Securities Litigation

The SEC recently approved the Municipal Securities Rulemaking Board's ("MSRB") extension to Municipal Advisors ("MA's") of its dealer Rule G-20, restricting gifts in connection with municipal securities. The Rule also updates and consolidates existing guidance and conforms to FINRA's similar requirements in FINRA Rule 3220. The Rule adds a new prohibition against entertainment-expense reimbursement from offering proceeds, Rule G-20(e). In general, the Rule prohibits gifts or services (including gratuities) exceeding $100 per year to any person if they relate to the provision of municipal advisory services, with some exceptions, including:

• Normal Business Dealings: Occasional gifts of meals or tickets to events hosted and attended by advisors, or sponsored business functions recognized by the IRS as deductible business expenses;
• Customary, decorative transaction commemorative gifts (like Lucite tombstones or plaque);
• Gifts of de minimis value;
• Promotional logo gifts of nominal value;
• Personal gifts, like bereavement, wedding, birthday or baby presents, not paid for or reimbursed by the firm.

The Rule also prohibits entertainment reimbursement from offering proceeds and requires records of all gifts, whether exempt or not. The new provisions of Rule G-20 become effective May 6, 2016. The Dodd-Frank Act established regulation of Municipal Advisors and tasked the MSRB with fleshing out the regulatory regime, subject to SEC approval. The MSRB first proposed this extension of its long-standing gift-limitations Rule G-20 to municipal advisors last October in Reg. Notice 2014-18, here. See MSRB Reg. Notice 2015-21 (Nov. 9, 2015). The Adopting Release 34-76381 (File No. SR-MSRB-02015-09) (Nov. 6, 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).