ICI Comments on MSRB Non-Cash Compensation Proposal

Washington, DC, July 22, 2004 - The Institute supports the Municipal Securities Rulemaking Board's (MSRB) recent efforts to provide greater uniformity between its rules governing certain gifts and gratuities given by brokers, dealers, or municipal securities dealers and NASD's rules governing non-cash compensation.

Background
MSRB Rule G-20 aims to prevent brokers, dealers, and municipal securities dealers from attempting to induce other organizations active in the municipal securities market to engage in business by means of personal gifts or gratuities given to employees. In general, the rule limits gifts to no more than $100 to each recipient in any year. The rule helps to ensure that dealers' municipal securities activities are undertaken in arm's length, merit-based transactions in which conflicts of interest are minimized.

In June, MSRB proposed amendments to Rule G-20 that would prohibit dealers from accepting or making payments of non-cash compensation in connection with a primary offering of municipal securities (including municipal debt offerings and sales of municipal fund securities), with limited exceptions consistent with those permitted in other securities markets. 

ICI Position
In a recent comment letter, the Institute expresses support for MSRB's proposal and commends MSRB for revising its rules to provide greater uniformity between its rules and those of the NASD where appropriate. The Institute's letter also includes a number of technical recommendations that are intended to better conform MSRB rules, as applied to brokers, dealers, and municipal securities dealers to NASD rules.

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