Oral Testimony of Municipal Securities Rulemaking Board 

Ronald Stack, Chair 

to the 

United States Senate 

Committee on Banking, Housing, & Urban Affairs 

March 26, 2009 

 

 Good morning Chairman Dodd, Ranking Member Shelby, and 

Members of the Committee. I am Ronald Stack, Chair of the 

Municipal Securities Rulemaking Board. I am pleased to testify 

today on behalf of the MSRB at the Committee’s second hearing on 

Enhancing Investor Protection and the Regulation of the Securities 

Markets. 

 The MSRB was created by the Congress in 1975 in the midst of 

the New York City fiscal crisis to write rules for municipal securities 

dealers -- many of whom at the time were unregulated and 
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unsupervised or registered by the SEC. Our mission was and 

remains clear: to protect the investing public and promote a fair and 

efficient market for municipal securities. This $2.7 trillion municipal 

market is fundamental to financing our nation’s infrastructure. 

Indeed, over 55,000 entities issue municipal securities -- which is ten 

times the number of corporate issuers. We are absolutely committed 

to preserving municipal access to capital, market integrity, and 

investor protection. This is our mission. 

 One of the most important ways to protect investors and 

preserve market integrity is through a culture of transparency that 

makes information available to all. Historically, access to public 

disclosures about municipal bonds has been hindered by a severely 

fragmented disclosure system that was cobbled together over the 

years. This system does not promote public access to disclosure 
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documents and it does nothing to shine a light on the disclosure 

practices of issuers, good or bad. 

 The MSRB has developed a comprehensive website that is 

transforming municipal disclosure and transparency for all investors, -

- large and small, institutional and retail. The MSRB’s Electronic 

Municipal Market Access system -- which we call “EMMA” – is so 

advanced that it exceeds disclosure systems for any other fixed 

income market, including corporate bonds. 

 With EMMA, all investors have free access on the web to an 

incredible amount of information about municipal securities. We’ve 

had real-time trading information up since 2005 and have added 

Official Statements and information about auction rate securities. 

Starting next week, we’ll add data about variable rate bonds. And, 

finally, in July of this year, we’ll be including all continuing disclosure 
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filings from municipal bond issuers, pursuant to a rule amendment 

passed by the SEC. 

 Our new system of making continuing disclosure available 

easily and on the web will be a vast improvement over the current 

system. EMMA will serve as a red flag for poor disclosure by issuers, 

just as it reveals good disclosure practices. 

 But good, timely dissemination of disclosure is only one of our 

myriad responsibilities. 

• We require municipal securities dealers to observe the highest 

professional standards in their dealings with investors -- full 

disclosure, suitability, fair pricing. 

• We are the only federal regulator that has successfully 

implemented a ban on pay-to-play. 
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• We test dealers’ professional qualifications and require them to 

take continuing education courses. 

• We have a complete set of rules regulating municipal dealers 

that we constantly review, modify, and change as necessary -- 

all with the approval of the SEC. 

 Unfortunately, we continue to read reports about other 

municipal market participants engaging in pay-to-play and similar 

activities. Some are alleged. And some are still under investigation. 

But, whatever the ultimate outcome, the market suffers from an 

“appearance” problem -- and that is not good for the municipal market 

or, for that matter, any market. 

 Earlier this year, we wrote to you and your colleagues on the 

House Financial Services Committee about the potential for 

regulation of some of these other market participants. They serve 
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critical roles in many of the complex financings and related derivative 

transactions that have become so commonplace in the municipal 

securities market today. They advise state and local governments -- 

big and small -- on how to structure a bond issue, how to sell it, how 

to market it, what type of securities to sell, how to invest bond 

proceeds, whether to use swaps, and other related derivative 

transactions. We believe that these and other similar market 

participants should be registered with the SEC and regulated by the 

MSRB, with rules similar to those that already apply to dealers. Many 

of them are fiduciaries and they should be subject to standards of 

professional conduct. Pay-to-play should be prohibited, just like it 

was prohibited for dealers in 1994. 

 I want to emphasize that I know that most of these participants 

and individuals are ethical and well-qualified. But, unfortunately, not 
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all of them are, and the activities of a few can taint the entire 

municipal market, by fact and by appearance. That’s something that 

we can’t afford -- especially in this current financial crisis. During this 

time of market stress, it is crucial that clear guideposts exist and that 

investor confidence in the municipal securities market is not 

undermined by questionable practices. Preventing pay-to-play 

throughout the municipal market is even more important now as the 

Congress has recognized the importance of rebuilding the nation's 

infrastructure and supported that goal through the stimulus bill. Also, 

as Treasury seeks to find solutions to assist the municipal bond 

market through the financial crisis, ensuring that all market 

participants adhere to the highest professional standards is essential. 

 The MSRB looks forward to working with the Committee, as 

well as other regulators and market participants, to ensure that the 
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level of investor protection provided in the municipal securities market 

is second to none. 

 Senators, thank you once again for inviting the MSRB to 

participate in this important hearing. 

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