On Christmas Eve's eve, the SEC approved, without change, the MSRB's proposed conduct rule for municipal advisors. Broadly, the Rule imposes:
- Fiduciary duty (care and loyalty) to municipal entity clients but only a duty of care to obligated persons;
- Written engagement-letter and conflict-disclosure regime;
- Suitability and KYC requirements;
- A list of prohibited practices, including a wide-ranging (but not absolute) ban on principal transactions with municipal entity clients.
New Rule G-42 has been in the works since January, 2014 and the MSRB filed two amendments with the SEC since. I discussed the latest changes (now adopted) making a narrow exception for particular fixed-income securities (after disclosure and consent) to the controversial principal-transaction ban, here. And the Rule proposal in greater depth here. New Rule G-42 will become effective in June 2016. The Adopting Release, No. 34-76753, SR-MSRB-2015-03 (SEC Dec. 23, 2015) is here.
Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 29 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2015 by Thomas K. Potter, III (all rights reserved)
PartnerTom Potter is a Partner in the firm's Nashville office, and his practice focuses on securities, corporate disputes, and appellate litigation. Tom has over 35 years of experience representing business interests.
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