Embargoed until 

March 26, 2009, at 1:00 pm 

Statement of 

Ronald A. Stack, Chair 

Municipal Securities Rulemaking Board 

on 

Transparency and Regulation in the Municipal Securities Market 

before 

Committee on Banking, Housing and Urban Affairs 

United States Senate 

March 26, 2009 

Municipal Securities Rulemaking Board 

1900 Duke Street 

Suite 600 

Alexandria, VA 22314 

703-797-6600 
Good morning Chairman Dodd, Ranking Member Shelby, and Members of the 

Committee. I am Ronald Stack, Chair of the Municipal Securities Rulemaking Board 

(“MSRB” or “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. Part I of my testimony provides a summary of the MSRB’s 

structure, authority, rules, information systems, and market transparency/ 

surveillance activities. Part II provides background on the municipal securities 

market. Part III is a discussion of what the MSRB is doing now to promote 

transparency in the municipal marketplace. Part IV points out significant gaps in 

the regulation of municipal market participants and discusses the manner in which 

the MSRB could further assist in enhancing investor protection and the regulation of 

the securities market, if its jurisdiction were expanded by the Congress. Finally, 

Part V is an executive summary of our major recommendations. 

I. BACKGROUND ON THE MSRB’S STRUCTURE, AUTHORITY, RULES, 

 INFORMATION SYSTEMS, AND MARKET TRANSPARENCY/ 

SURVEILLANCE ACTIVITIES 

A. MSRB Structure

The MSRB is a self-regulatory organization (“SRO”) established by the 

Congress in the Securities Acts Amendments of 1975 to develop rules for brokers, 

dealers, and banks (collectively “dealers”) engaged in underwriting, trading, and 

selling municipal securities. In furtherance of our investor protection mandate, the 
2

Board also operates information systems designed to promote transaction price 

transparency and access to municipal securities issuer disclosure documents. The 

MSRB stands as a unique SRO for a variety of reasons. The MSRB was the first SRO 

specifically established by Congress. Also unique is the fact that the legislation, 

codified in section 15B of the Securities Exchange Act (“Exchange Act”), dictates that 

the MSRB Board shall be composed of members who are equally divided among 

public members (individuals not associated with any dealer), individuals who are 

associated with and representative of banks that deal in municipal securities (“bank 

dealers”), and individuals who are associated with and representative of securities 

firms.1 At least one public member serving on the Board must represent investors 

and at least one must represent issuers of municipal securities. Further, the MSRB 

was created as a product-specific regulator, unlike most other securities regulatory 

bodies. 

Members of the MSRB meet throughout the year to make policy decisions, 

approve rulemaking, enhance information systems and review developments in the 

municipal securities market. Day-to-day operations of the MSRB are handled by a 

full-time independent, professional staff. The operations of the Board are funded 

through assessments made on dealers, including fees for underwritings and 

transactions.2

 

1 Under MSRB Rule A-3, the Board is composed of 15 member positions, with 

five positions each for public, bank dealer, and securities firm members. 

2 These fees are set forth in MSRB Rules A-12 through A-14. 
3

B. MSRB Authority

The substantive areas of the MSRB’s rulemaking authority are described in 

Section 15B(b)(2) of the Exchange Act, which lists several specific purposes to be 

accomplished by Board rulemaking with respect to the municipal securities 

activities of dealers in connection with their transactions in and provides a broad 

directive for rulemaking designed to: 

prevent fraudulent and manipulative acts and practices, to promote 

just and equitable principles of trade, to foster cooperation and 

coordination with persons engaged in regulating, clearing, settling 

and processing information with respect to and facilitating 

transactions in municipal securities, to remove impediments to and 

perfect the mechanism of a free and open market and, in general, to 

protect investors and the public interest. 

 Like other SROs, the MSRB must file its proposed rule changes with the 

Securities and Exchange Commission (“SEC”) for approval prior to effectiveness. 

Although the MSRB was created to write rules that govern dealer conduct in 

the municipal securities market, the Exchange Act directs that inspection of dealers 

for compliance with, and the enforcement of, MSRB rules be carried out by other 

agencies. For securities firms, the Financial Industry Regulatory Authority 

(“FINRA”), along with the SEC, performs these functions. For bank dealers, the 

appropriate federal banking authorities, in coordination with the SEC, have this 
4

responsibility.3 The MSRB works cooperatively with these regulators and maintains 

frequent communication to ensure that: (1) the MSRB’s rules and priorities are 

known to examining officials; (2) general trends and developments in the market 

discovered by field personnel are made known to the MSRB; and (3) any potential 

rule violations are immediately reported to the enforcement agencies. 

While Section 15B of the Exchange Act provides the MSRB with authority to 

write rules governing the activities of dealers in connection with their transactions 

in municipal securities, it does not provide the MSRB with authority to write rules 

governing the activities of other participants in the municipal finance market such 

as issuers and their agents (e.g., independent financial advisors, swap advisors, 

guaranteed investment contract brokers, trustees, bond counsel, etc.). Municipal 

securities also are exempt from the registration and prospectus delivery 

requirements of the Securities Act of 1933 and are exempt from the registration and 

reporting requirements of the Exchange Act. 

 In adopting Section 15B of the Exchange Act, Congress provided in 

subsection (d) specific provisions that restrict the MSRB and the SEC from 

regulating the disclosure practices of issuers in certain ways. Paragraph (1) of 

subsection (d) prohibits the MSRB (and the SEC) from writing rules that directly or 

indirectly (i.e., through dealer regulation) impose a pre-sale filing requirement for 

 

3 These federal banking authorities consist of the Board of Governors of the 

Federal Reserve System, the Federal Deposit Insurance Corporation, and the 

U.S. Treasury Department through its Office of the Comptroller of the 

Currency and Office of Thrift Supervision, depending upon the specific bank 

dealer. 
5

issues of municipal securities. Paragraph (2) of subsection (d) prohibits the MSRB 

(but not the SEC) from adopting rules that directly or indirectly require issuers to 

produce documents or information for delivery to purchasers or to the MSRB. 

Paragraph (2), however, specifically allows the MSRB to adopt requirements 

relating to such disclosure documents or information as might be available from “a 

source other than such issuer.” The provisions of subsection (d) commonly are 

known as the “Tower Amendment.” 

