The Municipal Securities Rulemaking Board (MSRB) plays a pivotal role in the regulation and oversight of the municipal securities market. Its fee structure remains a topic of contentious debate, particularly regarding the fairness and equity of the fees imposed on municipal advisors (MAs) versus those levied on dealer groups. Recently, feedback submitted to the MSRB, arising from their request for information (RFI) on rate card processes, has uncovered deep-seated frustrations among stakeholder groups, as they chart a course through an increasingly convoluted landscape of municipal finance.
Stakeholder responses to the MSRB’s RFI reveal a significant rift in perspectives. Dealer groups, represented by associations such as the Securities Industry and Financial Markets Association (SIFMA) and the Bond Dealers of America (BDA), argue for a restructured fee model that would alleviate the financial strain on dealers by implementing activity-based fees on municipal advisors. They perceive the current fee distribution as disproportionately weighted against them, raising concerns about the viability of small firms that would bear the brunt of these proposed changes.
Conversely, the National Association of Municipal Advisors (NAMA) has voiced strong opposition to this suggestion. The organization emphasizes the complexity of the advisory landscape, noting the heterogeneity among MA firms’ business models. NAMA’s Executive Director, Susan Gaffney, articulated that using covered persons as the baseline for assessing MA fees remains the most equitable method. Gaffney’s insights call attention to the potential adverse consequences of significantly altering the fee structure — particularly the risk of driving smaller MAs out of the profession, which undermines the MSRB’s essential mission: protecting municipal issuers.
This polarization among stakeholders demonstrates the inherent challenge for the MSRB: balancing the conflicting interests of dealers, who feel overburdened, and MAs, who are apprehensive about encountering increased fees that fail to recognize the diversity of their operations.
A critical aspect underlying the debate is fiscal accountability in structuring fees. The MSRB relies on generated fees to sustain its operations. In 2022, a new fee-setting process was introduced, leading to regulatory changes that prompted alarm among stakeholders about upcoming rate disbursements for 2024. The subsequent suspension of the newly proposed rate card highlighted the need for a more thoughtful approach to fee assessments and budget transparency.
Feedback from the BDA emphasized that while they do not oppose a fee structure tied to market activity, they believe clarity and predictability in fee adjustments are paramount. Notably, the BDA recommended that fee increments be capped at a more manageable threshold — a sentiment echoed by other associations advocating for stability in financial obligations. The proposed 25% increase in underwriting fees, juxtaposed against a drastic 48% reduction in trade count fees, showcases a volatility that stakeholders consider untenable.
The ABA’s proposal to base MA fees on market activities—specifically, the volume of bond issuance—illustrates a desire for a more proportionate fee assessment methodology across regulated entities. As MAs engage in the market, their contribution to the costs associated with regulatory oversight becomes critical. Yet, the current fee distribution reveals that MAs account for a modest portion of MSRB revenue, raising questions about fairness as they utilize MSRB’s reporting services.
The Path to a Sustainable Fee Structure
As the MSRB embarks on revising its fee framework for the 2026 calendar year, considerations from the RFI responses present an opportunity for constructive reform. Enhancements in fee transparency and clearer communication regarding budgeting processes stand out as focal areas for improvement. An increase in collaboration with stakeholders could foster an environment conducive to mediating these divides, eliminating potential disparities, and ensuring that regulatory costs are more evenly distributed.
Moreover, acknowledging the complexity of different business models and the operational realities of MAs will be vital in crafting a definitive assessment strategy. Creating tiered approaches to fee structures that account for both the market activity and the size of the advisory firm could strike a fair balance that supports the ongoing function of both dealers and municipal advisors.
Ultimately, the evolution of MSRB’s fee structure must reflect an understanding that the health and survivability of small firms—integral to a diverse marketplace—should not be jeopardized in the pursuit of regulatory efficiency. Only through careful consideration of diverse stakeholder perspectives can the MSRB hope to establish a sustainable, equitable framework that promotes the integrity of the municipal securities market.
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