WASHINGTON — The Municipal Securities Rulemaking Board is urging the Federal Reserve Board, the SEC and other financial regulators to exempt all municipal securities from the Volcker Rule, warning the failure to do so would bifurcate and hurt the municipal market without increasing the soundness of the banking system.

The Volcker Rule, named after former Federal Reserve chief Paul Volcker, was mandated by the Dodd-Frank Act and proposed jointly by four financial regulators. It would prohibit banks from proprietary trading and would restrict their investments in private equity and hedge funds. However, it would exempt short-term trading for market-making or to hedge risks.

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