[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 3935 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
2d Session
S. 3935
To amend the Securities Exchange Act of 1934 to clarify the composition
of the membership of the Municipal Securities Rulemaking Board, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 26, 2026
Mr. Kennedy introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To amend the Securities Exchange Act of 1934 to clarify the composition
of the membership of the Municipal Securities Rulemaking Board, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Municipal Securities Rulemaking
Board Reform Act of 2026''.
SEC. 2. THE MUNICIPAL SECURITIES RULEMAKING BOARD.
(a) In General.--Section 15B of the Securities Exchange Act of 1934
(15 U.S.C. 78o-4) is amended--
(1) by striking subsection (b) and inserting the following:
``(b) Municipal Securities Rulemaking Board.--
``(1) Membership.--
``(A) Definitions.--For the purposes of this
paragraph, a person is associated with--
``(i) a municipal securities broker if that
person is--
``(I) a partner, officer, director,
or branch manager of a municipal
securities broker;
``(II) a person occupying a similar
status as, or performing similar
functions as, a person described in
subclause (I);
``(III) any other employee of a
municipal securities broker who is
directly engaged in the management,
direction, supervision, or performance
of any activities relating to the
business of effecting transactions in
municipal securities for the account of
others; or
``(IV) a person directly or
indirectly controlling, controlled by,
or under common control with a
municipal securities broker;
``(ii) a municipal securities dealer if the
person is a person associated with a municipal
securities dealer; and
``(iii) a municipal advisor if the person
is--
``(I) a person associated with a
municipal advisor; or
``(II) an associated person of an
advisor.
``(B) Composition of board.--
``(i) In general.--The Board shall be
composed of 15 members, or such other number of
members as specified by the Commission under
clause (ii), who shall--
``(I) be appointed from among
individuals of integrity and
reputation; and
``(II) have experience in matters
that are affected by the municipal
securities markets.
``(ii) Commission alterations.--The
Commission may alter the number of members that
constitute the Board, provided that such number
shall always be an odd number.
``(C) Public representatives and regulated
representatives.--
``(i) Regulated representatives.--A
majority of the members of the Board shall be
individuals who are associated with a broker,
dealer, municipal securities dealer, or
municipal advisor (referred to in this
subsection as `regulated representatives')--
``(I) not fewer than 2 of whom
shall be associated with and
representative of brokers, dealers, or
municipal securities dealers that are
not banks or subsidiaries, departments,
or divisions of banks (referred to in
this subsection as `broker-dealer
representatives');
``(II) not less than 1 of whom
shall be associated with and
representative of municipal securities
dealers that are banks or subsidiaries,
departments, or divisions of banks
(referred to in this subsection as
`bank representatives'); and
``(III) not fewer than 2 of whom
shall be associated with a municipal
advisor (referred to in this subsection
as `advisor representatives').
``(ii) Public representatives.--The
remainder of the members of the Board shall be
individuals who were not associated with a
municipal securities broker, a municipal
securities dealer, a broker, a dealer, or a
municipal advisor (and who were not employed
by, or who were not an officer, director, or
controlling person of, any affiliate of any
such entity) during the 5-year period preceding
the date on which those individuals are
appointed to the Board (referred to in this
subsection as `public representatives')--
``(I) not less than 1 of whom shall
be representative of institutional or
retail investors in municipal
securities;
``(II) not less than 1 of whom
shall be representative of municipal
entities; and
``(III) not less than 1 of whom
shall be a member of the public.
``(D) Limitation.--The membership of the Board
shall, at all times, be as evenly divided as possible
between the number of public representatives and
regulated representatives, consistent with the
requirement under subparagraph (C)(i) that a majority
of the members of the Board shall be regulated
representatives.
``(E) Appointment of board members.--
``(i) Initial board.--Not later than 180
days after the date of enactment of the
`Municipal Securities Rulemaking Board Reform
Act of 2026', the Commission shall, subject to
clause (ii)--
``(I) appoint a Chairperson of the
Board and all other initial members of
the Board; and
``(II) designate a term of service
for each member appointed under
subclause (I).
