Municipal Securities Rulemaking Board (MSRB) Rule G-17
Rule G-17 sets forth the fair practice duties of underwriters owed to municipal issuers in issuing new municipal securities. First, an underwriter must not misrepresent or omit material information about municipal securities activities undertaken with a municipal issuer nor recommend, in a negotiated deal, against the issuer retaining a municipal advisor. Second, an underwriter must have fair pricing practices, including: (1) not charging disproportionate and unfair underwriting prices to the issuer, (2) paying an issuer in a primary offering a fair and reasonable price for the securities, (3) not arranging profit sharing agreements with investors from the resale of the issuer’s securities, and (4) not include excessive expenses for the personal benefit of issuer as an expense of the issue to be reimbursed from bond proceeds or the issuer. Third, the underwriters also have a duty to disclose information to the issuer in a negotiated underwriting. The underwriter must disclose its role in the issuance of municipal securities, actual or potential material conflicts of interest, and the material financial characteristics and known risks of a complex financing where the financing was recommended by the underwriter. Finally, underwriters must provide disclosures on the material aspects of the structures it recommends if they reasonably believe that the issuer’s personnel responsible for issuing securities lack knowledge or experience with the financing structure, even where it is routine and generally understood by the typical municipal market professional.
- The Dynamics of Underwriter Disclosures to Issuers under G-17
- G-17 Disclosures: Underwriters to Issuers
- Rule G-17 Interpretative Notices
- Implementation Guidance Regarding G-17
- Frequently Asked Questions (FAQs) Regarding an Underwriter’s Disclosure Obligations Under G-17
- Application of G-17 to Underwriters of Municipal Securities