The Municipal Securities Rulemaking Board has filed a proposed rule change with the Securities and Exchange Commission on MSRB Rule G-27, extending the COVID-19 related relief in order to give dealers additional time to comply with supervisory obligations.
The board is currently working with the SEC and the Financial Industry Regulatory Authority to consider if and how they need to modernize their supervisory rules to better reflect the changing work environments firms have experienced as a result of COVID-19. This relief, which becomes operative on Jan. 1, 2023, provides an extension while those details are worked out.
The relief extends until June 30, 2023, and makes it so "dealers have the option to continue to conduct inspections of municipal offices of supervisory jurisdiction, branch offices or non-branch locations remotely, without the need to conduct an on-site visit to such offices or locations, for such inspections for calendar year 2023 if the inspections are conducted by June 30, 2023," the board said.
Dealers are permitted to satisfy their office inspection obligations by conducting the applicable inspections remotely so long as dealers amend or supplement their written supervisory procedures to provide for remote inspections reasonably designed to assist in detecting and preventing violations of, and achieving compliance with applicable securities laws.
Dealers must also use remote inspections as part of an effective supervisory system, which includes the ongoing review of activities and functions occurring at all offices and locations in addition to making and maintaining the required records for all offices or locations that had inspections that were conducted remotely.
But while COVID-19 relief is being extended in some places, it's being rescinded in others. The MSRB also filed a separate proposed rule change with the Commission to amend Rule G-3, on professional qualifications requirements, to remove any references to certain expired temporary regulatory relief implemented during the heights of COVID-19.
That comes as trading volumes continue their upward trajectory, with the board announcing that year-to-date trading on its Real-Time Transaction Reporting System is up 61% from the same period in 2021, with November expected to be the seventh of the last eight months with trades exceeding one million.
"The record high number of trades in 2022 follows a record low in 2021 when municipal bond yields were at or near record lows," said John Bagley, chief market structure officer for the MSRB. "The dramatic increase in trading in 2022 has been driven mainly by a significant increase in demand for municipal bonds by individual investors as bond yields have risen."
