MSRB recommends federal oversight for municipal intermediaries, creation of muni czar

By Angela McDaniels

Tacoma, Wash., Feb. 11 - The Municipal Securities Rulemaking Board said it is making recommendations to Congress for bringing unregulated intermediaries in the municipal securities market under federal oversight.

The board is also making the case for changes to the overall federal financial regulatory structure that includes the creation of a municipal securities czar.

According to a news release, the board is recommending to Congress that it:

• Subject financial advisers, investment brokers and other intermediaries in the municipal market to a comprehensive regulatory scheme that prohibits fraudulent and manipulative practices, requires fair treatment of investors, issuers and other market participants, ensures rigorous standards of professional qualifications and promotes market efficiencies;

• Create an overall regulatory framework for the financial markets that consists of a market stability regulator, a prudential financial regulator and a business conduct regulator;

• Create a federal-level position charged with representing the needs of the municipal market or create a senior-level, multi-agency group to coordinate municipal finance issues;

• Create a more formal process for coordination among federal and state entities charged with enforcement of securities laws;

• Subject derivative instruments based on municipal securities to the same comprehensive regulations being considered for the overall derivatives market; and

• Use market-funded, market-specific self-regulatory organizations to embody and expand on basic antifraud standards of federal securities laws.

The Municipal Securities Rulemaking Board is based in Alexandria, Va. It was established in 1975 by Congress to develop rules regulating securities firms and banks involved in underwriting, trading and selling municipal securities.

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