``(ii) Interim board.--
``(I) In general.--Before
appointing the initial members of the
Board under clause (i), the Commission
may, without regard to the limitations
in subparagraph (C), appoint not more
than 3 individuals to serve as interim
members of the Board who shall be
responsible for ensuring the continuity
of the operations of the Board until
the Commission appoints those initial
members.
``(II) Membership.--In making an
appointment under subclause (I), the
Commission shall select from among
individuals of integrity and reputation
and who have experience in matters that
are affected by the municipal
securities markets.
``(III) Authority.--The members of
the interim Board appointed under this
subparagraph may exercise all of the
authority of the Board under this
section.
``(iii) Successors.--The Commission shall
appoint a successor to each member of the
Board, including each initial member of the
Board under clause (i), before the expiration
of the term of service of that member.
``(F) Vacancies.--A vacancy on the Board--
``(i) shall not affect the authority of the
Board under this section; and
``(ii) shall be filled by the Commission.
``(G) Term of service.--The term of service for
each Board member shall be 3 years, plus the amount of
time necessary for the appointment of a successor,
except that--
``(i) the term of service for a member
appointed under subparagraph (E)(i), other than
the Chairperson of the Board, shall expire in
increments, with--
``(I) \1/3\ of the terms of the
members so appointed expiring on the
date that is 1 year after the date on
which those members are appointed;
``(II) \1/3\ of the terms of the
members so appointed expiring on the
date that is 2 years after the date on
which those members are appointed; and
``(III) \1/3\ of the terms of the
members so appointed expiring on the
date that is 3 years after the date on
which those members are appointed;
``(ii) the term of service for a member
appointed under subparagraph (E)(ii) shall be
not more than 180 days; and
``(iii) any Board member appointed to fill
a vacancy on the Board before the expiration of
the term with respect to that vacancy shall be
appointed only for the remainder of that term.
``(H) Removal.--A member of the Board shall be
removable at will by the Commission.
``(2) Rules.--The Board shall propose and adopt rules to
effect the purposes of this title with respect to transactions
in municipal securities effected by brokers, dealers, and
municipal securities dealers and advice provided to or on
behalf of municipal entities or obligated persons by brokers,
dealers, municipal securities dealers, and municipal advisors
with respect to municipal financial products, the issuance of
municipal securities, and solicitations of municipal entities
or obligated persons undertaken by brokers, dealers, municipal
securities dealers, and municipal advisors and that, at a
minimum, shall--
``(A) provide that no municipal securities broker
or municipal securities dealer shall effect any
transaction in, or induce or attempt to induce the
purchase or sale of, any municipal security, and no
broker, dealer, municipal securities dealer, or
municipal advisor shall provide advice to or on behalf
of a municipal entity or obligated person with respect
to municipal financial products or the issuance of
municipal securities, unless such municipal securities
broker or municipal securities dealer meets such
standards of operational capability and such municipal
securities broker or municipal securities dealer and
every natural person associated with such municipal
securities broker or municipal securities dealer meets
such standards of training, experience, competence, and
such other qualifications as the Board finds necessary
or appropriate in the public interest or for the
protection of investors and municipal entities or
obligated persons. In connection with the definition
and application of such standards the Board may--
``(i) appropriately classify municipal
securities brokers, municipal securities
dealers, and municipal advisors (taking into
account relevant matters, including types of
business done, nature of securities other than
municipal securities sold, and character of
business organization), and persons associated
with municipal securities brokers, municipal
securities dealers, and municipal advisors;
``(ii) specify that all or any portion of
such standards shall be applicable to any such
class; and
``(iii) require persons in any such class
to pass tests administered in accordance with
subsection (c)(7);
``(B) be designed to prevent fraudulent and
manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating,
clearing, settling, processing information with respect
to, and facilitating transactions in municipal
securities and municipal financial products, to remove
impediments to and perfect the mechanism of a free and
open market in municipal securities and municipal
financial products, and, in general, to protect
investors, municipal entities, obligated persons, and
the public interest; and not be designed to permit
unfair discrimination among customers, municipal