C. MSRB Rules Overview

 The MSRB has adopted a substantial body of rules regulating dealer 

conduct that reflect the special characteristics of the municipal securities market 

and its unique regulatory needs These rules require dealers to observe the highest 

professional standards in their activities and relationships with customers. MSRB 

rules take into account the fact that rules for dealers in the municipal market – 

where issuers have significant discretion and non-dealer market professionals are 

unregulated – must sometimes be crafted in ways that differ from rules for dealers 

in the corporate securities market, where bond issuers and other market 

participants are subject to regulation. 

 MSRB rules represent a balance between broad, “principles-based” rules and 

specific prescriptive rules, depending on the nature of the specific subject of 

regulation. MSRB rules can generally be categorized as (1) fair practice rules (e.g., 

requirements for dealers to provide affirmative disclosures of material facts to 

investors; to ensure the suitability of dealer recommendations of municipal 
6

securities transactions; to price transactions fairly; to avoid conflicts of interest; and 

to publish fair and accurate advertisements and price quotations); (2) uniform 

practice rules (e.g., rules to ensure that standard procedures are followed in 

underwriting, clearing, confirming, and settling transactions in municipal securities; 

helping to ensure the efficiency of market operations while accommodating the 

differences between municipal securities and other debt instruments); (3) 

professional qualification rules (e.g., requirements for dealer personnel to pass tests 

demonstrating competency; continuing education requirement); (4) operational 

standards (e.g., rules regarding recordkeeping; supervision of professionals); and 

(5) marketplace disclosure rules (e.g., rules requiring dealer real-time reporting of 

trade prices; underwriter filing of issuer disclosure documents; and dealer 

disclosure of political contributions to the MSRB for public dissemination). These 

rules significantly exceed the general anti-fraud principles that are embodied in the 

federal securities laws. 

Maintaining municipal market integrity is an exceptionally high priority for 

the MSRB as it seeks to foster a fair and efficient municipal securities market 

through dealer regulation. The MSRB engages in an on-going review of its rules and 

market practices to ensure that the Board’s overriding goal of protecting investors 

and maintaining market integrity is not compromised by emerging practices. As an 

example, the MSRB implemented rules to remove the conflict of interest that can 

arise when political contributions may be used by dealers to obtain municipal 

securities business. We also seek to coordinate our rules with FINRA rules in cases 

where similar requirements make sense. 
7

The MSRB also reminds dealers of its rules in times of market stress when 

the pace of events might cause some to lose sight of their significance. For example, 

during 2008, as bond insurer ratings were reduced frequently and significantly, we 

reminded dealers of their disclosure obligations concerning credit enhancement.4 

We also issued an interpretive notice on transactions in auction rate securities that 

reminded dealers of their obligation to recommend investments that are suitable to 

their customers5 and provided guidance on reporting dealer buybacks of auction 

rate securities.6 When many issuers rushed to convert their high yielding auction 

rate securities to variable rate demand obligations, we reminded dealers of 

restrictions on underpricing of credit and tying the provision of letters of credit to 

the provision of underwriting services. 7 

D. Information Systems and Market Transparency/Surveillance

In furtherance of our investor protection mandate, the MSRB also operates 

information systems to improve the availability of information in the market about 

municipal issues. These systems ensure that investors have information necessary 

to make investment decisions, that dealers can comply with MSRB rules, and that 

the inspection and enforcement agencies have the necessary tools to do their work. 

 

4 MSRB Notice 2008-04 on Bond Insurance Ratings (January 22, 2008). 

5 MSRB Notice 2008-09 on Application of MSRB Rules to Transactions in 

Auction Rate Securities (February 19, 2008). 

6 MSRB Notice 2008-36 on Transactions Reporting of Dealer Buybacks of 

Auction Rate Securities: Rule G-14 (September 2, 2008). 

7 MSRB Notice 2008-34 on Bank Tying Arrangements, Underpricing of Credit 

and Rule G-17 on Fair Dealing (August 14, 2008). 
8

Since 1990, the Municipal Securities Information Library (“MSIL”) system has 

collected issuer primary market disclosure documents (i.e., official statements and 

advanced refunding documents) from underwriters and made them available to the 

market and the general public. The MSIL system also accepts and disseminates 

certain secondary market information provided by municipal issuers and trustees 

pursuant to SEC Rule 15c2-12. In order to further increase the accessibility of 

municipal market information by retail investors, the MSRB has developed a free, 

centralized database, named the Electronic Municipal Market Access system or 

EMMA, which is discussed further below and which will shortly replace the MSIL 

system. 

In 2005, the MSRB implemented a facility for real-time transaction reporting 

and price dissemination of transactions in municipal securities (the “Real-Time 

Transaction Reporting System” or “RTRS”).8 RTRS serves the dual role of providing 

transaction price transparency to the marketplace, as well as supporting market 

surveillance by the enforcement agencies. Surveillance data is made available to 

regulators with authority to enforce MSRB rules, including FINRA and the SEC. The 

market surveillance function of the MSRB’s transaction reporting system provides 

enforcement agencies with a powerful tool in enforcing the Board’s fair pricing 

rules. The MSRB offers a market-wide real-time feed of trade information and 

provides the data free of charge on EMMA, as discussed below. In addition, in 

January of this year, the MSRB implemented an enhancement to the system with the 

 

8 The MSRB’s transaction reporting rules require dealers to report 

transactions in municipal securities within 15 minutes of the time of trade 

execution.
9

addition of free public access to interest rate reset information on municipal 

auction-rate securities, including information on the success or failure of individual 

auctions. Free interest rate and related information on variable-rate demand 

obligations will be added to the system next week. And, beginning July 1 of this 

year, continuing disclosure filings made by state and local governments will be 

available as well. Once completed in July, 2009, the MSRB’s EMMA system will 

provide the most comprehensive and free database of municipal securities 

information as exists in any of the fixed income markets. 

Currently, EMMA does not contain information about the credit ratings of 

municipal securities, although they are of considerable importance to investors. The 

MSRB would welcome the submission by the rating agencies of such ratings on a 

real-time basis. Given the large number of bond insurer downgrades in the last 

year, investors should have access to underlying ratings as well as ratings on the 

municipal securities themselves. 

II. BACKGROUND ON THE MUNICIPAL SECURITIES MARKET 

A. Market Overview

When Section 15B of the Exchange Act was adopted in 1975, yearly issuance 

of municipal securities was approximately $58 billion.9 Much of this total 

represented general obligation debt, which reflected the simple, unconditional 

promise of a state or local government unit to pay to the investor a specific rate of 

 

9 See The Bond Buyer/Thomson Financial 2004 Yearbook at 10. 

Approximately half of this figure represents short-term debt maturing in less 

than 13 months. 
10

interest for a specific period of time. The investors in these bonds tended to be 

commercial banks and property/casualty insurers interested in tax-exempt interest. 

