OCC Bulletin 2018-3 | January 31, 2018

Municipal Securities Rulemaking Board Rules: Updated Comptroller’s Handbook Booklet

To

Chief Executive Officers of All National Banks and Federal Savings Associations, Department and Division Heads, All Examining Personnel, and Other Interested Parties

Summary

The Office of the Comptroller of the Currency (OCC) issued today the updated “Municipal Securities Rulemaking Board Rules” booklet of the Comptroller’s Handbook. The booklet incorporates updated guidance and examination procedures following changes to the Municipal Securities Rulemaking Board’s (MSRB) rules on best execution, transactions with sophisticated municipal market professionals (SMMP), and regular-way settlement for municipal securities transactions. In addition, technical revisions were made to this booklet to incorporate changes to 12 CFR 10 regulatory filing requirements, which now apply to federal savings associations engaged in municipal securities dealer activities.

Rescissions

The updated booklet replaces the booklet of the same title issued in July 2014. Also replaced is OCC Bulletin 2014-36, “Municipal Securities Rulemaking Board Rules: New Comptroller’s Handbook Booklet and Rescissions.”

Note for Community Banks

This booklet applies to the OCC’s supervision of national banks and federal savings associations engaged in municipal securities dealer activities. Community banks should be familiar with the application of MSRB rules to their operations.

Highlights

The updated booklet incorporates updated guidance and examination procedures on the following changes to MSRB Rules and 12 CFR 10:

MSRB Rule G-18, “Best Execution,” was implemented in 2016 and requires dealers to use reasonable diligence in seeking to obtain for their retail customer transactions the most favorable terms possible under prevailing market conditions.
MSRB Rule G-48, “Transactions With Sophisticated Municipal Market Professionals,” was amended in 2016 and provides that the best-execution obligations under MSRB Rule G-18 do not apply to transactions with customers that are SMMPs as defined in MSRB Rule D-15.
MSRB Rule D-15, “Sophisticated Municipal Market Professionals,” which defines the term SMMP, was amended in 2016 to broaden the customer affirmation requirement.
MSRB Rule G-12, “Uniform Practice,” was amended in 2017 to define regular-way settlement for municipal securities transactions as occurring on a two-day settlement cycle (T+2) as opposed to a three-day settlement cycle (T+3).
OCC regulation 12 CFR 10, “Municipal Securities Dealers,” was amended in 2017 to codify the requirement that a federal savings association that acts as a municipal securities dealer must file certain registration and termination forms with the OCC.

The updated booklet also contains less substantive changes, which are summarized in the “Table of Updates Since Publication” section of the booklet.

Further Information

Contact David Barfield, National Bank Examiner, Market Risk Division, at (202) 649-6396.

Grace E. Dailey
Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner