Key Takeaways
- Attorney Gary Varnavides submitted a formal comment letter to the MSRB on February 2, 2026, opposing proposed amendments to Rule D-15
- The proposed rule would exempt SEC-registered investment advisers from the customer affirmation requirement for SMMP status and presume qualifying RIAs meet the sophisticated municipal market professional definition.
- The letter argues that SEC registration alone does not indicate municipal securities sophistication, particularly for small RIAs
- Recent market events, including the Easterly ROCMuni fund collapse, underscore the need for stronger protections
- The full comment letter is available as a PDF download below
Why This Comment Letter Matters
On February 2, 2026, Varnavides Law founder Gary Varnavides submitted a formal comment letter to the Municipal Securities Rulemaking Board (MSRB) opposing proposed amendments to Rule D-15. The proposed changes would exempt SEC-registered investment advisers from the customer affirmation requirement for Sophisticated Municipal Market Professional (SMMP) status and allow dealers to treat qualifying RIAs as SMMPs without that affirmation.
Gary’s letter draws on his decade of experience at Sichenzia Ross Ference LLP, where he defended broker-dealers and gained firsthand insight into compliance failures within the financial industry. That experience now informs his work representing investors harmed by misconduct in the municipal bond market.
The Core Problem: SEC Registration Does Not Equal Municipal Securities Expertise
The proposed amendments to Rule D-15 rest on an assumption that SEC registration provides sufficient oversight for firms dealing in municipal securities. Gary’s letter challenges this premise directly.
Many small registered investment advisers — particularly those managing under $5 billion in assets — lack the infrastructure, compliance programs, and specialized expertise required for municipal securities. Allowing dealers to presume these firms qualify as SMMPs without customer affirmation would reduce certain protections (such as enhanced disclosures) and leave retail investors exposed to greater risk without the same level of safeguards.
JPA and Conduit Bond Proliferation: A Growing Threat
A central theme of the comment letter is the rapid proliferation of Joint Powers Authority (JPA) bonds and conduit debt in California. These instruments, often speculative-grade or entirely non-rated, are increasingly marketed to retail investors who may not fully understand the risks involved.
Gary’s letter highlights several concerning developments:
- CSCDA essential housing bonds and similar programs issued through the California Public Finance Authority have expanded rapidly with limited transparency
- Forbes investigations have documented numerous examples of JPA-issued workforce housing bonds that experienced severe financial distress or outright default
- SEC Director Dave Sanchez has publicly warned about the risks posed by conduit issuers operating with insufficient oversight
The Easterly ROCMuni Fund Collapse
The letter points to the Easterly ROCMuni fund (ticker: RMHIX) as a real-world illustration of the dangers facing municipal bond investors. The fund lost approximately 50% of its value in June 2025, devastating investors who had been led to believe they held conservative municipal bond positions.
This type of catastrophic loss is precisely what MSRB oversight is designed to help prevent. Reducing that oversight at a time of increasing complexity and risk in the municipal bond market would move regulation in exactly the wrong direction.
The Argument for Expanding Protections
Rather than exempting additional market participants from MSRB oversight, Gary’s comment letter argues that protections should be expanded. The municipal securities market has grown more complex, with new issuance structures and distribution channels that did not exist when current rules were written. Regulatory frameworks need to keep pace with these developments, not retreat from them.
Gary’s unique perspective — having spent a decade on the defense side of securities litigation before founding a firm dedicated to investor protection — gives him direct knowledge of how compliance gaps lead to investor harm. His letter urges the MSRB to prioritize investor protection over industry convenience.
Download the Full Comment Letter
The complete MSRB Rule D-15 comment letter submitted by Gary Varnavides on February 2, 2026, is available for download. The letter provides detailed analysis of the proposed amendments, supporting data on JPA bond defaults, and specific recommendations for strengthening municipal securities regulation.
Download and Read Gary’s Full Comment Letter (PDF)
Concerned About Your Municipal Bond Investments?
If you have suffered losses in municipal bonds, JPA housing bonds, or conduit debt instruments, Varnavides Law can help evaluate your options. Schedule a free consultation to discuss your situation.