 The municipal securities market has grown into a much larger and more 

complex market. Annual issuance of municipal securities has averaged $458 billion 

in recent years10 and a total of $2.7 trillion in principal value is outstanding.11 In 

addition to providing capital for governmental projects and operations, the 

municipal securities market helps to fund a variety of other public purposes, 

including transportation and environmental infrastructure, education, housing and 

healthcare. 

 Most municipal securities come to market with investment grade credit 

ratings, i.e., with ratings that are “BBB-” or above.12 Historically, investment grade 

municipal securities have been considered relatively safe investments, because of 

the very low rate of default. A 2002 report by Moody’s Investor Service concluded 

that the default rate for investment grade municipal securities debt over a 10 year 

period was .03%, compared to 2.32% for investment grade corporate debt. 13 A low 

rate of default for investment grade municipal securities also has been observed in 

studies by Standard and Poor’s and Fitch Ratings. 

 

10 Source: Thomson Reuters (based on 2005-2008 data). 

 

11 December 2008 estimates. See Federal Reserve Flow of Funds (March 2009) 

available at www.federalreserve.gov. As a comparison, the outstanding 

principal value of marketable U.S. Treasury Securities was $5.8 trillion.

12 Over 99% of rated long-term municipal securities coming to market in 2008 

were rated investment grade by at least one rating agency. 

13 Moody’s Rating Service, “Special Comment: Moody’s US Municipal Bond 

Rating Scale” (November 2002), available at http://www.moodys.com (also 

noting increased default risks for non-rated issues). 
11

 B. Issuers 

 Issuers of municipal securities include towns, cities, counties, and states, as 

well as other state and local government agencies and authorities that issue 

securities for special purposes (e.g., hospitals and colleges). There are over 55,000 

issuers of municipal securities that have outstanding approximately 1.23 million 

unique securities. Major issuer types, with the associated volume of issuance in 

2008, are shown in Figure 1. 

Figure 1 

Issuer Type 

2008 Issuance 

Volume 

($ billions)14

Percentage 

of total volume 

State Agencies 144.8 32% 

Local Authorities 81.4 18 

Districts 64.8 14 

Cities/Towns 60.2 13 

States 55.9 12 

Counties/Parishes 27.6 6 

Colleges/Universities 10.1 2 

Direct Issuers 7.2 2 

Source: Thomson Reuters

 The market is unique among the world’s major capital markets because the 

number of issuers is so large—no other direct capital market encompasses so many 

borrowers. The issues range from multi-billion dollar financings of large state and 

city governments to issues less than $100,000 in size, issued by localities, school 

districts, fire districts, and various other issuing authorities. The purposes for which 

 

14 Source: Thomson Reuters (includes issuance of both long-term and shortterm securities). 
12

these securities are issued include not only financing for basic government 

functions, but also a variety of public needs such as transportation, utilities, health 

care, higher education, and housing as well as some essentially private functions to 

enhance industrial development. In the last two decades debt issuance has become 

an important management tool for many municipalities, allowing flexibility in 

arranging finances and meeting annual budget considerations according to local 

needs and local priorities. The terms and features of some municipal securities have 

evolved over time into highly complex structures to meet a multitude of issuer 

borrowing and investment needs. Differences in laws among the fifty states, as well 

in local ordinances and codes among the tens of thousands of localities, that affect 

borrowing authority, lending of credit, powers to impose taxes and special 

assessments, contracting powers, budgeting restrictions, and many other matters 

result in an enormous variety of financing structures across the country that defies 

commoditization of the municipal securities market.

By contrast, there are only approximately 5,500 issuers of corporate debt 

and less than 50,000 corporate debt securities,15 even though the amount of 

corporate debt outstanding is $6.3 trillion.16 

C. Investors

 The municipal securities market has one of the highest levels of participation 

by individual investors, either through direct investments or through mutual funds, 

 

15 Source: FINRA. Includes all TRACE-eligible securities. 

16 December 2008 estimates. See Federal Reserve Flow of Funds (March 2009), 

available at www.federalreserve.gov. Corporate debt outstanding excludes 

asset-backed securities and foreign issues held by U.S. residents. 
13

together representing the majority of total municipal securities holdings. The other 

major categories of investors in municipal securities include property and casualty 

insurers and commercial banks. Figure 2 shows the percentages of direct 

investments in municipal securities in categories tracked by the Federal Reserve 

Board. 

Figure 2 

Holders of Municipal Securities Outstanding

As of December 2008

Household

36%

Mutual Funds

36%

Insurance Companies

15%

Commercial Banks 

and Savings Inst.

8%

Other

5%

Total: $2,690.1 Billion

Source: Federal Reserve Flow of Funds, March 2009

The “household” category in Figure 2 includes both direct investments by 

individual investors as well as trusts and other accounts (e.g., some types of hedge 

fund accounts that do not fall into other tracked categories). The “mutual funds” 

category includes both municipal bond funds and money market funds.17

 

17 Data collected by the Investment Company Institute (“ICI”) indicate that, as 

of September 24, 2008, the total net assets in tax-exempt money market 

accounts were approximately $482 billion, which would account for more 

than half of the Federal Reserve estimates of mutual fund holdings of 

municipal securities at this time. Of the $482 billion in tax-exempt money 

market funds tracked by the ICI in September, approximately $295 billion 

was held in retail money market funds and $187 billion was held in 
14

 D. Municipal Securities Dealers 

 The municipal securities market is an over-the-counter, dealer market. 

There are no central exchanges, specialists, or formal market maker designations. 

At the end of 2008, approximately 2,040 securities firms and banks were authorized 

to act as brokers and dealers in municipal securities (collectively, “dealers”). 

During a given year, approximately 1,430 dealers report transactions in municipal 

securities to the MSRB under its price transparency program. About 185 of these 

dealers serve as managing underwriters of new issues. 

 E. Market Activity

In general, municipal securities investors tend to be “buy and hold” investors. 

Trading patterns for municipal securities with fixed interest rates typically involve 

relatively frequent trading during the initial weeks after issuance, followed by 

infrequent or sporadic trading activity during the remaining life of the security. 

