WASHINGTON (Reuters) - The board that writes the rules for the $2.9 trillion U.S. municipal bond market said on Monday it will file a raft of regulations on financial advisors with the federal government in June.
The Municipal Securities Rulemaking Board is a self-regulatory organization made up of banks, issuers and advisors that writes the rules the Securities and Exchange Commission enforces.
The sweeping financial regulatory overhaul passed last year known as Dodd-Frank for its Congressional authors put municipal advisors under the board’s watch and gave advisors fiduciary duties to their clients, which include states, cities, schools and hospitals.
Since then, the board has been scrambling to tighten regulation of advisors. In June, it will file rules defining fiduciary responsibilities emphasizing “the duty of loyalty and care,” limiting gifts by advisors, and applying a “fair dealing” rule currently used for brokers and dealers to advisors.
The board is also looking into the best way to delineate between underwriters and advisors. Smaller issuers have said that barring advisors from acting as underwriters will drive up their costs.
The federal government began scrutinizing advisors and other areas of the market after Jefferson County, Alabama, came close to bankruptcy over soured sewer bonds, and Dodd-Frank changed the MSRB’s mandate to also protect those selling debt as well as those buying it.
As more attention is paid to the market, the demand for timely information about it is growing. Information about debt sold in the market is frequently not made available to investors or is posted well after it could have meaning for those buying bonds, DPC Data, Inc., found in February.
On Monday, the rulemaking board announced issuers will be able to now post presale documents such as preliminary official statements, on its EMMA database.
Issuers can also voluntarily provide information about the timing and the accounting standard used to prepare annual financial reports on the bonds to the web site, which stands for Electronic Municipal Market Access.
Reporting by Lisa Lambert; Editing by Andrew Hay