MSRB files new time of trade disclosure requirements with the SEC


The Municipal Securities Rulemaking Board has filed amendments to its Rule G-47 on time of trade disclosure with the Securities and Exchange Commission, which would add three new disclosure scenarios, update its definition of materiality in relation to the rule, and provide a few clarifying details as supplementary material.

The MSRB approved the amendments during its quarterly board meeting on Oct. 25-26 and follow the board’s request for comment on the changes to the rule in February 2023. This filing with the SEC preserves the bulk of the amendments with a few minor changes.

“In the request for comment we had talked about an old interpretation of dealing with obscure securities and the fact that the dealer is required to get information about them. It made sense for us not to move forward with that,” said Ernie Lanza, chief regulatory and policy officer for the MSRB. “As far as one of the three new disclosure items, which deals with disclosing to customers’ time of trade when there’s no official statement available, we did limit the scope of that to apply only to new issue customers.”

Mark Kim, chief executive officer of the MSRB.

Industry lobbyists generally welcomed the changes, and the MSRB made it a point to respond to comments made by the Bond Dealers of America and the Securities Industry and Financial Markets Association in the filing.

New disclosure requirements include adding yield to worst as a disclosure scenario, requiring a dealer to disclose if the computed yield required by the MSRB is different than the yield at which the transaction was executed.

“The MSRB believes that this information may be material to a customer’s investment decision, as it could impact a decision to purchase a municipal security at the current price or yield, and therefore may be required to be disclosed at or prior to the time of trade in addition to being disclosed on a customer’s confirmation,” the MSRB filing said. 

The lack of or unavailability of an official statement for new issue customers would also have to be disclosed under the amendments, in addition to whether an issuer has committed to making continuing disclosures related to the issue.

The amendments also specify that dealers do not need to “disclose to their customer material information that, pursuant to the dealer’s policies and procedures regarding insider trading and related securities laws, is intentionally withheld from the dealer’s registered representatives who are engaged in sales to and purchased from a customer,” the MSRB said.

The amendments also change the definition of materiality slightly. Rule G-47 currently defines the term ‘material information’ as “that information would be considered important or significant by a reasonable investor in making an investment decision,” the definition said. The amendments knock out “or significant” as part of the definition in order “to streamline and simplify the definition.”

The board waits for SEC response on the filing, when the SEC will respond with its own comments and set a compliance date.

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