Issues with variable interest rates tend to trade more frequently. Of the 

approximately 1.23 million outstanding municipal securities, the likelihood of any 

specific security trading on a given day is about one percent. Less than 10% of 

outstanding municipal securities are likely to trade in any given month.18 

 Notwithstanding the thin secondary market trading in individual municipal 

securities, aggregate daily trading activity in the market is substantial. During the 

 

institutional money market funds. Source: ICI, “Weekly Total Net Assets 

(TNA) and Number of Money Market Funds,” available at www.ici.org. 

18 Source: MSRB transaction data. 
15

period 2005-2008, an average of approximately 36,000 transactions in municipal 

securities was reported to the MSRB each business day, resulting in par values 

averaging about $23.2 billion per day. For the same period, nearly two-thirds of par 

value traded was variable rate securities, while fixed-rate securities accounted for 

almost 30%. Figure 3 shows the 30-day trailing average of daily transaction activity 

and volume in par (principal) amount traded for all types of municipal securities.19 

Figure 3 

Daily Transactions

2005 - 2008 

-

10,000

20,000

30,000

40,000

50,000

60,000

Jan-05 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Nov-08

Number of Trades

$0

$5

$10

$15

$20

$25

$30

$35

$40

Par Value (Billions)

Number of Trades

Par Value

Source: MSRB

Note: 30-day trailing average

 

III. MSRB ACTIONS TO PROMOTE TRANSPARENCY IN THE MUNICIPAL 

 MARKET 

A. Primary Market Disclosure

As noted above, since 1990, the MSRB has sought to improve the availability of 

municipal securities issuer disclosure documents to investors through its MSIL system. 

 

19 The MSRB provides statistical data on market activity on its web site at 

www.msrb.org and through EMMA. 
16

At that time, the SEC adopted its Rule 15c2-12 to, among other things, require the 

underwriter for most offerings of municipal securities to receive and review the issuer’s 

official statement before underwriting the issue. In turn, MSRB Rule G-36 requires 

underwriters to submit such official statements to the MSIL system. The MSIL system 

was the first comprehensive library of primary market disclosure documents in the 

municipal securities market. The MSRB developed the MSIL system to serve as a 

repository of disclosure documents and a “wholesaler” of these documents to market 

participants and information vendors. Since most disclosure documents in 1990 were 

made available in paper form, the MSIL system received such documents, scanned them, 

and provided electronic versions to subscribers for a minimal fee for use in information 

products provided to the market. More recently, many primary market disclosure 

documents are available in electronic form and the MSRB receives such documents and 

provides them directly to subscribers. 

In March 2008, the MSRB launched its Electronic Municipal Market Access 

(“EMMA”) pilot. EMMA is an Internet-based disclosure portal that provides free public 

access to primary market disclosure documents and real-time municipal securities trade 

price data for the municipal securities market, in a manner specifically tailored to retail 

investors. The EMMA website is accessible at www.emma.msrb.org. EMMA currently 

provides an easily navigable integrated display of primary market disclosures and 

transaction pricing data for a specific security, incorporating detailed user help and 

investor education information designed to make the information easily understood by 

retail investors. EMMA currently provides free access to the MSRB’s full collection of 
17

issuer disclosure documents dating back to 1990, as well as to trade price information 

since January 2005. 

On Monday of this week, the MSRB filed with the SEC a proposal to continue 

operation of EMMA on a permanent basis and to provide for more rapid 

dissemination of primary market disclosures through a centralized electronic 

submission and public access service. The MSRB expects that this new phase of 

EMMA will be fully operational by the end of May of this year. At that time, all 

underwriters will be required to submit official statements and related documents 

and information to EMMA electronically for immediate free public access through 

the EMMA website portal. Users of the website will be able to sign-up for free 

optional e-mail alerts to be notified of new and updated postings of disclosure 

documents and other information offered on EMMA. These documents will continue 

to be displayed in conjunction with real-time trade price information so that users 

viewing trading data for a specific municipal security will have immediate access to 

key disclosure information about that security. EMMA’s search engine is designed 

to assist retail investors in quickly finding the right document and information for a 

particular security. 

EMMA is the central force in moving the municipal securities market from 

the old paradigm where only the buyer of a specific new issue municipal security 

could be assured of receiving a copy of the disclosure document for that security 

when the trade is completed to a new marketplace where the general public will 

have free on-going immediate access to disclosure documents for all issues as soon 
18

as the documents become available. To further ensure broad access to the 

disclosures provided in official statements and advance refunding documents, the 

MSRB will make these documents available by subscription to information vendors 

and other bulk data users on terms that will promote the development of valueadded services by subscribers for use by market participants. 

B. Continuing Disclosure

The SEC revised its Rule 15c2-12 in 1995 to require underwriters to ensure 

that issuers have contracted to provide certain continuing disclosure information, 

including annual financial and operating data and material events notices, to certain 

private-sector information services designated as Nationally Recognized Municipal 

Securities Information Repositories (“NRMSIRs”). In these amendments, the MSRB 

was included as an alternative recipient of material event notices only. 

During the last few years, however, the MSRB grew concerned about investor 

access to continuing disclosure documents through the current NRMSIR system. As 

a result, after consultation with the SEC and review of the SEC’s White Paper to 

Congress on the municipal securities market,20 the MSRB began to plan for a 

continuing disclosure component of EMMA. This enhancement will combine 

continuing disclosure information with the primary market disclosure and trade 

information currently available to provide a central location for all such municipal 

securities market information. 

 

20 July 26, 2007, available at http://www.sec.gov/news/press/2007/2007-

148wp.pdf. 
19

On December 5, 2008, the SEC approved amendments to its Rule 15c2-12 to 

make the MSRB the central location for issuer continuing disclosure documents, 

effective July 1, 2009. EMMA’s continuing disclosure service will provide a userfriendly interface for free electronic submission of continuing disclosure documents 

by issuers, other obligated parties and their agents. As with official statements, 

these continuing disclosure documents will become immediately available for free 

to the general public through the EMMA website portal. Free optional e-mail alerts 

relating to new postings will also be made available in connection with continuing 

disclosure documents. In addition, the continuing disclosure documents will be 

integrated into the existing official statement and trade data display to produce an 

all-encompassing view of the relevant primary market, secondary market, and trade 

price information for each security in the marketplace easily accessible through 

EMMA’s powerful search engine. 

