Securities Litigation

Starting June 23, municipal advisors will be subject to revised Rule 42 and its heightened engagement letter and disclosure obligations. SIFMA has released exposure drafts of compliance documents to help MAs meet those requirements. The drafts include a model engagement letter, disclosure statements for both new and continuing engagements and a client -intake checklist. They are here. Broadly speaking, the amended Rule imposes upon municipal advisors

• A fiduciary duty of care and loyalty to municipal entity clients - but only a duty of care to obligated persons (like conduit borrowers);
• A written engagement-letter and conflict-disclosure regime;
• Suitability and know-your-customer obligations; and,
• A list of prohibited practices, including a wide-ranging (but not absolute) ban on principal transactions with municipal entity clients.

I discussed the rule when adopted by the SEC last December, here. The adopting release, No. 34-76753, is here. Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 30 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2016 by Thomas K. Potter, III (all rights reserved).