MSRB PROVIDES GUIDANCE TO UNDERWRITERS ON IMPLEMENTATION
OF NEW OBLIGATIONS TO STATE AND LOCAL GOVERNMENTS
The Municipal Securities Rulemaking Board (MSRB) recently published comprehensive implementation guidance to assist underwriters in meeting their newly expanded legal obligations to state and local governments.
Effective August 2, 2012, underwriters of municipal securities are required to disclose to their state and local government clients information about their role in a municipal bond transaction, risks about complex financial transactions, potential conflicts of interest and compensation received from third-party providers of derivatives and other investments, among other new requirements. These expanded obligations, intended to ensure state and local governments have the necessary information to make decisions when undertaking financial transactions, are outlined in an interpretive notice to MSRB Rule G-17 on fair dealing that was approved by the Securities and Exchange Commission on May 4, 2012. The interpretive notice also describes fair dealing responsibilities of underwriters in connection with their representations to issuers and with certain financial aspects of an underwriting.
The new implementation guidance reiterates the principles underlying the interpretive notice and provides practical considerations for underwriters to bear in mind when evaluating their activities and procedures for compliance.
The implementation guidance supplements other educational materials the MSRB has provided on underwriters’ new obligations to state and local governments.