The Municipal Securities Rulemaking Board announced on Tuesday that the Securities and Exchange Commission has agreed to revise its definition of “sophisticated” when it comes to some municipal bond investors

The revised definition of a so-called “sophisticated municipal market professional” (SMMP) exempts dealers from making some of the disclosures to institutional customers that they must make to other investors. It also satisfies pricing and suitability obligations of dealers to those customers.

Under the new definition, SMMP is defined as an institutional customer of a dealer that “has a reasonable basis to believe is capable of evaluating investment risks and market value independently, both in general and with regard to particular transactions in municipal securities.” The customer also affirmatively indicates that it is exercising independent judgment in evaluating the recommendations of the dealer.

The SEC also agreed to lower the amount of assets needed to qualify as an institutional customer from $100 million to $50 million.

The new definition “vastly simplifies the analysis required by dealers when determining whether their customers qualify as SMMPs and also provides “consistency with a new Financial Industry Regulatory Authority rule on suitability for institutional customers,” the MSRB wrote in a statement. 

Since issuing its original definition of SMMP in 2002, information available about municipal bonds has increased substantially, including information provided through its Electronic Municipal Market Access Website and other information vendors. These sources have made the material facts about municipal bonds more readily available, the board said in explaining the change.