II 

116TH CONGRESS 

1ST SESSION S. 1236 

To amend the Securities Exchange Act of 1934 to clarify the composition 

of the membership of the Municipal Securities Rulemaking Board, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 30, 2019 

Mr. KENNEDY introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To amend the Securities Exchange Act of 1934 to clarify 

the composition of the membership of the Municipal Securities Rulemaking Board, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Municipal Securities 

5 Rulemaking Board Reform Act of 2019’’. 

6 SEC. 2. THE MUNICIPAL SECURITIES RULEMAKING BOARD. 

7 (a) IN GENERAL.—Section 15B of the Securities Ex8 change Act of 1934 (15 U.S.C. 78o–4) is amended— 


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1 (1) by striking subsection (b) and inserting the 

2 following: 

3 ‘‘(b) MUNICIPAL SECURITIES RULEMAKING

4 BOARD.— 

5 ‘‘(1) MEMBERSHIP.— 

6 ‘‘(A) DEFINITIONS.—For the purposes of 

7 this paragraph, a person is associated with— 

8 ‘‘(i) a municipal securities broker if 

9 that person is— 

10 ‘‘(I) a partner, officer, director, 

11 or branch manager of a municipal se12 curities broker; 

13 ‘‘(II) a person occupying a simi14 lar status as, or performing similar 

15 functions as, a person described in 

16 subclause (I); 

17 ‘‘(III) any other employee of a 

18 municipal securities broker who is en19 gaged in the management, direction, 

20 supervision, or performance of any ac21 tivities relating to the business of ef22 fecting transactions in municipal secu23 rities for the account of others; or 

24 ‘‘(IV) a person directly or indi25 rectly controlling, controlled by, or 


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1 under common control with a munic2 ipal securities broker; 

3 ‘‘(ii) a municipal securities dealer if 

4 the person is a person associated with a 

5 municipal securities dealer; and 

6 ‘‘(iii) a municipal advisor if the person 

7 is a person associated with a municipal ad8 visor. 

9 ‘‘(B) COMPOSITION OF BOARD.— 

10 ‘‘(i) IN GENERAL.—The Municipal Se11 curities Rulemaking Board (referred to in 

12 this section as the ‘Board’) shall be com13 posed of 15 members, or such other num14 ber of members as specified by the Com15 mission under clause (ii), who shall be— 

16 ‘‘(I) appointed from among 

17 prominent individuals of integrity and 

18 reputation; and 

19 ‘‘(II) knowledgeable of matters 

20 relating to the municipal securities 

21 markets. 

22 ‘‘(ii) COMMISSION ALTERATIONS.— 

23 The Commission may alter the number of 

24 members that constitute the Board if that 

25 number is an odd number. 


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1 ‘‘(C) PUBLIC REPRESENTATIVES AND REG2 ULATED REPRESENTATIVES.— 

3 ‘‘(i) PUBLIC REPRESENTATIVES.—A 

4 majority of the membership of the Board 

5 shall be individuals who were not associ6 ated with a municipal securities broker, 

7 municipal securities dealer, or municipal 

8 advisor during the 5-year period preceding 

9 the date on which those individuals are ap10 pointed to the Board (referred to in this 

11 subsection as ‘public representatives’)— 

12 ‘‘(I) not less than 1 of whom 

13 shall be representative of institutional 

14 or retain investors in municipal secu15 rities; 

16 ‘‘(II) not less than 1 of whom 

17 shall be representative of municipal 

18 entities; and 

19 ‘‘(III) not less than 1 of whom 

20 shall be a member of the public with 

21 knowledge or experience in the munic22 ipal industry. 

