Written Supervisory Procedures

The MSRB requires each firm to establish, implement, and maintain a system to supervise municipal advisory activities and municipal advisory associates. The system should be designed to comply with applicable securities laws, regulations, and MSRB rules. The system should include:

•Written supervisory procedures (WSPs). These procedures should ensure that the municipal advisor is compliant with all applicable laws and rules. It should be amended promptly to reflect changes in the rules, and these should be communicated to staff.

•Designation of a principal. One or more principals should be designated as responsible for the implementation of the supervisory system.

In addition, municipal advisors must establish policies to test and modify the written procedures, and they must conduct a compliance review of the compliance policies and WSPs at least annually.

WSPs must take into account the advisor’s:

•Size

•Organizational structure

•Scope of activities

•Disciplinary history of its associated persons

They must also account for the likelihood that associated persons may be engaged in relevant outside business activities and any indicators of irregularities or misconduct (red flags).

The rule also requires that each municipal a