The MSRB expects to file with the SEC next week a proposed rule that would 

permit EMMA to accept voluntary filings of continuing disclosure by issuers and 

obligors. We hope that this will encourage disclosure beyond that which is 

currently required by SEC Rule 15c2-12, such as quarterly financial information and 

information about related municipal derivative transactions. 

C. Auction Rate Securities/Variable Rate Demand Obligation 

Transparency

In 2009, the MSRB implemented its Short-term Rate Transparency 

(“SHORT”) System to increase transparency of municipal ARS and VRDOs. The 

SHORT System is the first centralized system for collection and dissemination of 
20

critical market information about ARS and VRDOs. Information collected by the 

SHORT System is made available to the public, free of charge, on EMMA. 

The SHORT System will be implemented in phases. The first phase, which 

became operational on January 30, 2009, collects and disseminates interest rate and 

related information about municipal ARS, including information about the success 

or failure of each auction. The SHORT System is scheduled to become operational 

for VRDOs on April 1, 2009. This interest rate information allows market 

participants to compare ARS and VRDOs across issues and track current interest 

rates. Included in this information is the current interest rate, the length of the 

interest rate reset period as well as characteristics of the security, such as the 

identities of broker-dealers associated with the operation of the securities. 

Later phases of this initiative to increase transparency of ARS and VRDOs 

include the collection and dissemination of ARS bidding information. This 

information will allow market participants to obtain important information about 

the liquidity of ARS and greater granularity into the results of the auction process. 

In addition, the MSRB plans to collect ARS documents that describe auction 

procedures and interest rate setting mechanisms as well as VRDO documents that 

describe the provisions of liquidity facilities, such as letters of credit and standby 

bond purchase agreements. 
21

D. Market Statistics and Data

 EMMA provides market activity information, including transaction price data 

for the most recent daily trades and a daily summary of trading activity throughout 

the municipal securities market. EMMA’s daily trade summary provides the type of 

trade (i.e., customer bought, customer sold or inter-dealer trades), the number of 

securities and the number of trades for each trade type and the par amount of the 

trades for all published trades disseminated by the MSRB for every trading day since 

May 2006. This information is provided on EMMA’s market statistics pages and 

provides municipal securities investors with a market-wide view of the municipal 

securities market. An example of such information follows: 

Daily Trade Summary By Trade Type – February 20, 2009 

Trade Type Number of 

Securities 

Number of 

Trades 

Par Amount 

($ Millions) 

Customer Bought 9,623 22,514 $6,077 

Customer Sold 6,268 7,425 $3,661 

Inter-Dealer Trade 4,941 10,333 $2,322 

All Trades 13,587 40,272 $12,060 

30-Day Average Trade By Trade Type – January 08, 2009 to February 20, 2009 

Number of Trades: 41,676 Par Amount: $12,052 Million

Inter-Dealer 

Trade

11,354 Customer 

Bought

22,297

Customer 

Sold

8,025

Customer 

Bought

$5,748

Customer 

Sold

$4,083

Inter-Dealer 

Trade

$2,221
22

 Market statistics on EMMA also include the par amount traded for the most 

active sectors of the municipal securities market and trading volume by trade size, 

maturity, and source of repayment. 

Par Amount Traded for Most Active Sectors – February 20, 2009 

Total Par Amount: $12,060 Million 

Education

21%

Various 

Purposes

14%

Transportation

Utility 12%

10%

Health

10%

Housing

5%

Other

23%

Improvement

5%

 E. Investor Outreach and Education

The MSRB is conducting an aggressive campaign to reach out to investors 

about all the information that is easily available to them through EMMA. We have 

also added important educational materials to the EMMA site to assist investors in 

their understanding of the municipal securities market. The MSRB is gratified that 

we have had over 53,000 visitors to EMMA in its 12 months of pilot operation who 

have downloaded almost 4.0 terabytes of files and data. Messages we have received 

through the EMMA feedback and contact pages indicate a very positive response 

from users, which include retail and institutional investors, brokers, investment 
23

advisors, issuers, information services, researchers, media, and others. We plan to 

continue diligently to improve EMMA’s service to both investors and issuers. 

The MSRB has long sought to improve investor access to municipal securities 

disclosure as well as to require, through its dealer regulation, that the municipal 

securities market continue to be fair to investors and efficient for all market 

participants. Once fully operational, EMMA will allow for more timely and accurate 

disclosures, valuations, and information regarding municipal securities, which will 

benefit all market participants. EMMA’s free public access to real-time trade price 

information and to the key disclosure documents has already provided 

unprecedented transparency to this market. As we complete each new phase of 

EMMA, the MSRB will provide increasing levels of transparency that will greatly 

benefit both investors and issuers alike and which is unparalleled in other markets. 

IV. An Expanded Role for the MSRB to Enhance Investor Protection and 

 Regulation of the Securities Markets 

A. Unregulated Parties in the Municipal Securities Market. 

 The current financial crisis has exposed gaps in the regulatory structure that 

governs U.S. financial institutions and the products they offer. It is clear that 

regulatory reform is necessary to address changes in the capital markets, such as 

the creation of new financial products and the emergence of firms providing advice 

regarding these products. The municipal securities marketplace has evolved from 

one in which states and municipalities offered traditional, fixed rate bonds to 

finance specific projects into a market that involves the use of complex derivative 

products and intricate investment strategies. 
24

 Current federal law does not permit the MSRB to regulate the swap firms that 

assist in the creation of these derivative products for municipal issuers. The law 

also does not permit the MSRB to regulate other non-dealer municipal market 

participants, such “independent” financial advisors that provide advice to issuers 

regarding bond offerings or investment brokers that assist issuers with investing 

bond proceeds. The MSRB believes regulation of these entities and other municipal 

advisors is essential to protect investors and ensure market integrity, and that the 

MSRB is in the best position to provide this regulation and therefore should be given 

such authority. The MSRB believes that its current regulatory structure for 

municipal securities dealers provides a ready model for oversight of municipal 

advisors, including financial advisors and investment brokers. The MSRB also 

believes that expanded oversight would be most effective in a dual regulatory 

structure with the SEC. Under this approach, firms would be required to register 

with the SEC, and the MSRB would provide more prescriptive rules applicable to 

these firms and their activities. With the expansion of its jurisdiction, the MSRB’s 

composition should be reviewed to provide for appropriate representation of all 

types of regulated parties as well as to ensure expanded public representation. 

