Due to the considerable operational obstacles faced by many entities under their regulatory umbrella due to COVID-19, the Municipal Securities Rulemaking Board (MSRB) has filed a rule change to provide regulatory relief by extending the compliance and testing deadlines for certain MSRB rules and temporarily staying some MSRB late fees.
The proposed rule changes took effect immediately upon filing on April 9, 2020.
Late Fees Temporarily Suspended
MSRB fees that are due or are assessed under MSRB Rules A-11 and A-12(d) and A-13 between March 1 and July 31, 2020, but are not paid on time will not incur late fees. However, please note that, after August 1, 2020, unpaid balances will incur late fee charges until the unpaid balance is paid.
Deadline for Certain Supervisory Functions Extended
The amended rules would allow the following annual supervisory obligations under MSRB Rule G-27 (regarding supervision) and Rule G-44 (regarding supervisory and compliance obligations of municipal advisors) to be completed on or before March 31, 2021, which would fulfill compliance requirements for 2020:
- Rule G-27(d)(i)(A)-(C)—inspection of an office of municipal supervisory jurisdiction, branch office, or non-branch location
- Rule G-27(b)(vii)—annual compliance interviews or meetings to discuss relevant municipal securities activities of the representative(s) and principal(s)
- Rule G-27(f)(i)—submission of a report by the designated principal(s) to senior management that reviews the firm’s supervisory controls
- Rule G-44(d)—completion of the annual written certification by the chief executive officer of a municipal advisor which confirms the development and implementation of processes to establish, maintain, review, test, and modify written compliance policies and supervisory procedures
Additional Time to Complete Professional Qualification Standards Allowed
Due to the temporary closing of Prometric test centers that FINRA (Financial Industry Regulatory Authority) uses to deliver professional qualification examinations for the MSRB, firms and individuals will be allowed additional time to fulfill professional qualification standards.
Compliance deadlines are extended 120 days from the time the MSRB announces that testing centers are open for those individuals acting as a principal without having passed the relevant examination.
The deadline to complete the Regulatory Element component of continuing education would be extended for 120 days from the day that testing centers are reopened, provided that remote training is unavailable
Needs analysis and delivery of continuing education may be completed on or before March 31, 2021.
The deadline for persons acting as municipal advisor principals to qualify using the Series 54 (Municipal Advisor Principal Qualification Examination) has been moved to March 31, 2021.
Extended: Revised Interpretive Notice
The MSRB has extended the compliance date to implement the Revised Interpretive Notice until March 31, 2021.
Compliance with amended Form G-32 pertaining to the collection of new data elements from underwriters related to primary offerings of municipal securities through the MSRB’s Electronic Municipal Market Access (EMMA®) Dataport system has also been extended to March 31, 2021.
Keys for Navigating MSRB Amended Requirements: Documentation and Communication
Although extensions have been granted, it would be best practice for firms to continue to conduct business as usual (to the extent this is possible under current conditions). Take particular note of extensions related to supervisory functions that normally occur in-person, such as branch examinations and annual compliance meetings as these will need to be delayed until in-person meetings are once again feasible, which is still uncertain.
In the event disruptions to established business continuity plans occur and it becomes necessary to take advantage of the new extensions, we recommend firms take the following actions:
- Clearly document that your firm completed a careful and thorough evaluation of the situation and reached a decision in consultation with senior management to adjust branch exams or the report from the designated principals to the firm’s senior management detailing the review of the firm’s supervisory controls. Firms should be sure to specifically reference MSRB Notice 2020-09 and understand that when branch examinations resume, firms will be expected to explain and document any issues and steps taken to remediate the issues which may have resulted with respect to the pandemic.
- Maintain a high level of awareness of the extended deadlines with regards to professional qualification examinations, considering that Prometric, the exam provider, has not yet announced when its exam sites will reopen, and ensure your firm is on alert for notifications from Prometric that testing sites have reopened.
- Communicate directly with the MSRB with any concerns or issues. Questions about this notice may be directed to Gail Marshall, Chief Compliance Officer, at 202-838-1361, or Bri Joiner, Director, Professional Qualifications, at 202-838-1347.
The extensions are limited to those outlined above.
Should you or your firm have questions regarding the amended MSRB requirements outlined in this notice, contact us at (619) 278-0020 to schedule a consultation. Our compliance experts are standing by to help during this difficult time.