23 ‘‘(ii) REGULATED REPRESENTA24 TIVES.—Other than public representatives, 

25 the members of the Board shall be individVerDate Sep 11 2014 00:27 May 03, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1236.IS S1236

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1 uals who are associated with a broker, 

2 dealer, municipal securities dealer, or mu3 nicipal advisor (referred to in this sub4 section as ‘regulated representatives’)— 

5 ‘‘(I) not less than 1 of whom 

6 shall be associated with and rep7 resentative of brokers, dealers, or mu8 nicipal securities dealers that are not 

9 banks or subsidiaries, departments, or 

10 divisions of banks (referred to in this 

11 subsection as ‘broker-dealer represent12 atives’); 

13 ‘‘(II) not less than 1 of whom 

14 shall be associated with and rep15 resentative of municipal securities 

16 dealers that are banks or subsidiaries, 

17 departments, or divisions of banks 

18 (referred to in this subsection as 

19 ‘bank representatives’); and 

20 ‘‘(III) not less than 1 of whom 

21 shall be associated with a municipal 

22 advisor (referred to in this subsection 

23 as ‘advisor representatives’). 

24 ‘‘(D) LIMITATION.—The membership of 

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1 vided as possible between the number of public 

2 representatives and regulated representatives, 

3 taking into account the requirement under sub4 paragraph (C)(i) that the majority of the mem5 bership of the Board shall be public representa6 tives. 

7 ‘‘(E) APPOINTMENT OF BOARD MEM8 BERS.— 

9 ‘‘(i) INITIAL BOARD.—Not later than 

10 180 days after the date of enactment of 

11 the ‘Municipal Securities Rulemaking 

12 Board Reform Act of 2019’, the Commis13 sion shall, subject to clause (ii)— 

14 ‘‘(I) appoint a Chairperson of the 

15 Board and all other initial members of 

16 the Board; and 

17 ‘‘(II) designate a term of service 

18 for each member appointed under 

19 subclause (I). 

20 ‘‘(ii) INTERIM BOARD.— 

21 ‘‘(I) IN GENERAL.—Before ap22 pointing the initial members of the 

23 Board under clause (i), the Commis24 sion may, without regard to the limi25 tations in subparagraph (C), appoint 


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1 not more than 3 individuals to serve 

2 as interim members of the Board who 

3 shall be responsible for ensuring the 

4 continuity of the operations of the 

5 Board until the Commission appoints 

6 those initial members. 

7 ‘‘(II) MEMBERSHIP.—In making 

8 an appointment under subclause (I), 

9 the Commission shall select from 

10 among individuals of integrity and 

11 reputation and who are knowledgeable 

12 of matters relating to the municipal 

13 securities markets. 

14 ‘‘(III) AUTHORITY.—The mem15 bers of the interim Board appointed 

16 under this subparagraph may exercise 

17 all of the authority of the Board 

18 under this section. 

19 ‘‘(F) VACANCIES.—A vacancy on the 

20 Board— 

21 ‘‘(i) shall not affect the authority of 

22 the Board under this section; and 

23 ‘‘(ii) shall be filled by the Commission. 

24 ‘‘(G) TERM OF SERVICE.—The term of 

25 service for each Board member shall be 3 years, 


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1 plus the amount of time necessary for the ap2 pointment of a successor, except that— 

3 ‘‘(i) the term of service for a member 

4 appointed under subparagraph (E)(i), 

5 other than the Chairperson of the Board, 

6 shall expire in increments, with— 

‘‘(I) 1 7 ⁄3 of the terms of the mem8 bers so appointed expiring on the date 

9 that is 1 year after the date on which 

10 those members are appointed; 

‘‘(II) 1 11 ⁄3 of the terms of the 

12 members so appointed expiring on the 

13 date that is 2 years after the date on 

14 which those members are appointed; 

15 and 

‘‘(III) 1 16 ⁄3 of the terms of the 

17 members so appointed expiring on the 

18 date that is 3 years after the date on 

19 which those members are appointed; 

20 ‘‘(ii) the term of service for a member 

21 appointed under subparagraph (E)(ii) shall 

22 be not more than 180 days; and 

23 ‘‘(iii) any Board member appointed to 

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1 cancy shall be appointed only for the re2 mainder of that term. 

3 ‘‘(H) REMOVAL.—A member of the Board 

4 shall be removable at will by the Commission. 

