Kyle Glazier: (00:03)
Hello, and welcome to another Bond Buyer podcast. I’m Kyle Glazier, an executive editor at the Bond Buyer, and I’m joined today by Susan Gaffney, the executive director of the National Association of Municipal Advisors. Susan, thank you for joining me.

Susan Gaffney: (00:17)
Thank you, Kyle. Appreciate being here.

Kyle Glazier: (00:19)
Well, we’ve got a group of things we could talk about today, but why don’t we start by talking a little bit about name as goals. What have you been up to as an organization? Anything we should know about?

Susan Gaffney: (00:31)
Well, we continue to focus a lot of our time on educational issues. And so that’s been our main focus over the past couple of years. Last year, we had a very strong webinar series where we invited regulators and market participants to talk about outlook trends, um, and, and compliance matters. Compliance really is our major focus. We have been developing tools and resources over the years to help our members, especially small firms have robust practices to comply with MSRB rule making so many firms have a practitioner serving also as their CCO. So we really seen the need to help them understand and create consideration papers, et cetera, so that they can develop their own policies and procedures to make sure that they comply with the rules and are prepared for the fun time when an examiner comes knocking some of those resources, just so you know that we’ve developed and, and sort of revamped over the past few months, we have a 10 page considerations for developing an annual compliance matrix.

Susan Gaffney: (01:43)
We have a 10 page G 42 checklist and policies and procedures resource. We have resources on G 37 G 40, model documents on how to implement a continuing education program and other resources related to general market issues and how MAs, intersect with that. But one thing that we added last, which is very exciting is we’ve compiled a whole new compliance provider resource. So many MAs need external assistance. You know, whether that’s a one off legal question or whether that’s, uh, more assistance with developing their WSPs reviewing their WSPs making assorted filings. So we developed a resource, um, on considerations when hiring external compliance providers. And we also interviewed so far, we’ve had five interviews with compliance providers so that our members can just see for themselves who’s out there, the services they provide cetera. So we’re really hoping that that will help firms. You would think that some we’re probably past the critical point of, um, new rule making, but I think there are a lot of ma firms who are reassessing what they have been doing. It’s been about five years since they’ve taken maybe a deep dive and it’s time to do that again. So we wanna make sure we’re there to help them as they do that, those reassessments.

Kyle Glazier: (03:04)
All right. That sounds pretty interesting. There, there are a number of, uh, of broader topics, right? Where there can, can sometimes be room for different industry groups to, uh, coordinate their activities. Um, are you, are you working with any of the other industry groups on anything right now?

Susan Gaffney: (03:19)
Sure. We really appreciate working on the library resource group, the disclosure resource group, and just being a part of many conversations, especially we are not as engaged as other groups are on lobbying efforts or advocacy efforts up on the hill. Um, but we’re certainly monitoring and supportive efforts such as of the bank qualified limit, advanced fundings, et cetera. And so we keep an eye on that and support, um, that group as much as we can.

Kyle Glazier: (03:48)
All right. I’m glad you, you mentioned the MRB a moment ago, as you alluded to, there was sort of a frantic rule making pace for a while for municipal advisors and that that’s mostly died down, but the MSRB remains pretty busy putting out requests for comment and proposals of various kinds. What is it that you are watching most closely and where are your concerns if you have any?

Susan Gaffney: (04:14)
Sure. I think there’s, you know, four major issues that we are focused on for this year. One is the MSS been talking for the past year or so about updating rule G 34, uh, which really is about MAs needing to get QIP numbers, in competitive sales. And there are some technical changes that we’ve been awaiting for that, and to send over to the SEC for approval, again, that that may be a little mundane and boring, but it really could help MAs with their WSPs and just make it more streamlined. So that is one thing we continue to keep an eye on and, and hope we can get closure on that this year, as you know, most recently, they’ve also put out a couple of other types of comments, not for rules, but more so for resources. And, and one was the pricing bond on resource, and we wrote our comment letter and discussed the, this is a very important topic and we all take it seriously and need to continue to take it seriously.

Susan Gaffney: (05:11)
Uh, we were concerned and expressed our concerns about be it being too prescriptive. And that for the first time, it seemed as though the was diving into may work like on the ground work. So in addition to the specific comments we made about pricing and that, and the intersection of MAs rule making and that task, we also question the more global issue of what does this mean and what happens next. So is, is there an intent to work on these types of issues about ma work on the ground, or is it more global about making sure the policies and procedures are in place to adapt to the way each firm needs to address these tasks? Again, unlike a lot of other professionals, ma firms vary very much so from across the country. So what an ma firm may be doing in New York could be very different than what an ma firm may be doing for clients in Arizona.

