Municipal Securities Supervision (MSRB Rule G-27)
Municipal securities have their own regulatory body (the Municipal Securities Rulemaking Board (MSRB)) and their own supervision rule. MSRB Rule G-27 parallels FINRA Rule 3110 but applies specifically to municipal securities activities.
Supervisory Obligations
- Each broker, dealer, and municipal securities dealer must supervise the conduct of municipal securities activities to ensure compliance with MSRB rules and the Securities Exchange Act
- Supervision must be performed by associated persons qualified as one of these principal types:
| Principal Type | Exam | Scope |
|---|---|---|
| Municipal Securities Principal | Series 53 | Overall municipal securities activities |
| Municipal Securities Sales Principal | - | Sales supervision |
| Municipal Fund Securities Limited Principal | Series 51 | 529 plans and other municipal fund securities |
| General Securities Principal | Series 24 | May also supervise municipal activities |
- The Series 53 Municipal Securities Principal is responsible for the firm's overall municipal securities supervisory system, including Written Supervisory Procedures (WSPs), internal inspections, correspondence review, and supervisory controls
Exam Tip: Gotchas
- Series 53 = municipal principal; Series 52 = municipal representative. These are often confused. The Series 53 is the supervisory qualification.
- A General Securities Principal (Series 24) may also supervise municipal activities, but the Series 53 is the dedicated municipal qualification.
Written Supervisory Procedures for Municipal Activities
WSPs for municipal securities must specifically address:
- Opening of each customer account in which municipal securities transactions may be effected
- Review of each transaction in municipal securities on a daily basis
- Each transaction in a discretionary account for municipal securities
- A copy of the WSPs must be maintained at each office of municipal supervisory jurisdiction
Exam Tip: Gotchas
- Municipal securities transactions must be reviewed daily - not weekly or monthly. This is more frequent than the general supervisory review requirement.
Annual Review
- Each dealer must conduct a review of municipal securities activities at least annually
- The review must be reasonably designed to detect and prevent violations of securities laws and MSRB rules
- This parallels the general annual compliance review under FINRA Rule 3110 but focuses specifically on municipal activities
Exam Tip: Gotchas
- MSRB Rule G-27 covers municipal activities specifically; FINRA Rule 3110 covers the firm's overall supervisory system. The exam tests which rule applies to which scope.