5 ‘‘(2) RULES.—The Board shall propose and 

6 adopt rules to effect the purposes of this title with 

7 respect to transactions in municipal securities ef8 fected by brokers, dealers, and municipal securities 

9 dealers and advice provided to or on behalf of mu10 nicipal entities or obligated persons by brokers, deal11 ers, municipal securities dealers, and municipal advi12 sors with respect to municipal financial products, the 

13 issuance of municipal securities, and solicitations of 

14 municipal entities or obligated persons undertaken 

15 by brokers, dealers, municipal securities dealers, and 

16 municipal advisors and that, at a minimum, shall— 

17 ‘‘(A) provide that no municipal securities 

18 broker or municipal securities dealer shall effect 

19 any transaction in, or induce or attempt to in20 duce the purchase or sale of, any municipal se21 curity, and no broker, dealer, municipal securi22 ties dealer, or municipal advisor shall provide 

23 advice to or on behalf of a municipal entity or 

24 obligated person with respect to municipal fi25 nancial products or the issuance of municipal 


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1 securities, unless such municipal securities 

2 broker or municipal securities dealer meets such 

3 standards of operational capability and such 

4 municipal securities broker or municipal securi5 ties dealer and every natural person associated 

6 with such municipal securities broker or munic7 ipal securities dealer meets such standards of 

8 training, experience, competence, and such 

9 other qualifications as the Board finds nec10 essary or appropriate in the public interest or 

11 for the protection of investors and municipal 

12 entities or obligated persons. In connection with 

13 the definition and application of such standards 

14 the Board may— 

15 ‘‘(i) appropriately classify municipal 

16 securities brokers, municipal securities 

17 dealers, and municipal advisors (taking 

18 into account relevant matters, including 

19 types of business done, nature of securities 

20 other than municipal securities sold, and 

21 character of business organization), and 

22 persons associated with municipal securi23 ties brokers, municipal securities dealers, 

24 and municipal advisors; 


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1 ‘‘(ii) specify that all or any portion of 

2 such standards shall be applicable to any 

3 such class; and 

4 ‘‘(iii) require persons in any such 

5 class to pass tests administered in accord6 ance with subsection (c)(7); 

7 ‘‘(B) be designed to prevent fraudulent and 

8 manipulative acts and practices, to promote just 

9 and equitable principles of trade, to foster co10 operation and coordination with persons en11 gaged in regulating, clearing, settling, proc12 essing information with respect to, and facili13 tating transactions in municipal securities and 

14 municipal financial products, to remove impedi15 ments to and perfect the mechanism of a free 

16 and open market in municipal securities and 

17 municipal financial products, and, in general, to 

18 protect investors, municipal entities, obligated 

19 persons, and the public interest; and not be de20 signed to permit unfair discrimination among 

21 customers, municipal entities, obligated persons, 

22 municipal securities brokers, municipal securi23 ties dealers, or municipal advisors, to fix min24 imum profits, to impose any schedule or fix 

25 rates of commissions, allowances, discounts, or 


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1 other fees to be charged by municipal securities 

2 brokers, municipal securities dealers, or munic3 ipal advisors, to regulate by virtue of any au4 thority conferred by this title matters not re5 lated to the purpose of this title or the adminis6 tration of the Board, or to impose any burden 

7 on competition not necessary or appropriate in 

8 furtherance of the purposes of this title; 

9 ‘‘(C) if the Board deems appropriate, pro10 vide for the arbitration of claims, disputes, and 

11 controversies relating to transactions in munic12 ipal securities and advice concerning municipal 

13 financial products, except that no person other 

14 than a municipal securities broker, municipal 

15 securities dealer, municipal advisor, or person 

16 associated with such a municipal securities 

17 broker, municipal securities dealer, or municipal 

18 advisor may be compelled to submit to such ar19 bitration except at his instance and in accord20 ance with section 29; 

21 ‘‘(D) provide for the periodic examination 

22 in accordance with subsection (c)(7) of munic23 ipal securities brokers, municipal securities 