Susan Gaffney: (06:11)
And of course, that’s also pushed by the fact what does the client need. And just as MAs are very diverse, issuers are far more diverse. So the fact is that we want to make sure that our members understand what the responsibilities are, having a really focus on the work that they’re doing, what they’re committed to be doing, but then how do the rules apply? And then what is the MSRB’s intent with these resources is something we’re, we’re quite focused on. And our third big issue for this year that we’re keeping an eye on at the MSRB. There was a solicitor ma couple rounds of comments on that exciting issue, but this time embedded in, there was a discussion on general record keeping rules and rule G eight and how that could be changing. Whereas it’s not one stop shopping right now, it’s one stop shopping.

Susan Gaffney: (07:03)
So your record keeping responsibilities are all listed in rule G eight. There was a discussion as they wanted to do in this rule in G 46 to take the record keeping component and put it in the rule. So I’m guessing like at the bottom of the rule, it will discuss us the record keeping. And while we can understand why that sounds like, maybe sounds like a good idea when we think about that and what it would take for firms to adapt to that, even H how the MSRB would adapt to that. You know, we are concerned about that issue, but more importantly, we didn’t know about this until we read about it in the proposal. So this is something where we would hope that there’d be greater communication with all of us in the marketplace and regulated entities to talk about these types of issues.

Susan Gaffney: (07:50)
Because again, it, it might have been a great idea. I understand why that is, but talking maybe to more focus groups talking, um, as well as underwriters, et cetera, as to how they would actually be able to practice this and what it would take, I think, is something that needs to be considered in an area. As again, we pointed out in our comment letter that deserves its own conversation. And so we’re hoping that if that is something that thess intending to do, that we can have these conversations. And, and I guess I, I think this dovetails into their, their broader purpose right now on, on the rule making end, which is the retrospective rule review, uh, which also includes resources. And, you know, we have constantly, and consistently said that have discussions with practitioners of beginning of the process as just starting to even think about developing a rule, because, you know, you might get some insights that just help that whole process, rather than at the very end having us, you know, have to write a letter that says, oh, this, this may not work because of X, Y, and Z. So that continues to be a comment. And, and we hope to, you know, enhance our communication with the MSRB and market other market participants to, you know, as you know, those ideas are in an incubator to be able to shed some light and to discuss them so that the rule making or the resources in the, this case, can really be as helpful as possible to all involved

Kyle Glazier: (09:18)
Well, subsequent to them putting this out. Have you gotten any feedback from them on, you know, what the, what the intent was, whether the intent was to alter G eight,

Susan Gaffney: (09:27)
Have not. Okay. Unfortunately, we have not, again, I know everybody has a lot on their plate and there’s a lot of happening over the past month or so. So, you know, we just have that on our radar as a conversation to have this year to see what is happening. And again, it is more global to the whole retrospective rule review. I would argue, well, the ma rules are relatively new compared to many of the G rules that have existed for years and years. It’s the resources that maybe we would like to comment on more. Uh, we’ve all lived when we first got the resources. When we first got the rules, it was all brand new, all brand new to MAs. Okay. So now we’ve lived with these issues for a while. You know, what, what insights again do practitioners have, does the MSRB have that could maybe, you know, work to enhance those resources so that they’re more applicable going forward.

Kyle Glazier: (10:19)
And for any of our listeners who may not be aware, the, the entire municipal advisory regime really didn’t exist until about 11 years ago, for the most part. Um, and, and many of the rules of course, are, are far younger than that. So it is quite quite new compared to some of the dealer roles, certainly.

Susan Gaffney: (10:38)
Yes. And quite limited. I mean, when you look at the whole rule book, the vast majority apply to broker dealers. And again, as we mentioned, they’ve existed for a long time. So we understand that, you know, that obviously deserves great attention. We’re just hoping when they do talk about a rules, or again, more specifically the resources that we can have more global conversations about that.

Kyle Glazier: (11:03)
All right. Was there anything else about the SRB that you, uh, were thinking about? No,

Susan Gaffney: (11:07)
I, again, I’m hoping that there’s not, another, uh, crush or crash of rule making coming forward. I, I think that they certainly have so much on their, and, uh, the retrospective rule review being a, you know, years long process, uh, seems to be, you know, was taking up a great deal of attention on that side of things. So, you know, who knows we, I could jinx it, we could jinx it with this call and, uh, tomorrow wake up and see something new. So we’re staying on our toes. But if, if from a strategic standpoint, it’s sort of these four main issues that we’re focused on at the right now.

Kyle Glazier: (11:44)
All right, we’re gonna pause briefly for a advertisement break and we will be right back. And we’re back with Susan Gaffney, the executive director of the National Association of Municipal Advisors picking up on our conversation. Another, another aspect of the municipal advisory, existence, let’s say that is fairly new, is that of the examinations, right with regulation comes of your compliance with those regulations, that those have really only gotten off the ground in the past, you know, couple of years here, in some cases, uh, in some aspects, anyhow, what’s your sense of how that’s going? Is, is that, has that been pretty smooth sailing or not?

