Event Recap
Fixed-Income Legal & Compliance Roundtable
On July 14, 2016, the BDA held a Legal & Compliance Roundtable in Washington, DC followed by a networking dinner. The roundtable provided an opportunity for candid, in-person discussion with industry colleagues at other BDA member firms.  A complete recap follows. 

The event featured the following speakers:
  • LeeAnn Gaunt, Chief, Public Finance Abuse Unit, Division of Enforcement, SEC
  • Mark Zehner, Deputy Director, Public Finance Abuse Unit, Division of Enforcement, SEC 
  • Jessica Kane, Director, Office of Municipal Securities, SEC
  • Rebecca Olsen, Deputy Director, Office of Municipal Securities, SEC
  • Patrick Geraghty, Vice President, Market Regulation, FINRA
  • Gerard Finn, Chief Counsel, Market Regulation, FINRA
  • Ritta McLaughlin, Chief Education Officer, MSRB  
  • Gail Marshall, Associate General Counsel, MSRB
Below, you will find an overview of the items discussed at the roundtable including priorities from FINRA, MSRB and the SEC.  Additionally, the full Legal & Compliance roundtable agenda can be found here .   
 
Discussion Overview

MA Rule G-42
  • Model documents and the need for them to be updated, simplified and streamlined 
  • Firms are receiving examination requests to justify fee arrangements
  • A discussion about the necessity to build MA due diligence files for engagements, logging and documenting hours spent on a deal, and how firms are storing the necessary documentation
  • Challenges with issuers as it relates to the defined scope of the engagement and challenges with RFPs including suggesting changes to issuer documents within the allowable scope of the rule
  • Challenges in timing for submission of disclosures to issuers versus when the firm is officially engaged 
MCDC 
  • Discussion focused on consultant recommendations and where they differ from one another
  • Firms discussed passing on a deal if they are not satisfied with the due diligence process of the issuer or a member of the syndicate
  • Syndicate certification letters and the desire for firms to have consistency from deal to deal and year over year 
  • The policy of certain firms to retain information on all deals, even those they do not bid, so that they can document to examiners that they passed on a deal because of concerns related to due diligence 
Best Execution 
  • BDA shared its considerations document with those in the room
  • We plan to hold a larger call or webinar for our members after distributing the document to submitting firms this week 
FINRA Sweeps & Unique Exam Requests
  • Growing focus on 15c3-5 direct market access including how firms establish hard vs soft stops and voluntarily establish credit limits for retail clients
  • Gifts and entertainment policies of issuer clients and how some firms are monitoring the issuer's own policies as a best practice
Regulatory Panel Overview

MSRB
  • The MSRB's rollout of MuniEdPro which provides a suite of coursework designed for municipal market participants containing the most up to date content available 
  • Enhancements to EMMA including displaying bank loan information
  • An update on the retail confirmation disclosure proposals and an assurance that the BDA's views are being considered as they move toward the final rule phase
SEC Division of Enforcement 
  • An overview of the MCDC initiative including an update that issuer actions are expected to move forward as the next step in the process
  • With regard to potential actions against individuals, the SEC is always keeping their eyes open for activities of deal participants
  • A priority for the Division continues to be issuer disclosure
  • Roundtable participants were provided a brief overview of recent enforcement activities covering issuer disclosure
  • Turning to "what's next?", we can expect a focus on municipal advisors and their activities as well as a continued look at broker dealer issues generally 
SEC Office of Municipal Securities 
  • A review of the Municipal Advisor regime including recent approvals of certain MSRB rules and the monitoring of instances of municipal advisor miscommunication
  • A discussion of direct placement of municipal debt and whether an instrument is a loan or a security 
  • Continued focus on municipal market structure including the SEC's 2012 Municipal Market Report which focused on priority items like best execution and pre-trade pricing information
  • Disclosure initiatives like potential improvements to SEC Rule 15c2-12 
  • Investor Advisory Committee recommendations to the Commission including the desire to see a finalization of the retail confirmation disclosure rules to ensure full transaction costs are provided to investors before they purchase or sell a bond 
FINRA Market Regulation Department
  • Surveillance efforts including using markups as part of their ongoing economic analysis
  • An overview of the Fixed Income Group under Market Regulation which consists of:
    • Trade reporting and data integrity reviews
    • Investigations team whose biggest focus for the year is on best execution; in particular this team is investigating blocking access to a counterparty through an ATS, what the review process is and reasons for blocking
  • New Surveillance Initiatives/Results
    • FINRA is seeing trade reporting compliance rates improving 
    • They are also looking for anomalies in data patterns in order to resolve issues before they become systemic
  • FINRA's Legal Department offered a walk-through of the disciplinary process and what firms can do to help it go smoothly 
  • Supervision and the importance of having a policy which outlines your process and then proof, through documentation that you followed your own policy
This Legal & Compliance Roundtable is part of a series of BDA events specifically tailored to the unique interests of middle-market and regional fixed-income dealers. If there is anything in the above overview for which you would like a more in-depth overview, please do not hesitate to reach out to BDA staff. 

Thank you to our roundtable sponsors!
Bond Dealers of America | www.bdamerica.org