In-Depth: Broker/Dealer Compliance Services

MBPA Principals on Broker/Dealer Compliance

Municipal securities dealers are subject to numerous rules promulgated by the MSRB, FINRA and the SEC. Compliance with these rules is a major undertaking for these firms and requires constant supervision and attention.

MBPA is able to assist broker-dealers with their compliance efforts in a number of instances:

Securities Exchange Act Rule 15(c)2-12
Currently the SEC is examining broker-dealers to determine their compliance with Rule 15(c)2-12. The significance of complying with this rule was first brought to the attention of the municipal securities dealers by the National Examination Risk Alert that was issued by the SEC’s Office of Compliance Inspections and Examinations on March 19, 2012, wherein the SEC explained the duties and obligations of municipal broker-dealers.
Following that Alert, the SEC issued its Municipalities Continuing Disclosure Cooperation Initiative which led to the self-reporting of 15(c)2-12 violations by many municipal broker-dealers.

Firms that self-reported violations have been required to enter settlement agreements with the SEC which, as part of the settlement, requires the retention of an independent consultant to provide review and assistance of the municipal broker-dealer’s policies and procedures.

MBPA currently offers consulting services in this area and has been retained by two municipal broker-dealer firms to provide this necessary service.

MSRB Rule G-27
G-27 sets forth the supervisory obligations of municipal broker-dealers. MBPA and its managers have over 50 years of experience in the municipal regulatory environment and have assisted municipal broker-dealers with respect to their G-27 supervisory obligations.
MBPA will bring a “best practice” approach to your municipal broker-dealer’s supervisory policies and can assist you in the implementation of the appropriate supervisory policies and procedures.

MSRB Rule G-19
MSRB Rule G-19 provides that “[a] broker, dealer or municipal securities dealer must have a reasonable basis to believe that a recommended transaction or investment strategy involving a municipal security or municipal securities is suitable for the customer, based on the information obtained through the reasonable diligence of the broker, dealer or municipal securities dealer to ascertain the customer's investment profile.
MBPA has the experience and expertise necessary to assist your firm in fashioning the appropriate policies and procedures to ensure compliance with this rule.

Other MSRB Rules
Other MSRB rules that municipal broker-dealers must comply with include Rules G- 17 and G-23 which deal with municipal financial advisory activities, and Rules G-37 and G-38 which cover political contributions and the solicitation of municipal securities business.
MBPA has experience in the compliance aspects of these rules as well and can assist you in your firm’s efforts to follow these rules.

Worth T. Blackwell, Principal
H. Gilmer Nix, Principal
Andrew V. Pittman, Principal

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