The Securities and Exchange Commission approved the Municipal Securities Rulemaking Board’s proposal to implement a “best execution” standard for municipal securities transactions. The new rule will take effect December 7, 2015, following a year-long implementation period. The MSRB modeled its rule on the Financial Industry Regulatory Authority’s best-execution rule for equity and non-municipal fixed income securities. MSRB Rule G-18 generally requires that, in any transaction in a municipal security for or with a customer or a customer of another dealer, a dealer use “reasonable diligence” to ascertain the best market for the subject security and buy or sell in that market so that the resultant price to the customer is as favorable as possible under prevailing market conditions. This basic best execution obligation does not apply to transactions in municipal fund securities (such as 529 college savings plans). The MSRB also amended Rules G-48 and D-15 to provide that a dealer’s best execution obligation will not apply to transactions with “sophisticated municipal market professionals” and to require additional customer affirmations in order to qualify as an SMMP.
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