entities, obligated persons, municipal securities
brokers, municipal securities dealers, or municipal
advisors, to fix minimum profits, to impose any
schedule or fix rates of commissions, allowances,
discounts, or other fees to be charged by municipal
securities brokers, municipal securities dealers, or
municipal advisors, to regulate by virtue of any
authority conferred by this title matters not related
to the purpose of this title or the administration of
the Board, or to impose any burden on competition not
necessary or appropriate in furtherance of the purposes
of this title;
``(C) if the Board deems appropriate, provide for
the arbitration of claims, disputes, and controversies
relating to transactions in municipal securities and
advice concerning municipal financial products, except
that no person other than a municipal securities
broker, municipal securities dealer, municipal advisor,
or person associated with such a municipal securities
broker, municipal securities dealer, or municipal
advisor may be compelled to submit to such arbitration
except at his instance and in accordance with section
29;
``(D) provide for the periodic examination in
accordance with subsection (c)(7) of municipal
securities brokers, municipal securities dealers, and
municipal advisors to determine compliance with
applicable provisions of this title, the rules and
regulations thereunder, and the rules of the Board,
which shall specify the minimum scope and frequency of
such examinations and shall be designed to avoid
unnecessary regulatory duplication or undue regulatory
burdens for any such municipal securities broker,
municipal securities dealer, or municipal advisor;
``(E) include provisions governing the form and
content of quotations relating to municipal securities
which may be distributed or published by any municipal
securities broker, municipal securities dealer, or
person associated with such a municipal securities
broker or municipal securities dealer, and the persons
to whom such quotations may be supplied, which shall be
designed to produce fair and informative quotations, to
prevent fictitious or misleading quotations, and to
promote orderly procedures for collecting,
distributing, and publishing quotations;
``(F) prescribe records to be made and kept by
municipal securities brokers, municipal securities
dealers, and municipal advisors and the periods for
which such records shall be preserved;
``(G) define the term `separately identifiable
department or division', as that term is used in
section 3(a)(30), in accordance with specified and
appropriate standards to assure that a bank is not
deemed to be engaged in the business of buying and
selling municipal securities through a separately
identifiable department or division unless such
department or division is organized and administered so
as to permit independent examination and enforcement of
applicable provisions of this title, the rules and
regulations thereunder, and the rules of the Board and
so that a separately identifiable department or
division of a bank may be engaged in activities other
than those relating to municipal securities;
``(H) provide for the operation and administration
of the Board, the compensation of the members of the
Board (subject to the rule issued by the Commission
under section 2(c)(1)(B) of the `Municipal Securities
Rulemaking Board Reform Act of 2026'), and the
appointment and compensation of such employees,
attorneys, and consultants as may be necessary or
appropriate to carry out the functions of the Board
under this section;
``(I) provide that each municipal securities
broker, municipal securities dealer, and municipal
advisor shall pay to the Board such reasonable fees and
charges as may be necessary or appropriate to defray
the costs and expenses of operating and administering
the Board, which shall specify the amount of such fees
and charges, which may include charges for failure to
submit to the Board, or to any information system
operated by the Board, within the prescribed
timeframes, any items of information or documents
required to be submitted under any rule issued by the
Board;
``(J) establish the terms and conditions under
which any broker, dealer, or municipal securities
dealer may sell, or prohibit any broker, dealer, or
municipal securities dealer from selling, any part of a
new issue of municipal securities to a related account
of a broker, dealer, or municipal securities dealer
during the underwriting period; and
``(K) with respect to municipal advisors--
``(i) prescribe means reasonably designed
to prevent acts, practices, and courses of
business as are not consistent with a municipal
advisor's fiduciary duty to its clients;
``(ii) provide continuing education
requirements for municipal advisors;
``(iii) provide professional standards; and
``(iv) not impose a regulatory burden on
small municipal advisors that is not necessary
or appropriate in the public interest and for
the protection of investors, municipal
entities, and obligated persons, provided that
there is robust protection of investors against
fraud.
