S. 3935

[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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