MSRB seeks comment on proposal to loosen advisor testing standards

BY SourceMedia | MUNICIPAL | 12/01/22 12:16 PM EST By Caitlin Devitt

The Municipal Securities Rulemaking Board is seeking feedback on a proposal that would allow returning advisors, under certain conditions, to avoid fresh testing requirements.

Rule G-3 currently requires a municipal advisor representative or principal whose qualification has lapsed for two years to re-take their Series 50 exams or apply to the MRSB for a waiver due to an extraordinary case.

The proposed G-3 amendment would broaden the exemption ? and eliminate the current extraordinary case waiver ? for individuals who meet certain criteria, such as previously having been a qualified MA for at least three years and who left the job no more than three years prior. The board has proposed eight conditions that an individual needs to meet in order to qualify for the exemption.

The proposed amendment is aimed at promoting "greater flexibility for individuals to step away from the municipal securities market for a period of time, including for personal matters such as family needs or educational pursuits," the MSRB said in its request for comment.

"Easing such barriers to reentry would promote greater diversity and inclusion in the municipal securities market by providing municipal advisors with greater flexibility to attract and retain a broader pool of professionals."

The board seeks market feedback on 15 questions related to the proposal, including on the proposed criteria and timeline that would allow an individual to qualify and whether the draft amendment would achieve the goal of providing greater flexibility and certainty for firms regarding the requalification process under G-3.

Market participants have until Jan. 30, 2023 to submit comments.

The feedback will help the MSRB decide whether to pursue the changes further through a proposed rule change filed with the Securities and Exchange Commission.

The board authorized the request for comments at its most recent quarterly meeting in late October.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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