Trade group's case against SEC that challenges MSRB's constitutionality stayed until August

Bloomberg News

The American Securities Association's federal appeals court case over a Securities and Exchange Commission order – an order the ASA says should be scrapped due to the Municipal Securities Rulemaking Board's unconstitutional structure – has been stayed until August.

The U.S. Court of Appeals for the Eleventh Circuit in an order filed Monday stayed the case until Aug. 13. In a motion filed March 3, the SEC had asked the court to put the case on hold, but that motion was opposed by ASA and denied by the court in a March 12 order.

The court said it was granting the delay now based on the ASA no longer opposing it, and on the MSRB's announcement March 7 that it will not be moving forward with a rule implementation (controversial among broker-dealers) on which the case largely rests.

On Nov. 15, 2024, the ASA, a nonprofit trade association, petitioned the court for review of an SEC order granting approval of a proposed rule change to amend MSRB Rule G-14 to shorten the timeframe for reporting trades in municipal securities to the MSRB. 

"The MSRB recently announced that it will delay setting an effective date for those rules while it considers potential changes to address concerns raised by ASA and others," the SEC said in its motion, adding that the court had recently granted the trade association's motion for an abeyance until Aug. 13 in a challenge to the approval of similar rules proposed by the Financial Industry Regulatory Authority "based on a similar announcement of FINRA's intent to reconsider them." 

In its March 14 motion asking the court to reconsider its original order denying the motion, the SEC said that after the ASA filed its opposition to the SEC's March 3 motion, the MSRB "made an announcement confirming that it will not implement the rules that ASA challenges, thereby addressing the concerns expressed in ASA's opposition." 

The trade association "has thus stated that it no longer opposes the commission's motion for an abeyance until August 13," the SEC said in its March 14 filing, noting that its motion for reconsideration was "time sensitive" because the SEC's opening brief was due on April 11. 

The SEC's order "shortens the timeframe to report trades to the Municipal Securities Rulemaking Board to one minute," the ASA said in its opening brief filed Feb. 27. "Petitioner argues that the order must be set aside because the MSRB is unconstitutionally structured in violation of the private nondelegation doctrine, Article II and the separation of powers, and the Appointments Clause," the ASA said in its brief, which described the MSRB as "unicorn regulatory body."