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U.S. Securities and Exchange Commission

SEC Proposes Permanent Rule Requiring Municipal Advisors to Register With Agency


Washington, D.C., Dec. 20, 2010 — The Securities and Exchange Commission has voted to propose a rule creating a new process by which municipal advisors must register with the SEC.

The proposed rule, required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, would supplant a temporary rule the Commission adopted in September. Because the Act required that these advisors register by Oct. 1, 2010, the Commission adopted its earlier temporary rule on an interim basis so that advisors could fulfill the Act's mandates.

Municipal advisors provide advice to state and local governments and other borrowers involved in the issuance of municipal securities or with respect to the investment of governmental monies. Municipal advisors also solicit business from a state or local government for a third party. Subject to certain exemptions, the definition of municipal advisor under the Dodd-Frank Act includes financial advisors, guaranteed investment contract brokers, third-party marketers, placement agents, solicitors, finders, and certain swap advisors that provide municipal advisory services.

Under the proposed permanent registration regime, municipal advisors would have to submit more detailed information than is currently required and certify that they have met or will meet the qualifications and regulatory obligations required of them.

In particular, the proposed rule would require:

  • A municipal advisory firm to submit a Form MA to register.
  • An individual municipal advisor to submit a Form MA-I to register.
  • A municipal advisory firm or individual municipal advisor to submit a Form MA-W to withdraw from registration.
  • A non-resident municipal advisory firm (and any non-resident general partner or managing agent of a municipal advisory firm) to submit a Form MA-NR in order to appoint an agent for service of process.

Like the temporary form required of municipal advisors (Form MA-T), the registration forms envisioned by the proposed rule would require municipal advisors to provide identifying and contact information, and to disclose — by selecting from a list — the municipal advisory activities in which they engage.

Municipal advisors also would be required to provide disciplinary history information similar to the information that the SEC obtains from registered broker-dealers and investment advisers. Individual municipal advisors would be required to amend the form whenever any of the required information has become inaccurate in any way; and municipal advisory firms would be required to amend the form annually, and whenever identifying and contact information or disciplinary information has become inaccurate.

Municipal advisors can continue to access and complete the temporary registration form (Form MA-T) on the SEC's website. Information filed by municipal advisors on Form MA-T is made publicly available on the SEC's website. In addition to registering with the SEC, municipal advisors also must register with the Municipal Securities Rulemaking Board (MSRB). Information about MSRB registration is available at: http://www.msrb.org/Rules-and-Interpretations/MSRB-Registration.aspx.

Public comments on the proposed rule should be received by the Commission within 45 days of publication of the rule in the Federal Register. The temporary rule will expire by no later than Dec. 31, 2011.

Recent Rulemaking

Under the Dodd-Frank Act, the Commission has been engaging in significant rulemaking — some of which includes:

  • Strengthening oversight of investment advisers: Proposed new rules to facilitate the registration of advisers to hedge funds and other private funds with the SEC; implement a mandate to require reporting by certain advisers that are otherwise exempt from SEC registration; increase the asset threshold for advisers to register with the SEC; and define "venture capital fund."

  • Security-based swap reporting and dissemination: Proposed new rules entailing how security-based swap transactions should be reported and publicly disseminated.

  • Security-based swap data repositories: Proposed new rules that would specify the requirements for security-based swap data repositories.

  • Security-based swap fraud: Proposed a new rule to help prevent fraud, manipulation, and deception in connection with the offer, purchase or sale of any security-based swap — as well as in connection with ongoing payments and deliveries under a security-based swap.

  • Security-based swap conflicts: Proposed rules intended to mitigate conflicts of interest for security-based swap clearing agencies, security-based swap execution facilities, and national securities exchanges that post security-based swaps or make them available for trading.

  • Reporting of pre-enactment security-based swaps: Adopted an interim rule that requires certain swaps dealers and other parties to report any security-based swaps entered into prior to the July 21 passage of the Dodd-Frank Act. This rule applies only to such swaps whose terms had not expired as of July 21.

  • Asset-backed securities: Proposed rules that would enhance ABS disclosure by:

    • Requiring registered ABS issuers to perform a review of the assets that underlie the ABS.

    • Requiring an ABS issuer to disclose the nature, findings and conclusions of this review of assets.

    • Requiring the issuer or underwriter for both registered and unregistered ABS offerings to disclose the findings and conclusions of any review performed by a third party that was hired to conduct such a review.

  • Whistleblower: Proposed a whistleblower program and rules that would reward individuals who provide the agency with high-quality tips that lead to successful enforcement actions.

  • Say-on-Pay: Proposed rules that would enable shareholders to cast advisory votes on executive compensation and "golden parachute" arrangements.

  • Specialized disclosures: Proposed rules, in accordance with the Dodd-Frank Act, requiring new disclosures about mine safety, conflict minerals from the Congo, and payments to governments by the extractive industry.

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Modified: 12/20/2010