The MSRB notified municipal advisors of updated guidance on Rule G-42 affecting the duties of non-solicitor municipal advisors and the making of recommendations.
On February 15, the MSRB requested feedback on frequently asked questions ("FAQs") relating to the difference between requirements for municipal advisors "providing advice on" and "making recommendations of" municipal securities transactions and municipal financial products. In response to the feedback, the MSRB revised the FAQs to clarify that:
- readers should assume that the information in each FAQ meets the definition of "advice" for purposes of Rule G-42;
- each G-42 recommendation determination is based on the prevailing facts and circumstances of a particular communication and, specifically, cannot be avoided based on the wording (such as using "could" or "may"); and
- readers should cross-reference FAQs with the current conduit issuer guidance.
The MSRB stated that it will consider providing guidance regarding recordkeeping requirements related to Rule G-42 at a later date.
Commentary / Steven Lofchie
The MSRB acknowledges that the regulations governing municipal advisors are still relatively new and, thus, that it is particularly open and interested in industry comment on market practices and appropriate standards. The draft MSRB FAQ is also notable for a fairly extensive discussion of the term "recommendation," a term that is notably undefined in the FINRA Rules and in the SEC's new Best Interest proposal but that could come to have great regulatory enforcement significance if the SEC adopts its best interest standard. Accordingly, it is advised, in fact, recommended, that firms closely review the MSRB's discussion of the term "recommendation."
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