On June 16, the SEC issued a temporary exemptive order, allowing registered municipal advisors to solicit banks, their wholly-owned commercial lenders and credit unions in connection with direct placements by municipal-issuer clients. Ordinarily, that placement-agent activity would require broker-dealer registration under ’34 Act Section 15 (15 U.S.C. § 78o).
The Commission granted the temporary exemption to allow MAs to assist municipal issuers – especially smaller municipalities not otherwise eligible for the Fed’s Municipal Liquidity Facility – with ...
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 ...
On April 12, the Tennessee Republican Party filed a petition in the US Sixth Circuit Court of Appeals, seeking to invalidate the SEC's approval of new rules extending the MSRB's long-standing "pay-to-play" prohibitions to new municipal advisors.
The MSRB has prohibited "pay-to-play" practices in the municipal securities space since its Rule G-37 was promulgated in 1994. The Rule does not prohibit political contributions by bond dealers outright, but instead prohibits them from doing business with issuers to who's elected officials a dealer has made political ...
The MSRB's Rule G-37 amendments applying pay-to-play prohibitions to Municipal Advisors and their third-party solicitors will become effective August 17, 2016. The proposed amendments extend Rule G-37 to municipal advisers and third-party solicitors:
- Imposing a two-year ban on business with municipal entities after any contribution to an issuer official who can influence municipal-advisory business, subject to $250 de minimis exclusion to officials for whom a contributor can vote;
- Prohibiting soliciting, coordinating ("bundling"), and contributions to state/local ...
Last Thursday, November 12, the MSRB published its Compliance Advisory for Municipal Advisors ("MA's"). The new MA regulatory regime was imposed by Dodd-Frank and implemented by the MSRB and SEC over the past several years. The Advisory highlights some of fundamental regulatory requirements for MA's and identifies some potential compliance risks, including, for example:
- Failing to register;
- Failing to ensure MA associated persons are Series 50 qualified (still in pilot);
- Failing to implement an MA-specific compliance program under Rule G-44;
- Failing to distinguish ...
The MSRB recently released a content outline for the new Series 50 Municipal Advisor Representative examination, which the SEC approved in principle earlier this year. See MSRB Reg. Notice 2015-06. The MSRB filed the Rule Proposal with the SEC on April 22 for immediate effectiveness. SR-MSRB-2015-04. The Series 50 exam will require MA Representative candidates to complete 100 multiple-choice questions within 3 hours on a range of topics, including:
- SEC and MSRB Rules on municipal advisor activities;
- Municipal Finance generally;
- Credit analysis and due diligence of municipal ...
The MSRB last week proposed an extension of its gift-limitations Rule G-20 to encompass municipal advisors. The Proposed Rule generally limits gifts in relation to municipal securities or advisory services to $100 per year. The limit excludes normal-course (not excessive) business entertainment or sponsorships, transaction commemoratives, or personal gifts (e.g. birthdays, weddings). Comments on the G-20 proposal are due by December 8 and the MSRB will hold a webinar on the release November 13. See MSRB Reg. Not. 2014-18, here. The MSRB also has proposed amendments extending ...
The SEC last week approved new MSRB Rule G-44 implementing supervision and compliance requirements for municipal advisors. The MSRB touted the Rule as "its first dedicated rule for municipal advisors" under the Dodd-Frank mandate for greater regulation of the nation's municipal-securities markets. See MSRB Reg. Not. 2014-19, here. New Rule G-44 requires Municipal Advisors to follow the same supervision and compliance regime otherwise applicable to registered broker-dealers under FINRA Rules 3110- 3130. It requires, among others: - Written supervisory procedures ...
The MSRB proposed a Revised Draft of Rule G-42 ("Duties of Non-Solicitor Municipal Advisors") by Reg. Not. 2014-12 issued July 23, 2014. We addressed the original proposal in our January 23 blog post, here. The Revised Draft Rule G-42 contains the same basic structure and objectives as originally proposed. It establishes (a) DUTIES owed by Municipal Advisors ("MA's") to Municipal Entity ("ME") clients and to Obligated Person ("OP's"); (b) An engagement-letter-type disclosure regime with certain required DISCLOSURES; (c) A suitability requirement MA's must follow ...