Proposed Exemptive Order Related to Muni Advisors
Summary
SIFMA provided comments in response to the SEC’s Proposed Exemptive Order. The Proposed Exemptive Order would allow a registered municipal advisor, acting on behalf of a municipal issuer client, to solicit and engage in the direct placement of municipal securities with certain institutional investors, and receive transaction-based compensation for such activities, without registering as a broker-dealer under Section 15 of the Securities Exchange Act of 1934.
SIFMA strongly opposes the Proposed Exemptive Order and, for the reasons articulated below, believes that if a municipal advisor acts as a placement agent (i.e., underwriter) with respect to direct placements of municipal securities, it should be subject to all of the requirements that would apply to a broker-dealer when acting in that same capacity.
Excerpt
Vanessa A. Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: File Number S7-16-19; Notice of Proposed Exemptive Order Granting a Conditional Exemption from the Broker Registration Requirements of Section 15(a) of the Securities Exchange Act of 1934 for Certain Activities of Registered Municipal Advisors (“Proposed Exemptive Order”)
Dear Ms. Countryman:
The Securities Industry and Financial Markets Association (“SIFMA”)1 submits this comment letter in response to the U.S. Securities and Exchange Commission’s (“SEC” or “Commission”) Proposed Exemptive Order.2 In brief, the Proposed Exemptive Order would allow a registered municipal advisor, acting on behalf of a municipal issuer client, to solicit and engage in the direct placement of municipal securities with certain institutional investors, and receive transaction-based compensation for such activities, without registering as a broker-dealer under Section 15 of the Securities Exchange Act of 1934 (“Exchange Act”). SIFMA strongly opposes the Proposed Exemptive Order and, for the reasons articulated below, believes that if a municipal advisor acts as a placement agent (i.e., underwriter) with respect to direct placements of municipal securities, it should be subject to all of the requirements that would apply to a broker-dealer when acting in that same capacity.
I. Executive Summary
For the following reasons SIFMA believes the Proposed Exemptive Order should be withdrawn in its entirety:
Reduces Investor Protections
The Proposed Exemptive Order would allow municipal securities to be placed by municipal advisors with a broad class of purchasers, including non-bank entities, without requiring any disclosures to purchasers or, in some scenarios, without reporting to regulators. Not only would purchasers be subject to an information void due to a lack of disclosures, but they also would forgo the protections that are present when a broker-dealer is the intermediary.