24 dealers, and municipal advisors to determine 

25 compliance with applicable provisions of this 


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1 title, the rules and regulations thereunder, and 

2 the rules of the Board. Such rules shall specify 

3 the minimum scope and frequency of such ex4 aminations and shall be designed to avoid un5 necessary regulatory duplication or undue regu6 latory burdens for any such municipal securities 

7 broker, municipal securities dealer, or municipal 

8 advisor; 

9 ‘‘(E) include provisions governing the form 

10 and content of quotations relating to municipal 

11 securities which may be distributed or published 

12 by any municipal securities broker, municipal 

13 securities dealer, or person associated with such 

14 a municipal securities broker or municipal secu15 rities dealer, and the persons to whom such 

16 quotations may be supplied. Such rules relating 

17 to quotations shall be designed to produce fair 

18 and informative quotations, to prevent fictitious 

19 or misleading quotations, and to promote or20 derly procedures for collecting, distributing, and 

21 publishing quotations; 

22 ‘‘(F) prescribe records to be made and 

23 kept by municipal securities brokers, municipal 

24 securities dealers, and municipal advisors and 


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1 the periods for which such records shall be pre2 served; 

3 ‘‘(G) define the term ‘separately identifi4 able department or division’, as that term is 

5 used in section 3(a)(30), in accordance with 

6 specified and appropriate standards to assure 

7 that a bank is not deemed to be engaged in the 

8 business of buying and selling municipal securi9 ties through a separately identifiable depart10 ment or division unless such department or di11 vision is organized and administered so as to 

12 permit independent examination and enforce13 ment of applicable provisions of this title, the 

14 rules and regulations thereunder, and the rules 

15 of the Board and so that a separately identifi16 able department or division of a bank may be 

17 engaged in activities other than those relating 

18 to municipal securities; 

19 ‘‘(H) provide for the operation and admin20 istration of the Board, the compensation of the 

21 members of the Board (subject to the rule 

22 issued by the Commission under section 

23 2(b)(1)(B) of the ‘Municipal Securities Rule24 making Board Reform Act of 2019’), and the 

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1 ees, attorneys, and consultants as may be nec2 essary or appropriate to carry out the functions 

3 of the Board under this section; 

4 ‘‘(I) provide that each municipal securities 

5 broker, municipal securities dealer, and munic6 ipal advisor shall pay to the Board such reason7 able fees and charges as may be necessary or 

8 appropriate to defray the costs and expenses of 

9 operating and administering the Board, which 

10 shall specify the amount of such fees and 

11 charges, which may include charges for failure 

12 to submit to the Board, or to any information 

13 system operated by the Board, within the pre14 scribed timeframes, any items of information or 

15 documents required to be submitted under any 

16 rule issued by the Board; 

17 ‘‘(J) establish the terms and conditions 

18 under which any broker, dealer, or municipal 

19 securities dealer may sell, or prohibit any 

20 broker, dealer, or municipal securities dealer 

21 from selling, any part of a new issue of munic22 ipal securities to a related account of a broker, 

23 dealer, or municipal securities dealer during the 

24 underwriting period; and 

25 ‘‘(K) with respect to municipal advisors— 


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1 ‘‘(i) prescribe means reasonably de2 signed to prevent acts, practices, and 

3 courses of business as are not consistent 

4 with a municipal advisor’s fiduciary duty 

5 to its clients; 

6 ‘‘(ii) provide continuing education re7 quirements for municipal advisors; 

8 ‘‘(iii) provide professional standards; 

9 and 

10 ‘‘(iv) not impose a regulatory burden 

11 on small municipal advisors that is not 

12 necessary or appropriate in the public in13 terest and for the protection of investors, 

14 municipal entities, and obligated persons, 

15 provided that there is robust protection of 

16 investors against fraud. 