``(3) Board authority.--The Board, in conjunction with or
on behalf of any Federal financial regulator or self-regulatory
organization, may--
``(A) establish information systems; and
``(B) assess such reasonable fees and charges for
the submission of information to, or the receipt of
information from, such systems from any persons which
systems may be developed for the purposes of serving as
a repository of information from municipal market
participants or otherwise in furtherance of the
purposes of the Board, a Federal financial regulator,
or a self-regulatory organization, except that the
Board--
``(i) may not charge a fee to municipal
entities or obligated persons to submit
documents or other information to the Board or
charge a fee to any person to obtain, directly
from the internet site of the Board, documents
or information submitted by municipal entities,
obligated persons, brokers, dealers, municipal
securities dealers, or municipal advisors,
including documents submitted under the rules
of the Board or the Commission; and
``(ii) shall not be prohibited from
charging commercially reasonable fees for
automated subscription-based feeds or similar
services, or for charging for other data or
document-based services customized upon request
of any person, made available to commercial
enterprises, municipal securities market
professionals, or the general public, whether
delivered through the internet or any other
means, that contain all or part of the
documents or information, subject to approval
of the fees by the Commission under section
19(b).
``(4) Guidance.--The Board may provide guidance and
assistance in the enforcement of, and examination for,
compliance with the rules of the Board to the Commission, a
registered securities association under section 15A, or any
other appropriate regulatory agency, as applicable.
``(5) Meetings.--The Board, the Commission, and a
registered securities association under section 15A, or the
designees of the Board, the Commission, or such association,
shall meet not less frequently than 2 times a year--
``(A) to describe the work of the Board, the
Commission, and the registered securities association
involving the regulation of municipal securities; and
``(B) to share information about--
``(i) the interpretation of the Board, the
Commission, and the registered securities
association of Board rules; and
``(ii) examination and enforcement of
compliance with Board rules.
``(6) Data standards.--
``(A) In general.--The Commission shall adopt data
standards for information submitted to the Board.
``(B) Consistency.--Any data standards adopted
under subparagraph (A) shall incorporate, and ensure
compatibility with (to the extent feasible), all
applicable data standards established in the rules
promulgated under section 124 of the Financial
Stability Act of 2010 (12 U.S.C. 5334), including, to
the extent practicable, by having the characteristics
described in clauses (i) through (vi) of subsection
(c)(1)(B) of such section 124.
``(C) Consultation.--The Commission shall consult
market participants in establishing data standards
under subparagraph (A).
``(D) Rule of construction.--Nothing in this
paragraph may be construed to affect the operation of
paragraph (1) or (2) of subsection (d).
``(7) Rule of construction.--Nothing in this section shall
be construed to impair or limit the power of the Commission
under this title.''; and
(2) in subsection (c)--
(A) in paragraph (7)--
(i) in subparagraph (A), in the matter
preceding clause (i), by striking ``(b)(2)(E)''
and inserting ``(b)(2)(D)''; and
(ii) in subparagraph (B), in the first
sentence, by striking ``(b)(2)(E)'' and
inserting ``(b)(2)(D)''; and
(B) in paragraph (8), by striking ``member or''.
(b) Technical and Conforming Amendments.--The Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.) is amended--
(1) in section 3(a)(30)(B) (15 U.S.C. 78c(a)(30)(B)), by
striking ``section 15B(b)(2)(H)'' and inserting ``section
15B(b)(2)(G)''; and
(2) in section 15A (15 U.S.C. 78o-3)--
(A) in subsection (b)(15)(B), in the matter
preceding clause (i), by striking ``section
15B(b)(2)(E)'' and inserting ``section 15B(b)(2)(D)'';
and
(B) in subsection (e)(3), by striking ``section
15B(b)(2)(K)'' and inserting ``section 15B(b)(2)(J)''.
(c) Rulemakings.--
(1) Securities and exchange commission.--The Securities and
Exchange Commission--
(A) may issue any rules to carry out this Act, and
the amendments made by this Act, that may be necessary
or appropriate in the public interest or for the
protection of investors, municipal entities, or
obligated persons; and
(B) shall issue a final rule that provides the
maximum compensation for a member of the Municipal
Securities Rulemaking Board.
(2) Municipal securities rulemaking board.--Not later than
60 days after the date on which the Securities and Exchange
Commission has completed the appointment of the initial members
of the Municipal Securities Rulemaking Board under section
15B(b)(1)(E) of the Securities Exchange Act of 1934, as added
by subsection (a), the Municipal Securities Rulemaking Board
shall submit to the Commission any notice of a proposed change
to the rules of the Board that is required as a result of the
amendments made by this section.
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