Broker-dealer groups cast eyes toward 2026 after 'good year' for muni regulation

The year 2025 has been "a good year" for municipal securities regulation ? a representative of one broker-dealer group said, and he's hopeful that the trend toward "sensible regulation" will continue in 2026.

Michael Decker, senior vice president for research and public policy at the Bond Dealers of America, said BDA believes that the Securities and Exchange Commission, led by Chairman Paul Atkins, as well as the Municipal Securities Rulemaking Board and the Financial Industry Regulatory Authority, "are moving in the right direction."

Atkins, nominated by President Donald Trump, was sworn in as SEC chairman on April 21. Decker pointed to several initiatives that were withdrawn or reversed in 2025. For example, the MSRB in March announced that the board had voted to withdraw its pre-trade concept release, which had been published in January.

Decker also cited the SEC's withdrawal earlier this year of its proposed Regulation Best Execution as well as decisions by the MSRB and FINRA to maintain their existing 15-minute trade reporting standards despite each having received SEC approval to implement a one-minute reporting standard.

The MSRB's decision to rescind the one-minute trade reporting deadline came after "months of dialogue and engagement with market participants," MSRB President and CEO Mark Kim said in a June press release.

"The initiatives that were withdrawn or reversed were all superfluous," Decker said. "It was unnecessary, excessive regulation."

Looking ahead to 2026, Decker said that both the MSRB and FINRA are currently conducting retrospective rule reviews. He pointed to a notice the MSRB published in November to seek comment on draft amendments to MSRB Rule D-15, which defines the term sophisticated municipal market professional.

The draft amendments to Rule D-15 would modify the asset threshold for a municipal entity to qualify as an SMMP and exempt SEC-registered investment advisors from having to make certain affirmations to qualify for SMMP status under MSRB rules, the Nov. 3 request for comment notice said. The comment deadline is Feb. 2, 2026, the notice said.

"We're excited about that initiative," Decker said.

In addition, BDA has heard that FINRA is reviewing FINRA Rule 3110, its supervision rule, "to, among other changes, provide flexibility for remote work," he said.

"We expect to see a rule proposal around that fairly soon," Decker said, adding that he suspects the MSRB is apt to follow FINRA's lead on that issue. "So if FINRA finalizes a rule next year updating its supervision rules, presumably the MSRB would follow closely behind."

The Securities Industry and Financial Markets Association is also looking ahead to 2026.

"In 2026, SIFMA will be engaging with the MSRB on the development of its strategic plan, with a particular focus on the MSRB's retrospective review of its rulebook," Leslie Norwood, managing director, associate general counsel and head of municipal securities at SIFMA, said in written comments provided via a spokesperson.

SIFMA's main focus "will be on rule harmonization, wherever practicable, across the MSRB, FINRA and SEC," Norwood said. Rule harmonization eases regulatory burdens and reduces costs "while increasing certainty and predictability," she said.

"One example of this is supporting the MSRB's efforts to harmonize requirements under Rule G-28 for dealer personnel engaging in municipal securities activities away from their own firm to comport with FINRA's similar rule," Norwood said.

Norwood also said that SIFMA is pleased that the MSRB will be reviewing MSRB Rule G-27, its dealer supervision rule,to update it "to reflect how business gets done since the COVID pandemic."

Another effort SIFMA will undertake will be to advocate for rule changes that will ease dealer burdens "without negatively impacting market information or protections," she said.

"An example of this is the review of the submission process for primary offering data and documents by dealers under Rule G-32 through Form G-32," Norwood said. "Finally, SIFMA supports reviewing and clarifying the use of the term 'financial advisor' in light of the Dodd-Frank regulation of municipal advisors."

With regard to SEC rulemaking, "SIFMA will be following up its advocacy with the SEC on the Reg AB Concept Release and has requested the SEC consider principal trading relief, including for fixed income products," Norwood said.

SIFMA was among a group of organizations representing various aspects of the muni market that signed a Dec. 1 comment letter submitted to the SEC regarding its "Concept Release on Residential Mortgage-Backed Securities Disclosures and Enhancements to Asset-Backed Securities Registration," which the agency issued on Sept. 26.

In the letter, the organizations urged the SEC to consider, in any potential rulemaking that may come on the heels of the concept release, how certain proposals might impact the muni market. The SEC "should particularly consider how rulemaking might add to or create regulatory burdens and liability for issuers and borrowers in the municipal securities market," and how any such added burdens would comport with President Trump's Jan. 31 executive order entitled "Unleashing Prosperity through Deregulation."

It is also anticipated that the SEC will release rulemaking toimplement the Financial Data Transparency Act, "which may have a significant impact on municipal securities participants," Norwood said.

"On the legislative front, SIFMA will continue its long-standing advocacy for the reinstatement of the tax-exemption on advance refundings of municipal bonds, to support state and local governments seeking flexibility and reductions in their borrowing costs for capital projects," she said.

American Securities Association President and CEO Chris Iacovella said muni bonds "are the backbone of how America builds schools, roads, and hospitals." Therefore, ASA's top municipal finance priority for 2026 "is preserving and strengthening the full muni finance 'toolbox' to keep borrowing costs low for communities," Iacovella said in a statement.

"ASA will continue to engage Congress and regulators to ensure federal policy does not unintentionally weaken the municipal market or limit access to affordable capital for Main Street," he said.