Municipal Securities Advertising and Communications

Dealers cannot say whatever they want about municipal securities. MSRB Rule G-21 and SEC Rule 15c2-12 set strict standards for what can be published, what must be disclosed, and who approves it all.

What You'll Learn

  • MSRB Rule G-21 advertising requirements and principal approval
  • SEC Rule 15c2-12 disclosure obligations and exemptions
  • MSRB Rule G-32 and the role of EMMA in municipal disclosure
  • Official statement (OS) and preliminary official statement (POS) delivery rules

MSRB Rule G-21: Advertising

  • No dealer may publish any advertisement concerning municipal securities that is materially false or misleading
  • All advertisements must be approved in writing by a municipal securities principal or general securities principal before first use
  • Records of all advertisements must be maintained in a separate file
  • "Advertisement" includes material published or distributed through public media: newspapers, websites, social media, radio, and TV

Key requirements:

  • Pre-use approval: A principal must approve before the ad is used (not after)
  • Separate file: Ads must be kept in their own file, separate from other records
  • Scope: Includes all public media channels, including digital and social media

Municipal fund securities ads (such as 529 plans) have additional requirements:

  • Must advise investors to consider objectives, risks, charges, and expenses before investing
  • Must state that more information is available in the issuer's official statement (OS)
  • Must state that the OS should be read carefully before investing
  • If the dealer publishing the ad is the underwriter, that fact must be disclosed

Exam Tip: Gotchas

  • G-21 requires pre-use (before first use) principal approval of ads, not post-use review. The exam tests this distinction frequently.
  • Social media posts about municipal securities count as advertisements under G-21. Tweets, posts, and text messages all fall under the rule.

SEC Rule 15c2-12: Municipal Securities Disclosure

This rule governs municipal disclosure requirements for primary offerings:

  • Requires underwriters of municipal offerings (over $1 million) to obtain and distribute official statements (OS)
  • Requires the issuer to enter into a continuing disclosure agreement: annual financial statements plus material event notices submitted to EMMA (Electronic Municipal Market Access)
  • The underwriter must reasonably determine that the issuer has committed to providing ongoing disclosure

What 15c2-12 does NOT do:

  • Does NOT require the issuer to register with or file documents at the SEC (munis are exempt from SEC registration)
  • Does NOT apply to offerings of $1 million or less
  • Does NOT replace MSRB rules; it works alongside them

Exemptions from 15c2-12:

  • Offerings of $1 million or less
  • Securities with a stated maturity of 18 months or less (exempt from continuing disclosure)
  • Securities in $100,000 minimum denominations with maturity of 9 months or less
  • Limited offerings: sold in $100,000+ denominations to no more than 35 sophisticated investors

Think of it this way: The SEC wants to protect retail investors buying long-term municipal bonds. Short-term notes and large-denomination bonds sold to sophisticated buyers carry lower disclosure burdens because those investors can evaluate risk on their own.

Exam Tip: Gotchas

  • The OS is NOT filed with the SEC. Unlike corporate prospectuses, municipal official statements go to EMMA, not the SEC. Munis are exempt from SEC registration.
  • The $1 million threshold applies to the aggregate offering size, not individual bond denominations. An offering of 2,000 bonds at $500 each ($1 million total) would trigger the rule.

MSRB Rule G-32: Disclosure in Primary Offerings

Rule G-32 covers what dealers must provide to customers and submit to EMMA (Electronic Municipal Market Access):

  • Dealers must deliver the official statement (OS) to customers by settlement of the transaction
  • If no OS is being prepared, the dealer must provide written notice of that fact, along with a copy of the preliminary official statement (POS) if one exists
  • Underwriters must submit the OS, POS, and advance refunding documents to EMMA electronically

Official statement (OS) vs. preliminary official statement (POS):

  • POS: Distributed before pricing; similar to a "red herring" prospectus in corporate offerings. Contains most information but lacks final pricing, interest rates, and yields
  • OS: The final disclosure document delivered at or before settlement. Contains complete terms including price, coupon, and yield

Exam Tip: Gotchas

  • The POS is like a red herring for munis. It contains everything except final pricing details.
  • Delivery deadline for the OS is settlement, not the trade date. Customers must receive it by settlement.

EMMA: Electronic Municipal Market Access

EMMA is the MSRB's centralized online system for municipal securities disclosure:

  • Free public access to official statements, continuing disclosure documents, trade data, and material event notices
  • Underwriters submit official statement (OS) and preliminary official statement (POS) documents to EMMA under Rule G-32
  • Issuers submit continuing disclosure documents (annual financials and material event notices) under their 15c2-12 agreements

Material event notices that must be filed on EMMA include:

  • Principal and interest payment delinquencies
  • Bond calls and tender offers
  • Defeasances
  • Rating changes
  • Adverse tax opinions or events affecting the tax-exempt status
  • Unscheduled draws on debt service reserves or credit enhancements
  • Substitution of credit or liquidity providers
  • Bankruptcy, insolvency, or receivership of the obligated person
  • Incurrence of a financial obligation (added in 2019 amendment)

Think of it this way: EMMA is to municipal bonds what EDGAR is to corporate securities. Both are free, electronic systems where investors can look up disclosure documents. The difference is that EMMA is run by the MSRB, while EDGAR is run by the SEC.

Exam Tip: Gotchas

  • EMMA is free. There is no charge for public access to municipal disclosure documents.
  • Issuers do not file with the SEC. Municipal issuers file continuing disclosure on EMMA, not with the SEC. This is a common exam trap because corporate issuers file on EDGAR with the SEC.