Pennsylvania + Wall


Pennsylvania + Wall provides commentary on a broad range of current financial, economic and regulatory reform topics. The views expressed are those of the authors, and do not necessarily reflect the position of SIFMA.

March 04, 2013

A Sensible Municipal Advisor Definition

By Michael Decker

FACTA, Mortgages, China - SIFMA AdvocacyPrior to Dodd-Frank, municipal advisors (consultants who advise state and local governments on bond issuance, used of derivatives and other related financial matters) were wholly unregulated.

These independent, non-dealer municipal advisors are engaging in the business of advising municipal issuers without having: 

  • Having taken any qualification test or professional examination;
  • Disclosing their backgrounds as registered representatives;
  • Restrictions on political contributions and gifts to issuer officials that would otherwise be prohibited for brokers, dealers and municipal securities dealers under the Municipal Securities Rulemaking Board’s rules; and
  • Prohibitions on using political consultants.

While Dodd-Frank sought to address this regulatory gap, the Securities and Exchange Commission proposed a rule to implement these provisions that went far beyond the scope and authority Congress had intended. 

The House of Representatives last year passed, on an overwhelming, bipartisan basis, legislation that would seek to clarify the scope of municipal advisor regulations under Dodd-Frank.  That legislation would ensure that any party explicitly engaged to serve as a municipal advisor would be subject to a fiduciary duty, regardless of whether they are a financial advisor, broker-dealer, bank or other type of entity.  

Representative Steve Stivers has now joined Congresswoman Moore in re-introducing this important piece of legislation. We believe it should again received large bi-partisan support from both houses of Congress.

Broker-dealers that underwrite state and local government bonds are already heavily regulated by the SEC. Because of delays in the SEC’s rulemaking process, non-dealer municipal advisors remain largely unregulated.

What the Stivers-Moore bill seeks to do is focus the SEC on what’s really important: ensuring that the thousands of independent municipal advisors that are currently unregulated by the SEC, come under federal regulation for the first time.

Michael Decker
Managing Director, Municipal Securities



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