1. Financial Advisors and Investment Brokers and Other 

Municipal Market Participants

 As federal lawmakers and policymakers are looking into unregulated 

participants throughout the financial markets such as mortgage brokers, so too 

should attention be paid to these participants in the municipal market. As municipal 

finance transactions have evolved and become more complex, there are many more 

advisors who work with municipal issuers, and brokers who act as intermediaries 
25

between issuers and others who provide necessary investment and other services. 

These participants have significant influence with issuers, earn significant fees, and 

many times, are not subject to any constraints on pay-to-play, as dealers have been 

since 1994. Unfortunately, the regulatory structure over the municipal market has 

not kept up with the evolving marketplace and nearly all of these participants are 

unregulated. At a minimum, municipal advisors such as financial advisors and 

investment brokers should be held to standards of conduct that protect municipal 

issuers, taxpayers, and investors in this market. The existing MSRB rulebook 

provides a ready model for the types of rules that could be developed for these 

market participants -- particularly in light of the fiduciary nature of many of the 

advisory services they provide. 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 has 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. 

 Investors in the municipal securities market would be best served by 

subjecting unregulated market professionals to a comprehensive body of rules that 

(i) prohibit fraudulent and manipulative practices, (ii) require the fair treatment of 

investors, issuers, and other market participants, (iii) mandate full transparency, 

(iv) restrict real and perceived conflicts of interests, (v) ensure rigorous standards 

of professional qualifications, and(vi) promote market efficiencies. The municipal 

securities dealer community undertook the transition from being unregulated to 
26

becoming subject to such a body of rules and standards beginning in 1975 with the 

creation of the MSRB. The MSRB believes it is now time for the unregulated 

professionals in this market to undertake this same transition, and that the MSRB is 

the most appropriate regulatory body to provide this regulation. 

 2. Current Regulation of Financial Advisors

 It should be noted that many financial advisory firms are registered as 

broker-dealers or municipal securities dealers and are, therefore, subject to MSRB 

rules, including Rules G-23 and G-37. Rule G-23 is a disclosure rule designed to 

minimize the apparent conflict of interest that exists when a municipal securities 

professional acts as both financial advisor and underwriter with respect to the same 

issue. With respect to financial advisors that are not dealers (known as 

“independent” financial advisors), approximately fifteen states have some form of 

pay-to-play prohibition. Some states have very broad pay-to-play rules that cover 

most state and local contracts, including those for financial advisory services. Other 

states have very narrow rules that apply only to specific situations. Some 

municipalities also have enacted such rules. Additionally, certain states and 

municipalities and agencies have disclosure obligations. While some states and 

localities have such pay-to-play laws, in many cases based on MSRB Rule G-37, the 

limited and patchwork nature of these state and local laws has not been effective in 

addressing in a comprehensive way the possibility and appearance of pay-to-play 

activities in the unregulated portions of the national municipal securities market. It 

is time for a coordinated and comprehensive approach to regulating municipal 

advisors, including “independent” financial advisors. 
27

 3. Number of Financial Advisors Active in the Marketplace

 Given the unregulated nature of this market, it is difficult to identify with 

precision the number of financial advisors, the number of offerings in which they 

participated, or the nature and scope of their advice. Nevertheless, the MSRB has 

reached out to market participants and has reviewed data on financial advisors 

supplied by Thomson Reuters. The MSRB believes that this information provides a 

reasonable estimate of the size of the market, but does not capture the entirety of it. 

 Based on the MSRB’s review, of the 358 financial advisory firms that 

participated in at least one primary market transaction in 2008, only 98 were 

registered with the MSRB as dealers. It appears that the vast majority of active 

financial advisory firms currently are not regulated by the MSRB or, in general, 

anyone else. 

Financial Advisory Firms

2008

MSRB Registered

27%

Not Registered with 

MSRB

73%

Source: MSRB; Thomson Reuters 
28

 4. Volume of Municipal Debt Issued with the Assistance of 

 Financial Advisors

 According to data obtained by the MSRB, approximately 70% of the total 

volume of municipal debt (by par amount) issued in 2008 was issued with the 

assistance of financial advisors. The total amount of municipal debt issued in 2008 

was $453 billion, and financial advisors provided advice in offerings that accounted 

for $315 billion of this total. 

Municipal Securities Issuance

2008

Subtotal with 

Financial Advisor

70%

Subtotal without 

Financial Advisor

30%

Total Municipal Issuance: $453 billion

Source: Thomson Reuters

 This percentage has increased over the last two years. In 2007, financial 

advisors participated in 66% of the total volume of offerings and, in 2006, financial 

advisors participated in 63% of the total volume of offerings. 
29

0%

10%

20%

30%

40%

50%

60%

70%

2006 2007 2008

Source: Thomson Reuters

Volume of Municipal Debt Issued with Assistance of Financial Advisors

Total With Financial Advisor Total Without Financial Advisor

63%

66%

70%

37% 34% 30%

 The length of maturity of the offerings did not change the percentages 

significantly. In short-term offerings (maturities of less than 13 months) in 2008, 

financial advisors participated in 69.3% of the offerings, and in long term offerings, 

financial advisors participated in 69.7% of the offerings. Hence, an overwhelming 

percentage of short and long term offerings were issued with the assistance of 

financial advisors. 

 5. Percentage of Unregistered Firms that Participated in Offerings

 Dealers participated as financial advisors in 38% of the total volume of 

offerings in which financial advisors provided assistance. Correspondingly, 

unregistered financial advisors participated in 62% of those offerings, which 

represented $196 billion of the $315 billion total.
30

 

Municipal Issuance With Financial Advisors

2008

MSRB Registered 

Financial Advisors

38%

Unregistered 

Financial Advisors

62%

Municipal Issuance With Financial Advisors: $315 Billion

Source: Thomson Reuters

 6. The Role of Swap Advisors

 The municipal securities derivatives market emerged in the 1980s and is still 

evolving. This market is very complex, with a variety of derivative products such as 

floating-to-fixed rate swaps, fixed-to-floating rate swaps, basis swaps, and 

swaptions. According to market participants, the vast majority of transactions are 

floating-to-fixed swaps, which are used to create synthetic fixed rate structures. 

These derivative products carry numerous embedded risks that may not be easily 

understood by less financially sophisticated issuers. Some such risks are interest 

rate risk, basis risk, tax risk, termination risk, and counterparty risk. Recent market 

conditions highlight this concern. Many sophisticated issuers face large swap 

termination fees due to changes in short-term interest rates. The extent to which 

many of these issuers may have underestimated the potential termination fees is of 

great concern to the MSRB. 

