Municipal Advisors Must Register By October 1, 2010
September 24, 2010
Types : Alerts
Background. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law by President Obama on July 21, 2010, and became effective one day later. The Dodd-Frank Act will, among other things, add additional regulation in the municipal securities markets.
This Alert does not deal with all of the financial services regulatory changes that the Dodd- Frank Act will impact. Instead, it seeks to highlight some changes that will be of interest to our Investment Management clients engaged in the municipal securities industry, such as financial advisors, guaranteed investment contract brokers, third-party marketers, placement agents, solicitors, finders, and certain swap advisors that provide municipal advisory services.
Who Must Register? All municipal advisors must register with the U. S. Securities and Exchange Commission (the “SEC”) by October 1, 2010 pursuant to a temporary rule adopted by the SEC, and as required by the Dodd-Frank Act. This temporary regulation is the first adopted by the SEC to implement the requirements of the Dodd-Frank Act. The SEC expects to propose a permanent rule later this year.
A “municipal advisor” includes anybody who provides advice to a municipal entity with respect to financial products including financial advisors and guaranteed investment contract brokers. The definition also encompasses all third-party marketers, placement agents, solicitors, finders, and swap advisers. Municipal advisors provide advice to state and local governments and other borrowers involved in the issuance of municipal securities. The advice typically relates to municipal derivatives, guaranteed investment contracts, investment strategies or the issuance of municipal securities. Municipal advisors also solicit business from a state or local government for a third party.[1] The definition of a “municipal advisor” does not currently include broker-dealers registered with the Financial Industry Regulatory Authority (or FINRA), municipal securities dealers registered with the Municipal Securities Rulemaking Board (or MSRB), and SEC registered investment advisers. Accordingly, such entities are not currently required to register.
How to Register? Municipal advisors can now access and complete the new registration form (Form MA-T) on the SEC’s website. Form MA-T requires municipal advisors to provide identifying and contact information, and select from a list of municipal advisory activities in which they engage. Municipal advisors also are required to provide disciplinary history information similar to what the SEC obtains from registered broker-dealers and investment advisers. Municipal advisors will be required to amend the form whenever any identifying and contact information or disciplinary information has become inaccurate in any way, and whenever a municipal advisor wishes to withdraw from temporary registration. Information filed by municipal advisors will be made publicly available on the SEC’s website.
Municipal advisors are encouraged to begin the registration process as soon as possible because of the impending registration deadline and the requirement that applicants first obtain an ID and password. If you have any questions concerning this Alert, or whether your entity might fall under the definition of “municipal advisor,” please do not hesitate to contact an attorney in our Investment Management group.
[1] Where a finder, solicitor or placement agent is currently soliciting or introducing municipal investment advisory business to any SEC registered or unregistered investment adviser, the SEC’s new Rule 206(4)-5 under the Investment Advisers Act of 1940, as amended, will prohibit such activity as of September 13, 2011, unless the finder, solicitor or placement agent itself is a FINRA registered broker-dealer or an SEC registered investment adviser.