Legal Alerts

Adopted to Comply with Dodd-Frank Act

The Securities and Exchange Commission (SEC) has adopted a temporary rule making it unlawful under the Securities and Exchange Act of 1934 for a municipal advisor (see below) to provide advice to or on behalf of state and local governments and other borrowers involved with municipal securities, unless the municipal advisor is registered with the SEC. The registration requirements also apply to municipal advisors who solicit business from a state or local government for a third party. The temporary rule was adopted to comply with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

The registration requirements of the temporary rule go into effect October 1, 2010, and will provide municipal advisors with a temporary registration process while the SEC develops a permanent registration program. Public agencies who use municipal advisors to assist them with issuing municipal bonds or other debt structures, or with investment-related activities, should verify that their municipal advisors have complied with these new requirements. 

A municipal advisor, as defined in the Dodd-Frank Act:

• is a person (who is not a municipal entity or an employee of a municipal entity) that (1) provides advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, including advice with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues; or (2) undertakes a solicitation of a municipal entity;

• includes financial advisors, guaranteed investment contract brokers, third-party marketers, placement agents, solicitors, finders, and swap advisors, if such persons are described in any of clauses (1) and (2) above; and

• does not include a broker, dealer, or municipal securities dealer serving as an underwriter (as defined in section 2(a)(11) of the Securities Act of 1933) (15 U.S.C. 77b(a)(11)), any investment adviser registered under the Investment Advisers Act of 1940, or persons associated with such investment advisers who are providing investment advice, any commodity trading advisor registered under the Commodity Exchange Act or persons associated with a commodity trading advisor who are providing advice related to swaps, attorneys offering legal advice or providing services that are of a traditional legal nature, or engineers providing engineering advice. 

For more information regarding the temporary rule and the impact it may have on your public agency, please contact Kelly J. Salt, John Rottschaefer or a Best Best & Krieger Public Finance practice group attorney for assistance.

Disclaimer: BB&K e-Bulletins are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.