The Bond Dealers of America (BDA) deploys a variety of advocacy and grassroots tools to influence the policy-making process and promote a more efficient fixed-income market. Regulatory authorities in Washington, D.C. recognize the BDA as an authority on technical issues and market trends. Through a variety of events and forums, our members have the opportunity to meet regulators and legislators to discuss market and business challenges. Our federal Political Action Committee (PAC) supports legislators who work to advance policies that improve the fixed income markets.
Federal Legislative and Regulatory Priorities & Accomplishments
Reconciliation 2.0
What’s New:
Speaker Johnson continues to state publicly that the House is looking at doing at least one more reconciliation package this Congress. While the BDA believes promises were made behind the scenes to House conservatives to get them to “yes” on the OBBB, we find it difficult, if not impossible for this scenario to play out especially with a waning majority.
Background:
Last year, against the odds, Congress passed the One, Big, Beautiful Bill that extended all TCJA personal tax cuts, and protected and expanded municipal bonds. The bill passed in a partisan manor via a budgetary process known as reconciliation. The bill was light on payfors, angering conservatives in the House Republican Caucus, and setting the stage for a 2026 push for an additional reconciliation package, one focused on sprawling budget cuts.
Rumors in recent weeks have been swirling about the potential for a second party-line spending bill focused on health-care reform, additional military appropriations for the ongoing Iran conflict, and additional spending measures that were eliminated from the One, Big, Beautiful Bill. The BDA has been bearish on this possibility, with these hesitations becoming even more pronounced in recent weeks with the continued thinning of the Republican majority in the House, and key Members of Leadership in both Chambers throwing cold water on the idea.
“I would love a second reconciliation bill, but I can count votes,” Ways and Means Chair Jason Smith said in an interview last week. “I’d also love to be Brad Pitt”. But noted, “Maybe people can prove me wrong,”
Last week, House Republicans met during their annual policy retreat, where conversations intensified on possible next steps to Reconciliation 2.0. The conversations have mostly focused on lowering health care costs, funding the Department of Homeland Security and advancing stalled housing affordability legislation. The wild card is the likely need for further funding if the Iran conflict continues, with some Republicans thinking the need for more war funding could jump-start a fresh reconciliation push.
Party leaders have also instructed Committee Chairs to revisit items that were dropped from the megabill enacted last summer as they consider what might get folded into a new piece of legislation. But many remain skeptical (including President Trump) that anything further can be achieved.
Currently, we feel the likelihood of any additional reconciliation package passing either Chamber of Congress remains very low. Further, we feel that any package that comes together will likely not focus on payfors, meaning the tax-exemption remains in a good position.
The BDA is planning fly-in’s through the remainder of the year, working to ensure the tax-exemption remains off the chopping block.
Optimism for Advance Refundings Grows
What’s New:
The BDA is leading industry advocacy for legislation that would fully reinstate municipal advance refundings. We continue to work simultaneously with Capitol Hill and issuer community in PFN to advance this key policy initiative.
Background:
The Investing in our Communities Act was introduced this spring by Representatives David Kustoff (D-TN) of the House Ways and Means Committee and Gwen Moore (D-WI) and on the Senate side Roger Wicker (R-MS) and Michael Bennet (D-CO) reintroduced the LOCAL Infrastructure Act.
Having the support of multiple sitting Members of the Ways and Means Committee sponsor this legislation and having robust bipartisan support in the Senate cannot be understated.
While this provision was not included in the recently advanced OBBB, progress has been made with key policymakers in both the House and Senate and has put AR in better position for passage in future spending or tax bills and remains a key BDA and PFN priority this year.
Remote supervision
What’s New:
FINRA last year issued a request for comment around a regulatory review related to the “modern workplace,” including a review of remote supervision rules. BDA’s letter in response focused on outlining the manner in which fixed income traders and others are supervised and made a case for greater flexibility around remote work and supervision.
FINRA’s consideration of these issues is consistent with BDA’s requests to both FINRA and the MSRB to further amend remote supervision regulation. BDA members met with senior FINRA staff on this issue in September, and FINRA indicated that they are drafting amendments to remote supervision rules. We expect to see a proposal soon.
The MSRB also issued a proposal to amend Rule G-27 related to supervision. Under the proposal, the current 30-day exception from treatment as a branch office or OMSJ for locations other than a primary residence would be extended to 60 days. The proposal would also clarify the definition pf “structuring.” BDA’s letter to the Board was generally supportive.
