SIE Ready🏙️ Municipal Securities · Lesson 5 of 5 · 5 min
The MSRB Writes the Rules, Others Enforce Them
📜 The MSRB makes the rules for the muni market but cannot fine anyone. Who can is a favorite SIE question.
💡 Key idea
MSRB writes; FINRA, the SEC and bank regulators enforce. G-17 = fair dealing, G-30 = fair prices, EMMA = free disclosure.
🧠 Why it matters
The MSRB writes rules for dealers (broker-dealers and banks) and municipal advisors. It does NOT enforce them or examine firms, and it does NOT regulate issuers. Enforcement: FINRA for broker-dealers, the SEC, and federal bank regulators for bank dealers. Mnemonic: "MSRB writes, others bite." Key rules: • G-17 FAIR DEALING: deal fairly with all persons; no deceptive, dishonest or unfair practice. • G-30 FAIR PRICING: principal trades at a fair and reasonable price including markup; agency commissions must also be fair. No fixed percentage; the key factor is a yield comparable to similar bonds. • G-15 CONFIRMATIONS: sent at or before completion of the trade; show CUSIP, price and yield. EMMA (emma.msrb.org) is the free official source for official statements, continuing disclosures and trade prices.
📈 In the real world
🔎 Retiree Mr. Chen wonders whether he paid too much for a hospital bond. He looks it up on EMMA and sees other trades the same day at similar yields. Had they been far apart, his complaint about the broker-dealer would go to FINRA, not the MSRB, because the MSRB writes the rules but does not enforce them.
📌 Takeaways
- MSRB writes rules but does not enforce, examine or regulate issuers
- G-17 fair dealing; G-30 fair and reasonable prices and commissions
- EMMA: free official statements, continuing disclosure and trade data
📖 Terms in this lesson
EMMA: The MSRB's free website showing municipal disclosure documents and trade prices.
✅ Test yourself
Which organization enforces MSRB rules against a broker-dealer that sells municipal bonds?
- The MSRB itself
- The issuing municipality
- FINRA
- The Federal Reserve Board
Answer: C · FINRA
FINRA examines broker-dealers and enforces MSRB rules against them; the SEC also has authority. The MSRB writes rules but has no enforcement power. Federal bank regulators handle bank dealers, and issuers do not police dealers.
Under MSRB Rule G-30, what is the standard for a dealer's price on a principal trade with a customer?
- Equal to the last price reported on EMMA
- Fair and reasonable, including any markup
- Set by the issuer in the official statement
- No more than 5% above the dealer's cost
Answer: B · Fair and reasonable, including any markup
G-30 requires an aggregate price, including markup, that is fair and reasonable given all relevant factors. There is no fixed 5% cap. A recent EMMA price is useful information, not a required price, and issuers do not set secondary-market prices.
What is EMMA in the municipal market?
- The MSRB's free website for muni disclosures and trade data
- FINRA's arbitration forum for resolving municipal bond disputes
- An SEC system used to register new municipal bond issues
- A rating agency that rates short-term municipal notes
Answer: A · The MSRB's free website for muni disclosures and trade data
EMMA (Electronic Municipal Market Access) is the MSRB's free public site for official statements, continuing disclosures and trade prices. Munis are exempt from SEC registration, FINRA runs arbitration, and note ratings come from rating agencies.
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