 To assist issuers in understanding the characteristics, risks, and potential 

benefits of these products, many firms developed expertise as swap advisors. These 
31

firms, of which there are approximately four dozen, according to the Bond Buyer’s 

Municipal Marketplace Directory 2008, provide financial advice to issuers regarding 

swap policy development, transaction structuring, documentation, and pricing. 

Swap advisors now include boutique firms, registered broker-dealers, and banks. 

While many firms adhere to their own standards of professional conduct, their swap 

advisory services are, for the most part, unregulated. 

 Also problematic is the lack of available public information regarding the size 

of the municipal securities derivative market. Market participants have suggested 

that the market is between $100 billion and $300 billion, annually, in notional 

principal amount, but until these derivative transactions are formally tracked, the 

figures will be unreliable. Given the complexity of municipal derivative 

transactions, the variety of risks, the growth of the market, and the reliance by 

issuers on the expertise of swap advisors, the MSRB believes these municipal 

market professionals should also be regulated. Moreover, the MSRB believes that its 

rules provide an appropriate framework for such regulation. 

 7. The Role of Investment Brokers

 A small group of advisory firms also provide investment advice to issuers 

concerning funds that are available to invest. These funds are typically bond funds, 

construction funds, escrow funds, debt service reserve funds, or capitalized interest 

funds. Advisory firms may recommend a variety of investments to the issuer, 

including bank investment agreements, guaranteed investment contracts, 

repurchase agreements, or forward delivery agreements. These investments may 

be offered by banks, insurance companies, or broker-dealers, and are bid 
32

competitively. Firms that offer such investment advice to issuers are not, for the 

most part, regulated. Given the complexity of these investments, their integral 

relationship to the municipal securities transactions, and the investment advice 

provided by these firms, MSRB believes that these municipal market professionals 

should be regulated as well. At a minimum, given the investment advice they 

provide to clients, these firms should be registered as investment advisors with the 

SEC. Additionally, MSRB believes that its rules, which go significantly beyond the 

anti-fraud provisions of the federal securities laws, provide an appropriate model 

for regulation of these market professionals. 

 8. Municipal Issuers

 When considering a new regulatory structure for the municipal securities 

market, it is important to recognize that the municipal market is distinct from other 

securities markets due to the role of sovereign municipal issuers, the diversity of 

issuer types, federal tax law and state law requirements and restrictions that relate 

to the issuance and sale of municipal securities. As the regulator of municipal 

securities dealers, the MSRB is keenly attuned to its role at the boundary between 

the federal government (establishing an efficient national marketplace and uniform 

investor protections) and states and municipalities exercising their public trust to 

meet the unique needs of their citizens. In the service of these goals, the MSRB has 

sought to provide rulemaking that is based on an understanding of the products that 

are being created and sold, and the dynamics driving decisions and market practices 

of the issuers, investors, and dealers. This requires careful tailoring of basic 
33

securities regulation principles to achieve key investor protection objectives 

without unduly imposing direct or indirect restraints on municipal issuers. 

 The SEC ’s current jurisdiction includes authority to enforce anti-fraud laws 

with respect to issuers of municipal securities, and the SEC has brought 

enforcement actions in a number of high profile cases in the past few years. In 

addition, the associations representing state and local municipal issuers 

(Government Finance Officers Association and National Association of State 

Treasurers, in particular) also have an extensive body of recommended practices 

and an impressive educational outreach effort to help municipal issuers adhere to 

the highest standards of conduct. The MSRB is not suggesting the need for any 

additional federal regulation governing municipal issuers. 

We believe that the MSRB’s new EMMA system is a key turning point in 

moving forward with considerably improved disclosure practices in the municipal 

securities market, and the issuer community wholeheartedly supports this 

evolution. The current system of continuing disclosure based on a limited number 

of private enterprises, through which disclosures are available for a fee and in most 

cases only through a laborious process that does not promote public access, fails to 

provide the sunshine on disclosure practices that EMMA soon will. Good and bad 

disclosure practices alike are largely obscured in the current restrictive continuing 

disclosure scheme. This will no longer be the case with the advent of the MSRB’s 

continuing disclosure service through EMMA. The EMMA system will serve as a red 

flag for poor disclosure by issuers, while revealing good disclosure practices. It also 

will remove existing impediments to ensuring that investors buy and sell in 
34

securities based on the most up-to-date disclosures. The EMMA website will make it 

abundantly clear to investors when disclosures are less than satisfactory, as 

opposed to the current restrictive system. If investors are not satisfied with an 

issuer’s disclosure standards, or if they are alerted to information of concern 

through disclosures, they will extract a penalty, and the issuer eventually will pay 

the price through higher borrowing costs. In partnership with the state and local 

government issuer community, the MSRB believes that recent improvements in the 

quality and timeliness of disclosures in the municipal securities market will 

accelerate. 

 B. Financial Markets Regulatory Structure

 The MSRB supports the concept of a multi-layered regulatory framework as a 

starting point for consideration of a new regulatory structure for the financial 

markets, as has been proposed by a number of governmental and nongovernmental 

bodies in recent months.21 

 Such a multi-layered regulatory framework would consist of (1) a market 

stability regulator to address overall conditions of financial market stability that 

could impact the general economy; (2) a prudential financial regulator; and (3) a 

business conduct regulator (linked to consumer protection regulation) to address 

 

21 See, e.g., U.S. Government Accountability Office, “Financial Regulation: A 

Framework for Crafting and Assessing Proposals to Modernize the Outdated 

U.S. Financial Regulatory System (GAO-09-216),” January 8, 2009, available 

at http://www.gao.gov/new.items/d09216.pdf; Group of Thirty, “Financial 

Reform: A Framework for Financial Stability,” January 15, 2009, available at 

http://www.group30.org/pubs/pub_1460.htm; U.S. Department of the 

Treasury, “Blueprint for a Modernized Financial Regulatory Structure,” 

available at http://www.treas.gov/press/releases/reports/Blueprint.pdf. 
35

standards for business practices. The MSRB stands ready to work closely with any 

systemic regulator to gather and analyze data about the municipal market as it 

relates to systemic risk in the financial markets. As well as a repository for 

municipal market data, the MSRB can be even better equipped to proactively 

monitor market activity and assist aggressively in enforcement activities. 

