MSRB rules and regs mostly for inside the firm
G-20: Gifts and gratuities
We need to be careful when we think about “gifts” in the sense of securities. Are we talking about a gift like we’d give our child, partner, or friend? Or are we talking about a “gift” we give someone, hoping they will do more business with us in the future. Gifts and “marketing expense” can be very close in this industry, but there are lines that clearly can be crossed, and bribery, extortion, and real crimes are why there are rules we have to follow.
Under MSRB Rule G-20, a broker, dealer, or municipal securities dealer cannot give a gift worth more than $300 to any one person, per year, in connection with that person’s municipal securities activities, unless the recipient is affiliated with (employed by) the firm giving the gift. This is a per-person, per-year limit - it resets annually and applies separately to each recipient - not a one-time payment cap or a firm-wide total. Firms have no limit on gifts given to their own affiliated persons and employees. The rule doesn’t reach gifts to individual retail customers either. A promotional item with the firm’s logo, such as an umbrella or a tote bag, falls outside the limit only when its value is nominal, substantially below the limit.
MSRB G-20 governs municipal securities dealers and municipal advisors. FINRA Rule 3220 sets the same $300 per-person, per-year gift limit for FINRA-member broker-dealers. The two rules run in parallel, so keep straight which one applies to which type of firm.
MSRB G-20 treats legitimate business entertainment differently from a gift, because the substance and motivation differ: entertainment is a cost of doing business, not compensation for steering business a client’s way. Entertainment doesn’t count against the $300 limit as long as it meets two conditions: it is occasional (not routine or recurring), and the representative hosting it attends in person. Common qualifying examples include:
- Occasional tickets to a sporting event or concert, attended together with the host representative.
- Occasional business meals, attended together with the host representative.
If the representative doesn’t attend, or the entertainment happens so often it stops being occasional, it’s treated as a gift and counts toward the $300 annual limit.
G-22: Control relationships
The MSRB definition of a control relationship is; “if a broker, dealer, municipal securities dealer, or any other person associated with one of them, controls, is controlled by, or is under common control with the issuer of the security or a person other than the issuer who is obligated, directly or indirectly, with respect to debt service on the security.”
All control relationships must be disclosed to the customer before the transaction; if the disclosure is made orally, written disclosure must follow at or before completion of the transaction. These are not necessarily a problem, but there easily could be, so they have to be disclosed so everyone involved can do their proper due diligence. In the current industry, there are lots of control relationships involved.
If the firm wants to place an order in a client’s discretionary account involving bonds or other securities, when there is a control relationship with the firm, they must disclose it before executing the transaction. Normally, in discretionary accounts, no contact is required before a trade. If the trade involves a control relationship, the client must be notified and the existence of the control relationship must be disclosed, and then the client must specifically authorize each transaction before it can be done.
G-28: Accounts at other brokers, dealers, and financial institutions
A person associated with an MSRB member firm can open accounts at other firms, but only with permission. Since September 16, 2026, G-28 matches FINRA’s rule on outside accounts. Before opening an account at another dealer or financial institution, the associated person must get the prior written consent of their employing firm, and must tell the executing (carrying) firm, in writing, that they are associated with the employing firm. This is a permission, not just a notification. The rule also reaches accounts of the person’s spouse and children who live with them or depend on them financially, and accounts the person controls. For an account opened before the person joined the firm, the consent and notice are due within 30 calendar days of joining.
Once the account is open, the executing firm must send the employing firm duplicate copies of confirmations and account statements when the employing firm asks for them in writing, and must follow any written instructions the employing firm gives with respect to transactions in the account.
G-31: Reciprocal dealings with municipal securities investment companies
The manager of a municipal securities bond fund, a municipal bond fund, potentially does a lot of municipal securities business, and would be a very profitable client for any municipal firm to carry. That is why this rule exists. MSRB says that no broker, dealer, or municipal securities dealer can solicit transactions in municipal securities with any investment company as defined under the Investment Company Act of 1940, as compensation or in return for the firm’s sales of that investment company’s shares. They may engage with MSRB member firms based on their skill, service, and similar, but not for sales generated.
G-37: Political contributions
MSRB Rule G-37 exists to prevent pay-to-play arrangements, where a political contribution influences the award of municipal securities or municipal advisory business. If a dealer contributes to the campaign of an official who can influence the selection of that dealer for municipal securities business, the dealer is barred from engaging in municipal securities business with that municipality for two years. The same two-year ban applies to a municipal advisor that contributes to the campaign of an official who can influence the selection of that advisor for municipal advisory business.
Sophisticated municipal market professional (SMMP)
SMMPs are defined by 3 requirements: the nature of the customer, a determination of how sophisticated they are by the firm, and an affirmation by the customer.
The nature of the customer would mean being a bank, savings and loan association, insurance company, registered investment company, an investment advisor under the Investment Advisor Act of 1940 or the Uniform Securities Act, or any other person or entity with total assets of at least $50m.
The firm must have a reasonable basis to believe that the customer is capable of evaluating the risks and market value independently, both with this particular transaction and the municipal market as a whole.
The customer must also agree that they have timely access to material information publicly available through established industry sources, and indicate they are exercising independent judgment in evaluating the following;
- The recommendations of the firm
- The quality of execution of the transactions, and
- The transaction price for non-recommended secondary market agency transactions, as to which the dealer’s services have been explicitly limited to providing anonymity, communication, order matching, and/or clearance functions, and the dealer does not exercise discretion as to how or when the transactions are executed.
Once a customer is an SMMP, the dealer owes it less (MSRB Rule G-48), and one duty that falls away is best execution (MSRB Rule G-18, the municipal counterpart of FINRA Rule 5310). For any other customer, best execution means using reasonable diligence to find the best market for the security, so that the customer’s price is as favorable as possible under prevailing market conditions. The rule lists what to weigh, such as the number of markets checked and how accessible quotations are; it sets no minimum number of quotes.
Use of ownership information obtained in a fiduciary or agency capacity
If a municipal securities dealer acts as a fiduciary or agent for an issuer (such as paying agent, transfer agent, registrar, or indenture trustee) or for another dealer, it may learn confidential, non-public information about who owns municipal securities. It can’t use that information to solicit purchases, sales, or exchanges of municipal securities, or otherwise for financial gain, unless the issuer, the other dealer, or the person on whose behalf the information was given consents.