Susan Gaffney: (12:28)
Well, you, I mean, you’re right. And point out it’s a different culture, right? Um, other types of other professionals have lived within this culture for years and, and they’re used to, it, it, it’s sort of new for MAs and, and new for examiners as well. Um, you know, we, we often talk about, and, and sometimes joke about, sometimes cry about that. There aren’t a lot of regulators who come from an ma point of view. So there’s been a lot of everyone getting to know each other and, and understanding the MA role at the table, but the examination process has pretty much gone smoothly. Obviously when it first started, we all were a little panicked about that, just on how it works, but, you know, we continue to be concerned. And I think the, the pricing issue that we just talked about from the MSRB is a great example.

Susan Gaffney: (13:12)
We held some webinars last year, as I mentioned, you know, with enforcement and with exams, a as well as with the MSRB and talked about the pricing issue. And, you know, we mentioned in our comment letter about that resource, we would like to sit down with all parties and just understand everyone’s perspective on what is expected from the MAs, how their addressing these issues in exams, again, to help MAs know what to expect and to do their best. So this is an area where on exams, especially, you know, we just want to, we’re not asking for insight information. We’re not asking for great uniformity, just understanding the approach, because then when you get something like this resource, then that just seems to, you know, make us wonder, okay, well, should we be following this line that the puts out, or what about what the examiners are saying?

Susan Gaffney: (14:08)
And then enforcement you know, have some very strong views on this. So we would really like to sit down on this pricing issue, especially, and just understand where everybody is, um, so that we have an understanding of that and see where there’s opportunity for greater conversation and understanding of how firms approach pricing and what is expected of them. But you’re right there, there’s a whole more general issue on exams, which is how, what is happening with them. We, you know, we spoke to them, they’re expecting, I think to have around 50 exams again, this year in the ma space. We just wanna make sure that again, not asking for uniformity, not asking for any inside information, but we do believe that if you’re examined in Nebraska, that there should be a baseline of that exam. That is very similar to how a firm in California may be examined also.

Susan Gaffney: (15:01)
And we’ve been hearing anecdotally just some different stories about the examinations. And so that continues to be a conversation we have with exam Robert Miller, who ran that office for many years, knew my voice too well on this topic, but it is something that we still, uh, want to discuss with the SCC and the exams office, especially just to make sure again, that members know what to expect and that the examiners also know from their own experience across the country, what is happening. And so that we can just, again, have some baseline information on how the, that office is approaching their exams at MA firms.

Kyle Glazier: (15:41)
So it sounds like your primary, uh, initiative with the SEC has to do with the exams program. Is that correct?

Susan Gaffney: (15:49)
I think so. I think that’s where the greatest into is from our members is again, we understand we accept this is the way the world works. Now. We just wanna make sure that we can work as well as we can within that world. So we have focused more on the exam front probably than anything else over at the SEC. And I would argue we could have had this conversation maybe four years ago, uh, but we’re still having it. So as things are sorted out there, we, we wish to continue those conversations with that office. Now, enforcements also always has interesting information. So we, again appreciate when they put forward a case or talk with us because you can really learn a lot. I personally believe that when you see one of these enforcement cases and read through it, you can learn maybe some and pick out some lessons to learn that maybe can apply more broadly in the ma space.

Susan Gaffney: (16:42)
So that’s something we, we also keep an eye on and, and appreciate again, the same with exams, having the conversations with enforcement, to just to be able to understand their approach and their thinking on, on various matters. So we’ve kind of focused on that a little bit more recently. Obviously we keep in contact with the office of municipal securities and appreciated working with Rebecca, uh, for so long. And, but this is a conversation I think that involves maybe all three of those divisions as, as well as the MSRB. We’d like to talk to the MSRB about these issues as well. So again, we all are a bit more coordinated in understanding what is happening with examinations.

Kyle Glazier: (17:24)
All right. One last thing I did wanna touch on in terms of enforcement, let’s say, is that part of the entire justification of regulating municipal advisors, right? It was super tech issuers to make sure that the people giving them advice, uh, with respect to their, uh, debt and financing were fiduciaries who were legally required to put the issuers interests ahead of their own, uh, and also to make sure that they were competent to do so that said, we continue to anecdotally hear that people continue to practice municipal advisory work without having been dually registered. And we’ve seen a couple of enforcement actions addressing this in the past couple of years. What, what do you hearing on that? Is that still a big concern for Nama and what do you think if anything can be done about it?

