November 8, 2010
November 8, 2010
Elizabeth M. Murphy
Securities and Exchange Commission
100 F St., NE
Washington, DC 20549-1090
RE: Amendments to MSRB Rule A-13
I would like to thank the Commission for the opportunity to submit comments on Securities and Exchange Commission Release No. 34-63095 related to the Municipal Securities Rulemaking Board's Notice of Filing Amendments to Rule A-13 proposing increases to certain administrative assessments and fees.
All industry participants recognize the necessity that the Board operates in a revenue neutral manner. Furthermore, most realize that the Board has taken on additional responsibilities in relation to disclosure and transparency that will result in increases in the Boards expenditures. Additionally, Congress has assigned the Board regulatory responsibilities related to Municipal Advisors. My concern, however, is that the Board has elected to recoup its additional expenditures from one segment of market participants, and has not quantified projections related to neither the anticipated future operational costs nor revenues generated by the proposed fee increases.
The proposed increases to fees charged broker-dealer registrants will double the par value transaction fee for sales, and create a technology fee of $1.00 per sales transaction. The proposing release does not provide any documentation in support of the necessity of increases of this size. The Board only reports that it ran at a deficit of $1.7 million in 2009. The 30 day trading averages posted on EMMA today show an average of over 38,000 trades reported per day with par value of over $12.5 billion. I have estimated projected revenues generated by the proposed fee increases (based on 250 trading days), at between fifteen and eighteen million dollars. This would almost double the Board's revenues, and these are not the only proposed fee increases. Is this really necessary to cover a $1.7 million shortfall and to provide a reserve for technology development?
One of the reasons the Board cites in its proposal to increase transaction related fees is the additional cost related to regulating Municipal Advisors. To date, approximately 700 firms have registered with the Commission as Municipal Advisors. The MSRB has proposed the imposition of fees for Municipal Advisor registration that would raise only approximately $400,000 annually. Clearly, this is not enough to support any significant regulatory activity related to Municipal Advisors. It would appear to be rather inequitable to require the MSRB registered broker-dealer community to finance the regulation of Municipal Advisors through transaction based fee increases. Nevertheless, the Board has announced that is the very thing a portion of the proposed fee increases is intended to cover. I would suggest that the Board calculate the revenues that must be generated to support Municipal Advisor regulatory activity, and assess registration fees accordingly, so that one segment of registrants is not financing the regulation of another. My firm is registered as both a Municipal Advisor and a broker-dealer, as are many market participants, but this does not affect my opinion that costs should be allocated equitably. There are other aspects of the fee increases that I believe require further inquiry, such as whether or not the proposed rates place a disproportionate burden on firms that have little underwriting participation and those firms whose business is primarily retail.
For the reasons stated above, I believe the Commission should require that the MSRB provide economic justification for its proposed fee structure and a more equitable distribution of assessments prior to approving any transaction based fee increase proposal. Thank you again for the opportunity to comment.
Executive Vice President
Coastal Securities, Inc.