” the Bond Sellers of America mentioned in its remark letter. “Whereas not with out flaws, the proposal is according to statute and customarily represents an inexpensive strategy to a sustainable MSRB funding plan.”
The Securities Trade and Monetary Markets Affiliation helps the SEC’s approval of the MSRB’s submitting and “proposes to proceed to satisfy with the MSRB to advocate for added incremental adjustments to its charge construction,” SIFMA’s letter mentioned.
The MSRB filed its proposed charge card for sellers and municipal advisors with the SEC Sept. 30. The MSRB’s proposal would set up charge card charges for the following 4 calendar years. The multi-year charge card replaces the MSRB’s annual charge card mannequin.
“Over the previous 18 months we’ve got listened to suggestions from our stakeholders and labored to handle their issues relating to our finances, reserves and charges following the suspension of our proposed 2024 charge card,” MSRB CEO Mark Kim mentioned within the launch. “The brand new multi-year charge card supplies higher transparency, stability and certainty in charges for regulated entities, leading to a extra predictable, rate-setting mannequin for MSRB.”
The MSRB, a self-regulatory group overseen by Congress and the SEC, does not obtain federal appropriations and is funded primarily by way of charges paid by regulated entities. The board established its present charge card mannequin in 2022. In November 2023, the MSRB filed with the SEC proposed amendments to MSRB Guidelines A-11 and A-13 to institute charge card charges for 2024.
Nonetheless, remark letters submitted to the SEC relating to the 2024 charge card proposal cited issues “associated to the MSRB’s charge setting processes and the volatility and unpredictability of charges underneath the present charge card mannequin,” the Sept. 30 submitting mentioned. The SEC
In response, the MSRB withdrew its proposed 2024 charge card “and started conducting in depth stakeholder outreach to solicit suggestions previous to proposing the following iteration of its charge card,” based on FAQs on its web site which have been up to date on Sept. 30 to handle questions regarding the new charge card proposal.
In its Oct. 24 letter, BDA mentioned it appreciated the MSRB’s “responsiveness to our concern that the earlier annual charge card system resulted in extreme charge charge volatility.”
Whereas BDA’s letter inspired the SEC to approve the MSRB’s multi-year charge card proposal, it additionally mentioned that as BDA positive aspects expertise with the brand new charge card system, the group expects “to proceed urgent” the MSRB in three areas.
One such space is the “relative contributions of broker-dealers and municipal advisors,” BDA’s letter, signed by Michael Decker, senior vp for analysis and public coverage at BDA.
“As we’ve got argued earlier than the fee and the board quite a few occasions earlier than, the contribution of regulated municipal advisors (MAs) to the MSRB’s finances is just too small,” BDA’s letter mentioned, including that the MSRB’s proposal would elevate the municipal advisor skilled charge by 6.6% in 2026 and by roughly 6% a 12 months in every of the next three years.
“Even with these will increase, nonetheless, [broker-dealers] will nonetheless pay almost 90 p.c of MSRB income derived from charges imposed on regulated entities,” BDA’s letter mentioned. “There isn’t a justification for this hole in contribution 15 years after MAs turned regulated.”
In its letter, BDA pointed to a portion of the MSRB’s charge card submitting which says “the MSRB believes that it could be applicable, over the course of this upcoming multi-year interval, to undertake a evaluation of municipal advisory actions and any potential mechanisms for gauging ranges and sorts of such actions that is perhaps applicable to be used in future municipal advisor charge settings underneath the multi-year charge card course of.”
BDA concurs “and welcomes this evaluation,” its letter mentioned.
“We consider a market-activity based mostly charge for MAs can be an applicable technique of addressing the hole between seller and MA contributions,” BDA’s letter to the SEC mentioned. “We look ahead to working with the board on this.”
SIFMA additionally expressed help for a market activity-based charge on MAs in its letter, signed by Leslie Norwood, managing director and affiliate basic counsel at SIFMA.
“SIFMA urges the MSRB to contemplate a municipal advisor market exercise charge on competitively bought new points as a further income supply,” Norwood mentioned within the letter. “SIFMA additionally would love the MSRB to proceed to extend municipal advisor charges, as such charges nonetheless solely signify 8% of the MSRB’s finances…”
NAMA, which represents municipal advisory companies and particular person MAs from throughout the nation, “doesn’t oppose the submitting or the institution of the four-year charge card,” its remark letter to the SEC mentioned.
The brand new strategy of setting charges for 4 years versus yearly affords MAs and broker-dealers “the chance to plan accordingly over this time horizon,” NAMA’s letter, signed by Susan Gaffney, NAMA’s government director, mentioned.
“Whereas that’s optimistic, we’re involved with how the MSRB will develop its budgets in these identical 4 years, guaranteeing that bills are in step with its regulatory mandate in order that the charges are assessed on an inexpensive foundation,” NAMA’s letter mentioned.
NAMA believes the per-MA charge stays “the one viable answer to gather charges on municipal advisors,” and it appreciates the MSRB’s help for that strategy, NAMA’s letter mentioned.
In follow-up feedback supplied to The Bond Purchaser, Gaffney mentioned NAMA has said many occasions {that a} market activity-based charge is inappropriate and unworkable for a lot of causes, together with the number of providers that MAs present and the way they’re paid for these providers.
“The MSRB has spent appreciable time discussing the best way to assess charges on MAs and continues to conclude that per-MA charges are probably the most applicable,” Gaffney mentioned in an Oct. 25 e-mail.
A second space the place BDA plans to proceed urgent the board is the four-year fee-setting window, based on its letter, which mentioned that such a window is probably going too lengthy.
“We acknowledge that the proposal features a technique of utilizing short-term credit sooner or later in opposition to over-collection by the MSRB just like the 45-percent credit that may apply to BD market exercise charges in 2026 and 2027,” the letter mentioned. “However a greater answer can be to not gather extra money than is required from the business within the first place.”
A two-year window would maybe be a greater compromise, BDA mentioned in its letter, including that it could “proceed to have interaction with the board on this query as we achieve expertise with the brand new charge card system.”
Lastly, BDA in its letter mentioned whereas it appreciates that the MSRB will undertake periodic evaluations of its income in the course of the proposed four-year fee-setting window, it’s urging the board to formalize an annual evaluation course of.