Susan Gaffney: (18:14)
Thanks. It is a big concern and, you know, we’re well past the time of, oh, I didn’t know I had to be registered. Oh, I didn’t know. I had to go over here and register here and then go over here and register here. I think we’re all past that time. So those professionals who may be approaching the line of ma work, um, should be knowing better at this day and time, but, you know, we are concerned and we, I would say last year, I heard more incidents than any of the previous years. So this is a big issue. And like you pointed out these rules and the regulation of MAs are done to protect issuers. If an issuer is relying on advice from an unregistered ma who does not have that fiduciary duty in place and is not adhering to the rule, making that’s in place for MAs to make sure their work meets the duty of care standard, uh, meets, uh, numerous other rulemaking standards, then that’s not being just to the the issuer.

Susan Gaffney: (19:10)
So we do think this is a big issue, and this is another conversation again, in, in my hopeful kumbaya moments of thinking that we all can sit down at a table and better understand how this works. And, and we’ve had the exam staff and we’ve had the enforcement staff kind of talk us through what happens when they get a tip on register me, but you know, the line of what constitutes ma work. Well, I may think that’s clear and you may think that’s clear. There are other people who don’t see it as clearly as we do. So I think that it’s always a case by case review and assessment, but again, understanding that. So again, if a registered ma is competing for business against an unregistered ma doing the same work, which we would call ma work, what are the variables that go into to assessing that that firm doesn’t need to be registered from a, from a regulatory standpoint?

Susan Gaffney: (20:09)
That is an outstanding question that we have, um, because this is very frustrating. And the, the other interesting thing is we’re seeing this in many areas across the country. So, you know, it’s not just a California problem or, or not just a Nebraska problem. It is, we hear it all over the place from different kinds of professionals that we, that we hear are, are coming close to or cross seen that line. So thank you for raising that issue because, and the MSRB, thankfully talked about this late last year and, and raised the issue and put out the information on what to do when you see a professional that you think should be registered and is not, but this continues to also be an issue. We, we talk a lot to the SEC about,

Kyle Glazier: (20:51)
All right. Do you think this is an area where the market could benefit or where practitioners could benefit from additional guidance from the SEC or do you think it’s, it’s pretty clear as it is?

Susan Gaffney: (21:03)
I think there are two things. One is, I think there are some areas in the ma role that, you know, probably to get some clarity to have a resource out there. So that explains more, you know, there’s the Q and A also that came out of that time. But just like we were talking about the resources, uh, from the SRB, having them review that, to make sure that they have the tools necessary to address the, these issue is, you know, sounds like a good way to go again, certainly not asking for anything wholesale and nothing, uh, regarding changing up the ma rule or, or what it currently exists as resources, but making sure that they have the information they need to be able to make these decisions on an unregistered versus registered ma I think is, would be important. And again, also just having us understand that process and what goes into that and how someone may be continue to be practicing with what looks like ma work, but is not determined to be ma work is just a process we would like to understand.

Kyle Glazier: (22:04)
All right, understood Susan, great to do to you. Um, are there, are there any other thoughts that you wanted to share before we sign off or anything we missed?

Susan Gaffney: (22:14)
No, I, I think this is it. I mean, obvious the only other thing that’s sort of outstanding is the ESG issue, which I, I think we both would be in trouble if we didn’t use those three letters in an interview is, is there’s a lot of attention. Uh, we, a lot of G OASS work on this and the industry groups and, you know, we kind of think that’s where the focus should be right now. We’re monitoring what the is doing. Obviously they noted, they’re speaking about it at their next board meeting, um, to see if they’re taking any steps from the, uh, request information they had earlier this year, but we’re putting our energy and helping the industry with their work on this and the resources, uh, and conversations that are occurring because of not only ESG disclosures, but also on labeled bonds.

Kyle Glazier: (23:00)
Sure. And keeping an eye, I, I trust on what the SECs doing for, for registered companies. Right. Cuz some of that thinking tends to, to trickle into the immune in municipal market. Is that your view?

Susan Gaffney: (23:11)
Right. So that’s been another thing this year. Yeah. The SEC’s work in the private sector on cybersecurity and on ESG. Certainly. I think we’re all on our toes on that and trying to see what, what comes out of that and what application it could have from, from MUNIland. So thank you. Yes, you’re right. We, we are paying attention to what they’re doing on the other side of the world to see how that might impact their decision making for this side of the world.

Kyle Glazier: (23:37)
All right. Sounds good. Should be interesting to see where it all lands. Susan, thank you for joining me really appreciated it.

Susan Gaffney: (23:43)
Thank you, Kyle. Appreciate you.

Kyle Glazier: (23:45)Thanks to Kellie Malone, who did the audio production for this episode. And don’t forget to rate us, review us and subscribe at From the Bond Buyer, I’m Kyle Glazier. Thank you for listening.

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