Background:
FINRA in 2024 finalized changes to FINRA Rule 3110 related to remote supervision. The release announced that FINRA was terminating the temporary, COVID-related remote work relief that had been in place since 2020 and establishing a new, permanent regime for remote work involving the new concept of “Residential Supervisory Location.” It also announced the creation of a new voluntary “Remote Inspections Pilot Program.” On May 10 the MSRB issued their own changes to MSRB Rule G-27 designed to comport the MSRB’s treatment of remote work and supervision with FINRA’s changes.
Unfortunately, the new, more flexible rules do not include traders or employees who “structure” transactions, and a priority for BDA is to incorporate those categories of employees in a more flexible regime. One issue that has arisen with respect to the MSRB rule changes is the divergent treatment of public finance bankers who may also work as Municipal Advisors and the employees of non-dealer MA firms. Another is the need for traders’ homes to be designated as Offices of Supervisory Jurisdiction (OSJs).
MSRB Rate Card
What’s New:
The SEC in December approved amendments to the MSRB’s “Rate Card” system for setting fee rates for companies regulated by the Board. Under the new system, fee rate changes would apply for a four-year period as opposed to annually under previous rules. The maximum any one fee rate can move when fee rates change has been reduced. Fee rate levels will not change over the next four years. However, dealers will receive a temporary, 45-percent fee rate reduction in 2026 and 2027 to make up for the MSRB over-collecting from the industry over the last two years. BDA supported the proposal and encouraged its approval.
Background:
The MSRB in December 2023 filed with the SEC their “Rate Card,” for 2024, the rates for the fees charged by the MSRB to dealers and MAs. The fee rates took effect on January 1, 2024. On January 29, 2024 the SEC suspended the 2024 Rate Card proposal and initiated disapproval proceedings, which likely would have led to the Proposal being rejected. As a result, the MSRB withdrew its 2024 fee rate proposal and the 2023 fee rates took immediate effect and remained in effect through 2025.
MSRB Release on SMMP Definition
What’s New:
The MSRB recently issued draft amendments on reforming and updating MSRB Rule D-15, which defines the term Sophisticated Municipal Market Participant (SMMP). The proposal would remove the requirement that dealers obtain an affirmation from Registered Investment Adviser customers before considering them as SMMPs. The proposal would maintain the requirement of a minimum of $50 million of total assets for most SMMPs but would raise the threshold for municipal entities (issuers) to $100 million. BDA filed a letter in support of the proposal but opposing the $100 million threshold for state and local governments.
Background:
In 2021 the SEC announced for the first time that Rule 15c2-11, a long-established rule in the OTC equity markets, also applies to quotations in fixed income securities. SEC staff then issued a temporary staff-no-action letter effectively exempting many bonds from the Rule if they meet certain criteria. The Rule requires traders, before publishing a quotation to a quotation medium, to review certain issuer financial information and ensure that information is available publicly.
In 2024 the SEC issued a new staff no-action letter with respect to the application of SEC Rule 15c2-11 to quotations for fixed income securities excluding municipals. The no-action letter effectively exempts many fixed income quotations from the Rule as long as the securities being quoted meet certain criteria. The newly issued letter does not have an expiration date.
Financial Data Transparency Act
What’s New:
A joint agency rulemaking, the first formal regulatory action in implementing the Financial Data Transparency Act (FDTA), was released last year by the OCC, Fed. FDIC, NCUA, CFPB, FHFA, CFTC, SEC, and Treasury. The agencies have proposed to require securities issuers to use both Legal Entity Identifiers (LEIs), a system of entity identification, as well as Financial Instrument Global Identifiers (FIGIs). FIGI is a less-proprietary system of securities identifiers which was developed as an alternative to CUSIPs. BDA raised several concerns in our response to the proposal. The agencies were supposed to have completed their joint rulemaking by the end of 2024. That did not happen, and the fate of the regulatory initiative is unclear. One question that has arisen recently is whether language-based artificial intelligence makes structured data disclosure obsolete.
Background:
In 2022 Congress enacted the FDTA as part of the National Defense Authorization Act. The Act is designed to promote the interoperability of data provided to financial regulators. The regulatory proposal would establish certain cross-agency data standards. One element, a standard for financial instrument identification, would use the Financial Instrument Global Identifier scheme instead of CUSIP.
The FDTA will, among other provisions, require municipal issuers to publish financial disclosure statements in a machine-readable format which will allow software to identify common data elements within the statements. There is a four-year implementation period from the date of enactment. The statute requires the SEC to develop a “taxonomy,” a collection of data items associated with tags thar will make the documents machine-readable. Issuers generally remain opposed to the FDTA.
One concern about the proposal is that at some point in the future the SEC may expect dealers to police municipal issuer compliance with the FDTA standard as current regulations do with respect to issuer continuing disclosure. Second is that the FDTA initiative could impose costs on the MSRB as the market’s disclosure repository which would be borne predominantly by dealers.
Advocacy Feature