17 ‘‘(3) BOARD AUTHORITY.—The Board, in con18 junction with or on behalf of any Federal financial 

19 regulator or self-regulatory organization, may— 

20 ‘‘(A) establish information systems; and 

21 ‘‘(B) assess such reasonable fees and 

22 charges for the submission of information to, or 

23 the receipt of information from, such systems 

24 from any persons which systems may be devel25 oped for the purposes of serving as a repository 


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1 of information from municipal market partici2 pants or otherwise in furtherance of the pur3 poses of the Board, a Federal financial regu4 lator, or a self-regulatory organization, except 

5 that the Board— 

6 ‘‘(i) may not charge a fee to municipal 

7 entities or obligated persons to submit doc8 uments or other information to the Board 

9 or charge a fee to any person to obtain, di10 rectly from the Internet site of the Board, 

11 documents or information submitted by 

12 municipal entities, obligated persons, bro13 kers, dealers, municipal securities dealers, 

14 or municipal advisors, including documents 

15 submitted under the rules of the Board or 

16 the Commission; and 

17 ‘‘(ii) shall not be prohibited from 

18 charging commercially reasonable fees for 

19 automated subscription-based feeds or 

20 similar services, or for charging for other 

21 data or document-based services cus22 tomized upon request of any person, made 

23 available to commercial enterprises, munic24 ipal securities market professionals, or the 

25 general public, whether delivered through 


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1 the Internet or any other means, that con2 tain all or part of the documents or infor3 mation, subject to approval of the fees by 

4 the Commission under section 19(b). 

5 ‘‘(4) GUIDANCE.—The Board may provide guid6 ance and assistance in the enforcement of, and ex7 amination for, compliance with the rules of the 

8 Board to the Commission, a registered securities as9 sociation under section 15A, or any other appro10 priate regulatory agency, as applicable. 

11 ‘‘(5) MEETINGS.—The Board, the Commission, 

12 and a registered securities association under section 

13 15A, or the designees of the Board, the Commission, 

14 or such association, shall meet not less frequently 

15 than 2 times a year— 

16 ‘‘(A) to describe the work of the Board, 

17 the Commission, and the registered securities 

18 association involving the regulation of municipal 

19 securities; and 

20 ‘‘(B) to share information about— 

21 ‘‘(i) the interpretation of the Board, 

22 the Commission, and the registered securi23 ties association of Board rules; and 

24 ‘‘(ii) examination and enforcement of 

25 compliance with Board rules. 


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1 ‘‘(6) RULE OF CONSTRUCTION.—Nothing in 

2 this section shall be construed to impair or limit the 

3 power of the Commission under this title.’’; and 

4 (2) in subsection (c)(7)— 

5 (A) in subparagraph (A), in the matter 

6 preceding clause (i), by striking ‘‘(b)(2)(E)’’ 

7 and inserting ‘‘(b)(2)(D)’’; and 

8 (B) in subparagraph (B), in the first sen9 tence, by striking ‘‘(b)(2)(E)’’ and inserting 

10 ‘‘(b)(2)(D)’’. 

11 (b) RULEMAKINGS.— 

12 (1) SECURITIES AND EXCHANGE COMMIS13 SION.—The Securities and Exchange Commission— 

14 (A) may issue any rules to carry out this 

15 Act that may be necessary or appropriate in the 

16 public interest or for the protection of investors; 

17 and 

18 (B) shall issue a final rule that provides 

19 the maximum compensation for a member of 

20 the Municipal Securities Rulemaking Board. 

21 (2) MUNICIPAL SECURITIES RULEMAKING

22 BOARD.—Not later than 60 days after the date on 

23 which the Securities and Exchange Commission has 

24 completed the appointment of the initial members of 

25 the Municipal Securities Rulemaking Board under 


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1 section 15B(b)(1)(E) of the Securities Exchange Act 

2 of 1934, as added by subsection (a), the Municipal 

3 Securities Rulemaking Board shall submit to the 

4 Commission any notice of a proposed change to the 

5 rules of the Board that is required as a result of the 

6 amendments made by subsection (a). 

Æ 


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