The Municipal Securities Rulemaking Board (MSRB) recently opened a discussion about its fee assessment process for municipal advisors (MAs) and dealers, gathering feedback from a wide array of stakeholders. The crux of the debate centers around perceived inequities in the current rate card system. Dealers have expressed that they are shouldering an “unfair” financial burden, advocating for a reassessment of how MAs are charged fees, yet representatives from the MA community refute these claims, indicating that such changes may be not only impractical but also detrimental.
The MSRB serves as an independent self-regulatory organization, relying on fees collected from regulated entities to fund its operations. In this light, any shift in the fee structure has significant implications for both MAs and dealers, both of whom navigate a complex landscape defined by regulatory mandates and market dynamics.
Responses from major dealer organizations—such as the Securities Industry and Financial Markets Association (SIFMA), the Bond Dealers of America (BDA), and the American Securities Association (ASA)—advocate for a fee structure that leans towards activity-based assessments for MAs. They argue that this approach could relieve dealers of what they view as an inequitable share of MSRB’s operational costs. On the other hand, the National Association of Municipal Advisors (NAMA) has pushed back against this initiative, asserting that the diversity in business models among MAs complicates any effort to levy appropriate fees. NAMA’s Executive Director, Susan Gaffney, highlights that using the number of covered persons as a basis for fee assessments remains the most equitable solution in a sector characterized by varied practices.
This divergence raises questions about the feasibility of aligning the interests of both parties. Dealers argue for a reformed fee structure that reflects actual market activity, potentially creating a fairer environment. Conversely, MAs caution that moving from a per-person fee to a more variable model could undermine smaller firms’ sustainability, potentially leading to reduced representation in the advisory space.
As identified in the letters of feedback, calls for enhanced transparency surrounding the MSRB’s budgeting and fee-setting processes are widespread. The BDA, for instance, commended the MSRB for its ongoing efforts to revisit these issues but emphasized the need for clearer communication regarding how fee rates are established and modified. Currently, the disparities in fee distribution raise pressing questions about whether MAs—which contributed merely 6% of collected fees in 2024—are benefiting disproportionately from regulatory services they do not adequately fund.
The BDA’s analysis of the MSRB’s fiscal structures underscores a significant imbalance: dealers paid $45 million compared to the mere $3 million generated through MA fees. Giroux’s comments from the ASA echo these sentiments, arguing that dealers bear a “disproportionate share” of the costs associated with regulations that also serve municipal advisors. This imbalance of contributions suggests an inherent issue in the existing fee framework that requires reconsideration.
To address these disparities, stakeholders suggest a pivot to market-activity-based fee structures for MAs, akin to the methodologies already employed for dealers. This proposal presents a more equitable shared responsibility model based on actual engagement levels in market activities, such as bond issuances. By tying fees to the volume of work undertaken by MAs— rather than a fixed per-person assessment—could help ensure that all parties contribute fairly according to their usage of the MSRB’s resources.
Nevertheless, these suggestions come with the caveat of potential administrative challenges. As NAMA pointed out, any new fee assessment system must consider the range of business models in the advisory arena. Striking a balance between simplifying the fee structure and accommodating diverse practices presents a formidable challenge for the MSRB, necessitating a thoughtful and inclusive approach to any prospective reforms.
As discussions surrounding the MSRB’s fee structure continue, it is apparent that a cooperative approach involving all stakeholders—dealers, MAs, and regulatory bodies—is essential. By fostering open dialogue and transparency, the MSRB can work towards creating a more equitable regulatory framework that fairly distributes costs while still maintaining the fundamental mission of protecting issuers. Reassessing the fee structures not only addresses current grievances but also prepares the ground for a more balanced regulatory landscape that can support the growth and sustainability of all market participants in the municipal securities arena. This ongoing dialogue will be critical in finding resolutions that honor the complexities of the municipal advisory industry while progressing towards a more just and efficient system.