Underwriters of municipal securities would have to clearly disclose potential risks and conflicts of interest to their issuer clients, under rules the Municipal Securities Rulemaking Board on Tuesday asked the Securities and Exchange Commission to approve.
"This proposal is a groundbreaking effort in ensuring the interests of state and local government bonds issuers are further protected in their transactions with underwriters of municipal securities," said MSRB executive director Lynnette Kelly Hotchkiss. "This gives us the ability to establish detailed requirements for underwriters and make important information more readily available to state and local governments that sell bonds."
The MSRB already bans deceptive, dishonest or unfair underwriter practices with issuers, but the proposed amendments to MSRB rule G-17 would also require affirmative disclosures. The underwriter of a negotiated offering that recommends a complex financing such as a variable rate demand obligation with
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