In the complex world of municipal securities, the ongoing discourse regarding the fee structures imposed by the Municipal Securities Rulemaking Board (MSRB) continues to spark significant contention. The disparities in how municipal advisors (MAs) and dealers are assessed fees have ignited a debate that highlights the challenges of regulatory fairness and transparency. Dealer groups assert that the burden of fees falls disproportionately on them, advocating for a system that shifts some of that financial load onto municipal advisors. Conversely, MAs contest these claims, deeming the proposed changes impractical. As stakeholders engage in this critical discussion, it becomes clear that the path forward requires a balanced approach that considers the diverse operational models across the industry.
The arguments from various organizations, including the Securities Industry and Financial Markets Association (SIFMA), the Bond Dealers of America (BDA), and the American Securities Association (ASA), convey a unified concern about the current fee structure set forth by the MSRB. These associations are vehemently requesting a reconsideration of how MAs are assessed fees, noting that a shift toward an activity-based fee model would alleviate the “unfair” financial burden shouldered by dealers.
In stark contrast, the National Association of Municipal Advisors (NAMA) stands firmly against these proposed changes. NAMA emphasizes the diversity of its member firms, arguing that attempting to establish a uniform fee schedule based on activity would pose unreasonable challenges, particularly for smaller MAs with varying business models. The sentiment, as articulated by NAMA Executive Director Susan Gaffney, suggests that a scenario where fees are not linked to the size of the advisory firm could stifle competition and inhibit market entry, thereby harming issuers—the very parties the regulations are designed to protect.
The MSRB operates as an independent self-regulatory organization tasked with oversight of municipal securities. Historically, the board has relied heavily on fees from regulated entities to fund its operations. In response to stakeholder complaints, as noted in their recent communications, the MSRB has initiated an extensive review of its rate-setting process. However, stakeholders have expressed dissatisfaction with the lack of transparency regarding how fees are established and adjusted annually. The January 2024 suspension of the MSRB’s 2024 rate card filing underscored the urgency of this review.
The proposals to revise fees have led certain organizations, including BDA, to commend the MSRB’s willingness to reassess its processes while simultaneously advocating for more predictable and transparent fee structures. BDA has gone so far as to suggest a tightened cap on the percentage increase allowed for fee changes, recommending that the board impose a limit of 10% rather than the previously allowed 25%. Such changes are viewed as essential for establishing a fairer fee assessment process that reflects actual usage of MSRB services.
A significant point of contention in the fee debate revolves around the disproportionate contributions made by dealers versus municipal advisors. According to BDA’s analysis, while municipal advisors contributed only 6% of the total fees in the fiscal year 2024, dealers bore the brunt of the fiscal responsibilities. This stark imbalance raises questions regarding fairness and accountability within the MSRB’s regulatory framework.
Gaffney’s insistence on maintaining a per-person fee model for MAs—despite its flaws—seems to stem from a recognition that it could offer a degree of stability in an otherwise volatile environment. Yet, the push for a market activity-based fee structure, as supported by multiple dealer groups, highlights a genuine concern that MAs, while reaping the benefits of MSRB governance and data services, are not contributing equitably to its operational costs.
In light of the ongoing discussions, it is imperative for all parties involved to seek a collaborative path forward. Establishing a fee structure that considers the intricacies of municipal advisory work, such as the volume of bond issuances, could provide a more equitable assessment of fees while ensuring the MSRB can meet its regulatory responsibilities effectively.
Moreover, a commitment to transparency in budgetary decisions can foster trust among stakeholders. Continued engagement between the MSRB and the involved parties may yield innovative solutions that address both concerns of fairness and the necessity for regulatory oversight.
Ultimately, the dialogue surrounding the MSRB’s rate card process highlights the complex interplay between regulation, operational needs, and market dynamics in the municipal securities space. By fostering an environment of open communication and collaboration, the MSRB can work towards an equitable fee structure that serves the greater interests of the market while ensuring that all players contribute their fair share to regulatory compliance. As these discussions evolve, it is crucial that both municipal advisors and dealers remain committed to finding a balance that protects the integrity of the municipal securities market.