Amendments to MSRB Rules

MSRB G-15 and G-30: Changes to the markup disclosure rules

The Municipal Securities Rulemaking Board (MSRB) and Financial Industry Regulatory Authority (FINRA) have amended rules G-15, G-30, and FINRA Rule 2232 to require dealers to disclose the compensation received (referred to as “markups” throughout) on certain municipal and corporate debt transactions.


These disclosures must appear on confirmations sent to non-institutional (retail) clients, based on the security’s prevailing market price (PMP). The rules were approved by the Securities and Exchange Commission (SEC) in November 2016, with both FINRA and the MSRB publishing implementation related guidance (FAQs) on July 12, 2017.1 The rules become effective on May 14, 2018. This paper focuses primarily on the amendments to MSRB Rules G-15 and G-30 and the potential challenges and focus areas for firms impacted by these changes.

Aimed at providing more transparency to retail clients, the MSRB has provided certain prescriptive requirements associated with determining the PMP using a “waterfall” analysis. However, a number of aspects within the analysis still require subjective determinations. Accordingly, impacted firms must conduct extensive and potentially onerous processes to demonstrate that the PMP used to determine a markup or markdown is consistent with MSRB rules. Further, the MSRB FAQs reiterated the May 14, 2018, rule effective date, leaving a compressed window for the industry to develop and/or implement technology solutions to automate the waterfall analysis and continuing to rebuff industry requests for rule delay or other relief.

MSRB Confirmation Disclosure and Prevailing Market Price Guidance: Frequently Asked Questions - July 12, 2017 and FINRA Fixed Income Confirmation Disclosure: Frequently Asked Questions (FAQ)

Key takeaways

  • Prepare for the knowns: While many subjective determinations remain for dealers when performing calculations necessary for compliance, the MSRB has provided guidance for much of the rule including the steps within the PMP waterfall analysis. With the effective date fast approaching, dealers should be preparing for known requirements and carefully consider existing processes which may be useful as a starting point, such as current best execution processes and controls.
  • Time is running out to implement technology solutions: The MSRB makes it clear that dealers may rely on technology solutions, including third-party vendors for some or all of the PMP waterfall analysis. A number of vendors have brought technology solutions to market purported to automate the process; however, firms should consider the time requirements of any large scale technology implementation with the rule effective less than a year away.
  • Vendor solutions don’t alleviate the dealer’s compliance responsibility: Dealers should recognize that any vendor solutions are still reliant on certain subjective determinations and that the dealer ultimately retains the responsibility for ensuring compliance with all applicable rule provisions. If relying on a technology solution, whether outsourced or proprietary, a dealer is expected to conduct a robust due diligence process to ensure the underlying steps and calculations performed by the chosen solution adheres to the policies and procedures adopted by the firm.
  • Books and records policies and procedure require updates: Whether a dealer chooses to rely on a third-party vendor solution, build an in-house technology solution, or rely on a fully manual process, the dealer must ensure that policies and procedures are in place designed to apply the chosen process accurately and consistently in all instances. Additionally, all relevant sections of a dealer’s policies and procedures must be updated to accurately reflect the policy and process changes being made to support rule compliance.

To learn more about markup disclosure rules, download the full report, Amendments to MSRB Rules.

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Marjorie Forestal
Deloitte & Touche LLP

Devanjn D'Souza
Senior manager
Deloitte & Touche LLP

Steve Allelujka
Senior consultant
Deloitte & Touche LLP

Rahul Patel
Deloitte & Touche LLP

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