The Municipal Securities Rulemaking Board’s 2021 annual report shows that amid pandemic-related market volatility, the organization focused on improving market transparency, leveraging existing technologies, and returning $19 million in excess reserves to the dealer industry.
Released Tuesday, the
“Looking back at what we have accomplished over the past year and the adversity of the pandemic, we are inspired by the dedication of our people to advance the MSRB’s mission to protect and strengthen the $4 trillion municipal securities market,” said MSRB CEO Mark Kim and MSRB Board Chair Patrick Brett, in a letter to stakeholders.
From a financial stewardship perspective, Brett and Kim pointed out that the MSRB made moves to “right-size its reserves providing a 40% reduction in three primary market-based fees over an 18-month period.”
The MSRB said this will return $19 million in excess reserves to the industry. In a release, Brett and Kim described the fee reduction as “the most substantial move yet to return excess reserves to the dealer community.”
The organization
However, when taking the MSRB’s temporary fee reduction into account, nearly 70% of the organization’s revenue is expected to come from municipal underwriting and trading fees, according to the MSRB’s
Addressing that, Brett and Kim said in a statement that the MSRB is “embarking on a comprehensive examination of [its] finances and fee structure to ensure an equitable and sustainable balance of funding.”
In terms of market transparency, the MSRB allocated more than $17 million of reserves to its modernization effort. That included an enterprise-wide migration of MSRB’s systems to the cloud and various enhancements to the EMMA website.
For example, in response to user feedback, the MSRB modified its CUSIP features on EMMA to ultimately remove unissued CUSIPs and make it easier for users to manage and filter CUSIP numbers.
The MSRB is also preparing for the launch of EMMA Labs, which the organization describes as an “innovation sandbox.” Essentially, EMMA Labs will allow municipal market participants to collaborate with MSRB staff to generate ideas and test out tools and concepts, according to the report.
In terms of market regulation, the MSRB began a comprehensive review in FY 2021, of its interpretive guidance. That review resulted in a number of changes beginning with the MSRB retiring 15 pieces of guidance from its rulebook effective May 10, 2021.
The MSRB also continued to provide regulatory relief to municipal dealers and advisors in light of the ongoing COVID-19 pandemic.
That included amendments to Rule G-27 regarding the ability to conduct remote internal inspections, and to allow more time to complete data elements for amended Form G-32 regarding primary offerings of municipal securities.
Rules G-10 on required notifications and G-48 regarding exclusions of certain market professionals, were also amended by the MSRB to ease limits on required notifications.
In addition to soliciting public comment on various new draft rules and amendments to rules, the MSRB extended the compliance deadline for municipal advisors to pass the Municipal Advisor Principal Qualification Examination, i.e., the Series 54 exam, and temporarily offered an online version of the test.
The MSRB annual report also highlights progress made with the organization's public trust goal, which in 2021 focused in part on diversity and inclusion.
More than 50% of MSRB staff identify as a racial minority and the MSRB brought its full Board to two-thirds women and one-quarter racial minorities, according to the report.
“As an organization, the MSRB is more diverse than at any point in its history,” Brett and Kim said.
Other MSRB public trust efforts in FY 2021 focused on environmental, social and governance factors and community engagement.
The report points to the MSRB’s support of the Municipal Forum of New York’s Urban Leadership Fellow Program to inspire high school students to careers in public finance. The MSRB also touted its work in the Washington, D.C. area, which included donations to help children, families, and individuals experiencing homelessness.
Regarding the elevation of ESG in the municipal securities market–ESG represents a body of strategies for sustainability in investing–the MSRB says that it is “looking inward to evaluate changes it can make to reduce the organization’s environmental impact,” and adds that those changes will include an “effort to reduce the MSRB’s own carbon footprint.”
ESG factors have