 A multi-layered regulatory approach, or in fact any scenario, requires that 

the regulatory entities have deep and extensive knowledge of all financial markets. 

The lack of municipal finance expertise at the federal level became apparent during 

the past year and resulted in a very late and limited recognition of the impact of the 

credit crisis on state and local municipal finances, and the failure of federal 

programs intended to alleviate the economic impact of the credit crisis to address 

the needs of state and local governments. 

 To this end, the MSRB strongly recommends the creation of a Treasury 

Department office or other significant federal position charged with representing 

the unique needs of the municipal securities market. We have proposed to 

President Obama’s Administration, as an alternative to such a federal position, the 

development of a senior level group to coordinate municipal finance issues among 

the White House, Department of the Treasury, Federal Reserve, SEC, MSRB, and 

other federal agencies and stakeholders. 

 C. Self-Regulatory Organizations

 The MSRB also believes that there is an important role for market-specific, 

self-regulatory organizations in any comprehensive regulatory framework. These 

SROs would continue to adopt rules and standards, establish market mechanisms 
36

and systems and standards of operations, and adopt market-specific rules and 

standards for investor protection. These SRO activities can far exceed the anti-fraud 

standards of the federal securities laws and can extend to the regulation of the 

behavior of market intermediaries, thereby ensuring the goals of investor protection 

and integrity of the securities markets. SROs are also uniquely situated to work 

with the industry to develop effective rules and information systems, and can be 

vital links between the industry and the broader regulatory community. SRO 

jurisdiction must be flexible and broad enough to encompass new products, market 

developments, new market entrants, market movements, and other changes. 

 D. Enforcement 

 Enforcement is key to an effective system of municipal regulation. 

Traditionally, enforcement activities have been spread across numerous federal and 

state governmental entities and self-regulatory organizations, consisting of the SEC, 

FINRA, various bank regulatory agencies, and state attorneys general, creating a 

patchwork of overlapping jurisdiction and inconsistent and uncoordinated 

enforcement activities. The SEC can be more effective if given additional resources 

for municipal enforcement. Further, while some coordination of enforcement 

activities currently exists, the MSRB strongly recommends that each of the entities 

that are charged with the enforcement of securities laws – regardless of the genesis 

of those laws – develop a more formal process to coordinate their regulatory and 

enforcement activities. Coordinated actions could avoid regulatory gaps, provide 

clearer statutory authority and promote an efficient and consistent enforcement 

mechanism for the industry. 
37

Finally, we recommend that Congress modify the MSRB’s regulatory 

authority to include an enforcement and examination support function that would 

further strengthen enforcement in the municipal securities market. With an 

increased statutory mandate, the MSRB could better analyze the large amount of 

data that we collect to assist in surveillance of the market. The MSRB and its staff 

have a depth of expertise in all aspects of the municipal market that is found 

nowhere else in the federal government, and we stand ready to further assist, if 

given the congressional mandate. 

 E. Derivative Products

 While derivatives can be an important risk management tool, they can be 

dangerous if the state and local government issuers who purchase them do not 

understand the risks they may create. The current state of the law as articulated in 

the Commodities Futures Modernization Act of 2000 prohibits regulation of swap 

agreements (which are broadly defined) with the exception of anti-fraud, and the 

issue of whether and how to regulate credit default swaps (“CDS”) and other 

derivative instruments remains controversial. While municipal derivatives play an 

important risk management role in the overall municipal securities market, 

municipal derivatives are only a fraction of the overall derivatives markets. The 

MSRB recognizes that the question of whether to regulate municipal derivative 

instruments should be answered by Congress in the context of the broader 

derivatives market and that, should Congress choose to place such derivative 

products under new regulations, the regulatory structure should encompass 

municipal derivatives as well. 
38

 In particular, consideration should be given to the inclusion of municipal CDS 

in the types of CDS covered by central counterparties and clearinghouses. The 

application of central counterparties and clearinghouses to municipal CDS would 

address concerns about the problems of lack of minimum capitalization of CDS 

protection sellers. It would also address the lack of transparency in CDS pricing, 

which currently may disadvantage certain investors and dealers. Furthermore, it 

would provide municipal issuers with information about whether dealers who 

underwrite their securities are also selling CDS on their debt. Issuers who 

considered such a dual role to pose a conflict of interest could then take whatever 

actions they deemed appropriate. Should enhanced disclosures in derivative 

instruments be a part of any regulatory scheme, the MSRB is well poised with its 

EMMA system to provide disclosures of municipal derivative contracts and provide 

the necessary transparency for our market. 

V. EXECUTIVE SUMMARY 

 Since its creation in 1975, the MSRB has worked diligently to foster and 

preserve a fair and efficient municipal securities market that serves the public 

interest. The dual goals of investor protection and market integrity have guided this 

mission. However, the increased sophistication of our market, changing financial 

markets generally, and the importance of investor protection in the market require 

a review of the regulatory structure of this market. 

 To that end, we make the following recommendations: 

• We believe that financial advisors, investment brokers, and other 

intermediaries in the municipal market should be brought under a 
39

comprehensive regulatory scheme. Further, we believe that the MSRB is the 

appropriate regulatory body to regulate these unregulated municipal market 

participants, as part of a dual regulatory structure with the SEC. 

• We support a multi-layered overall regulatory framework for the financial 

markets consisting of a market stability regulator, a prudential financial 

regulator, and a business conduct regulator. 

• We believe that there is an important role for market-specific SROs that are 

charged with adopting rules and standards, market mechanisms, information 

systems, and standards of operations that embody and expand upon the 

basic anti-fraud standards of the federal securities laws. 

• We recommend the creation of a Treasury Department office or other 

significant federal position charged with representing the unique needs of 

the municipal securities market, or alternatively, a senior-level multipleagency group to coordinate municipal finance issues among all market 

stakeholders. 

• We strongly recommend that federal and state entities charged with the 

enforcement of securities laws develop a more formal process to coordinate 

their regulatory and enforcement activities. 

• We believe that derivative instruments based on municipal securities should 

be subject to the same comprehensive regulatory framework that may be 

developed for swaps and other types of derivative financial products in other 

markets. The rules governing dealer activity developed by the MSRB over its 
40

history provide an appropriate model for the comprehensive regulation that 

should apply to all financial intermediaries active in the municipal market. 

 

 We stand ready to assist in this important work and are certain that investor 

protection will be served by increasing our mandate.