What is 'Municipal Securities Rulemaking Board (MSRB)'

The Municipal Securities Rulemaking Board, (MSRB), is a regulating body which creates rules and policies for investment firms and banks in the issuing and sale of municipal bonds, notes, and other municipal securities. States, cities and counties issue municipal securities for a variety of reasons.

Activities, regulated by the MSRB include the underwriting, trading, and selling of municipal securities financing public projects. 

BREAKING DOWN 'Municipal Securities Rulemaking Board (MSRB)'

The Municipal Securities Rulemaking Board, (MSRB) is a self-regulating organization managed by a Board of Directors, with four committees that oversee specific aspects of the organization’s governance and operation. Like the New York Stock Exchange or the National Association of Securities Dealers, the MSRB is a self-regulatory organization that is subject to supervision by the Securities and Exchange Commission.

The U.S. Congress created the Municipal Securities Rulemaking Board in 1975. It was given the assignment of creating rules and policies that would help prevent fraud and misleading acts in the securities industry. The MSRB was also designed to implement and support fair trading principles. In addition, it was tasked with creating and maintaining a system that would allow free and open trade in the securities market. One of its first accomplishments was creating a set of uniform standards dictating fair practices that municipal securities dealers should follow. The organization was also instrumental in paving the way for a smooth transition from traditional paper bonds to electronic versions in the 1980s.  

Major Types of Municipal Securities MSRB Oversees

A municipal bond is categorized based on the source of its interest payments and principal repayments. A bond can be structured in different ways offering various benefits, risks and tax treatments. 

  1. General Obligation (GO) backed by the creditworthiness of the issuer which has taxing power. Voter approval is prerequisite for issuance. These issues are the safest and yields tend to be lower as a result.

  2. Revenue bonds are securitized by a specific revenue stream, such as tolls or other user fees. Because these bonds are riskier than general obligation bonds, their yields tend to be higher for similar maturities.
  3. Short-term municipal bonds such as Tax Anticipation Notes (TANs), Revenue Anticipation Notes (RANs), Bond Anticipation Notes (BANs)
  4. Exotic or Unique bonds are usually some variation on the earlier categories and include Certificates of Participation and Private Activity Bonds. These are generally part of a state or local government bond issue.

Disclosure and the Role of the MSRB

In the 1980s, the Municipal Securities Rulemaking Board, (MSRB) played a central role in assisting the SEC in creating SEC Rule 15c2-12, which focuses on continuing disclosure. This ensures that issuers of municipal securities must agree to provide specific information to the MSRB on a regular basis about the investment securities they handle. This information includes annual financial reports and notices about events such as delinquencies, defaults, unscheduled draws on debt service reserves and any activities that would affect the tax-exempt status of the security.

This rule and related principles involving disclosures were prompted by an incident in 1983 in which the Washington Public Power Supply System defaulted on more than $2 billion in municipal bonds, representing one of the biggest and most costly municipal bond disasters in U.S. history.

More recently, the Municipal Securities Rulemaking Board, (MSRB) has served a role as a pioneer in helping to usher in the age of open electronic records in the securities industry. In the late 2000s, MSRB launched the Electronic Municipal Market Access website, which provides free public access to information related to municipal bond trading, along with important disclosure documents.

RELATED TERMS
  1. Series 52

    The Series 52 is a certification that qualifies a financial professional ...
  2. Municipal Bond

    A municipal bond is a debt security issued by a state, municipality ...
  3. Municipal Note

    A municipal note is debt issued by state and local governments ...
  4. Obligation Bond

    A municipal bond whose face value of the bond is greater than ...
  5. Series 53

    The Series 53 is an exam and license that permits an individual ...
  6. Municipal Investment Trust

    A municipal investment trust is a type of unit investment trust ...
Related Articles
  1. Financial Advisor

    Why You Should Invest In Municipal Bond ETFs

    These versatile instruments have become popular with investors in higher tax brackets and fill a specific niche in the wide selection of fixed-income offerings.
  2. Investing

    Do Municipal Bond Mutual Funds Offer a Tax Incentive?

    Learn about individual municipal securities and municipal bond funds, whose principal stability and tax-free yield appeal to high-income investors.
  3. Investing

    A Look at the Pros and Cons of Muni Bonds

    Considering muni bonds? Here's a look at their pros and cons.
  4. Financial Advisor

    How to Find the Best Bets in Muni Bonds

    Approach investing in municipal bonds the same as you would investing in stocks.
  5. Investing

    4 Tax-Free Muni Bond ETFs to Consider

    Tax free municipal bond ETFs are an excellent way to build wealth slowly. Here are 4 you should consider.
  6. Investing

    Think Twice Before Buying Tax-Free Municipal Bonds

    Municipal bonds are relatively safe, tax-exempt securities--but they are not without drawbacks. Due diligence is required.
  7. Investing

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
  8. Investing

    Foreign Investors Flock to U.S. Municipal Bonds

    Interest in U.S. municipal bonds by foreign investors is on the rise. Here's why.
  9. Investing

    Muni Bond ETFs to Date 2016 Performance Review (MUB, XMPT)

    Learn how municipal bond exchange-traded funds have performed year-to-date in 2016, and which ones have performed the best and the worst so far.
  10. Investing

    ETF Flows: U.S. Investment Grade Muni ETFs Are Winning Assets (MUB, PZA)

    Discover four exchange-traded funds (ETFs) that invest in municipal fixed income securities and witnessed the most capital inflows to date as of March 4, 2016.
RELATED FAQS
  1. What Is a Triple Tax-Free Municipal Bond?

    Learn how a triple tax-free municipal bond is like any corporate bond, but provides an additional incentive for investors ... Read Answer >>
  2. How are municipal bonds taxed?

    Discover information about the various tax implications for municipal bonds and zero-coupon municipal bonds at the state ... Read Answer >>
Hot Definitions
  1. Business Cycle

    The business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles ...
  2. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  3. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  4. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  5. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  6. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
Trading Center