Broker-dealer group expresses support for MSRB gift rule proposal in letter to SEC

A broker-dealer group in a comment letter urged the Securities and Exchange Commission to approve the Municipal Securities Rulemaking Board's proposal to amend its gift rule, but also told the MSRB it should clarify some language regarding event tickets.

On May 1, the MSRB filed with the SEC a proposed rule change to MSRB Rule G-20 to revise the MSRB's gift and gratuities requirements for dealers. The change is designed to harmonize the MSRB's gift rule requirements with the Financial Industry Regulatory Authority's amendments to its own rule regarding gifts, FINRA Rule 3220. Among other things, the MSRB proposal calls for increasing the gift limit to $300 from $100 per person per year, consistent with FINRA's rule as amended.

In its May 28 letter to the SEC, the Bond Dealers of America expressed support for the MSRB's proposal and called on the commission to approve it.

"When FINRA and MSRB rules which cover similar functions differ in their application, it raises compliance costs for dealers and raises the risk of inadvertent noncompliance," the letter, signed by Michael Decker, senior vice president for research and public policy at BDA, said. "We agree fully with the board's goals of harmonizing Rule G-20 with FINRA Rule 3220, and we believe the proposal effectively achieves that."

BDA's letter said "the specific changes in both the FINRA and MSRB gift rules have long been needed."

"As we told FINRA last year, 'this increase [in the gift limit] is sensible and necessary, reflects decades of inflation, and aligns the rule more closely with actual business practices,'" the letter said.

BDA's letter also referenced a statement from the MSRB regarding compliance dates for the MSRB proposal.

On May 26, the MSRB issued a reminder concerning the MSRB rule change operative date for FINRA-member dealers. The reminder noted that the operative date for dealers that are FINRA members is June 1, while a separate compliance date of Dec. 1 applies to bank dealers and all municipal advisors.

"However, a bank dealer or municipal advisor may choose to come into compliance with amended MSRB Rule G-20 in its entirety at any time beginning June 1, 2026," the MSRB's reminder said.

Should a bank dealer or municipal advisor opt to come into compliance at a date earlier than Dec. 1, "its compliance policies and procedures should be updated as of the date the firm actually determines that it will come into compliance with all provisions of amended MSRB Rule G-20," the MSRB's reminder said.

"We thank the MSRB for this clarification," BDA said in its letter.

"Many BDA members are dually registered FINRA broker-dealers and municipal advisors, and some are both FINRA BDs and bank dealers," the letter said. "Sometimes individual employees subject to Rule G-20 work for both units."

Having different compliance dates for various units inside a firm "would have been confusing and difficult to apply," BDA's letter said.

"The board's May 26 release provides reasonable flexibility for FINRA BDs also registered as MAs or bank dealers," the letter said.

The letter also mentioned a rule area where it would like to see the MSRB in the future provide some clarification. Section (d) of Rule G-20 addresses the question of gifts that aren't subject to the proposed $300 annual limit and that paragraph (i) of section (d) discusses gifts that aren't subject to the limit "in the context of 'normal business dealings,'" the letter said. That covers occasional tickets to sporting events, concerts, and other events hosted by the broker-dealer, BDA's letter said.

"Some BDA members have expressed that the language of paragraph (d)(i) is confusing," the letter said, adding that it isn't always obvious when event tickets count toward the annual gift limit and when they don't. "We ask that in the future the MSRB consider amending paragraph (d)(i) or issuing guidance around the rule to clarify when the normal business dealing exception applies."

Still, BDA in its letter to the SEC thanked the MSRB for its proposal, adding that it's "vital that FINRA and MSRB rules governing the same function" be in as close alignment as possible.

"The proposal is fully compatible with relevant statutes, and we urge the commission to approve it quickly," the letter said.

The MSRB designated the proposed rule change "as constituting a 'noncontroversial' rule change" under federal law, and filed it for immediate effectiveness.