Institute Comments on MSRB Guidance Regarding Municipal Transactions

Washington, DC, December 22, 2000 - The Institute has filed a comment letter with the Securities and Exchange Commission regarding the Municipal Securities Rulemaking Board's draft interpretive guidance in connection with the responsibilities of brokers, dealers, and municipal securities dealers under the MSRB's fair practice, quotation, uniform practice, and new issue securities rules.

The Institute's comment letter supports the MSRB's consideration of ways to promote the development of electronic systems for municipal securities, but opposes its approach in attempting to achieve that result.

The letter notes that the MSRB's proposed creation of a class of "sophisticated market professionals" that would receive a lesser degree of protection under the MSRB rules than other customers of dealers is based on the flawed premise that certain categories of investors routinely enjoy timely access to all material information on municipal securities than is available to brokers. The letter notes that not only is this inaccurate, but it is compounded by the fact that insufficient information about particular municipal securities is available in the first place. The letter adds that such deficiencies do not justify reducing the obligations of dealers under MSRB rules.

The letter also discusses the proposed list of factors that dealers should consider in determining whether a customer has access to all publicly available material facts concerning a transaction, and the extent to which the MSRB rules should be applied to electronic transactions.