February 21, 2011
Release 34-63576 (hereafter the Release) concerns registration of municipal advisors.
I am writing to comment on the positions excluded from the definition of municipal advisor, (and thereby not required to register) as proposed in the Release.
The Commissions proposal seems to misunderstand basic principles of local government law, and will have a negative effect on local government budgets and their operations.
Below is the language of concern, as provided by the Commission in response to the question of whether appointed officials of a municipal entity were intended to be included within the definition of municipal employee.
(NOTE: If appointed officials of the entity are intended to be included in the definition of municipal employee the appointed officials will NOT be required to register as Municipal Advisors. This would be the appropriate result.)
"the Commission does not believe that appointed members of a governing body of a municipal entity that are not elected ex officio members should be excluded from the definition of a municipal advisor. " Municipal Advisors. 76 Fed. Reg. 834 January 6, 2011.
Stated another way, the Commission believes that appointed members of a governing body of a municipal entity that are not elected ex officio members should be included in the definition of Municipal Advisor. In other words, the Commission believes the appointees should be treated differently from municipal employees and elected officials who are exempt from registration, and that the appointees should be considered Municipal Advisors and should be required to register. This interpretation and application will have a negative effect on local government budgets and their operations.
When Congress exempted the municipal entity and its employees from the definition of municipal advisor, I believe it did so with the express intent to include all of the entitys officers and employees, including its volunteer board members within that exemption. The SEC mistakenly fails to recognize that members of governing bodies and other appointed state and local officials are the personnel that operate the municipal entities. There are numerous boards set up by municipalities to directly carry out municipal purposes such as a foundation to receive natural gas lease revenues from city property and administer grants to improve the city airport facilities, park facilities, and improve declining city neighborhoods. Others cooperate to procure electric power for city operations in cooperation with other cities that also appoint representatives. These boards that may or may not include an elected official or a city employee, but they may also have volunteers that are appointed by the municipalities that created the boards to represent the city and operate board entities for the direct benefit of the municipality. On the other hand, the municipal advisors serve those officials. It confuses the issue by suggesting that those officials—the very intended beneficiaries of municipal advisor regulation—somehow are municipal advisors themselves. In short, the proposed regulations transforms decision makers of entities who need to receive advice, into advisors.
To be fair, the Commission identifies past instances of misconduct to justify its need to regulate pervasively. Nevertheless, municipal finance statistics suggest that there are far fewer instances of violations and misconduct in public finance than in the area of private finance where the Commission already regulates pervasively. Not to be overlooked is the fact that virtually every state and local government subjects itself to a transparency through a combination of public information and public meeting laws and extensive reporting through the media to their stakeholders. This transparency surpasses that of the Commissions exemplary efforts at transparency. These are coupled with an accessibility that fosters immediate individual contact with those concerned stakeholders.
As this regulation is currently proposed, the cost to local governments and officials to comply will be extensive and comes at the worst time for local governments. Local governments will be required to pay the cost for registering officials who are volunteers and who are mistakenly included in the term municipal advisors. In addition, the local government will need to hire counsel with expertise in dealing with the SEC to be sure that these officials are properly trained and advised in the intricacies of securities law. This cost will be in addition to the ongoing expense for counsel and various advisors who in the past have handled issues on behalf of the municipal entity.
I respectfully request that you consider including in the definition of municipal employee appointed board members and other elected and appointed officials who make decisions for the municipality, and thereby expand the group who do not have to register. The change will result in a logical separation between those who are advised and those who are the advisors.