SEC Finalizes Municipal Advisor RuleOn September 18th, the Securities and Exchange Commission (SEC) gave final approval to the definition of “municipal advisor” (MA). The SEC first proposed the definition in 2010, as required by the Dodd-Frank Act. Since then, the SEC has been working to develop final definitions of firms and individuals that would be regulated as “municipal advisors,” so that the Municipal Securities Rulemaking Board (MSRB) could adopt more detailed rules to regulate those parties. The definition and forthcoming MSRB rulemaking will be very important for issuers of municipal securities, whether tax-exempt or taxable. The SEC municipal advisor rule specifies which activities will be covered by the Dodd-Frank Act imposed fiduciary duty of a municipal advisor to its government client, may result in the need for new written representations by issuers, and may limit the manner in which the underwriters and other professionals interact with issuers.
Most importantly for GFOA members, unlike the proposed rule, all state and local government employees, board members, committee members and others are clearly exempted from the rule when acting in their official capacity. The exemption also applies to government employees and officials who may have to participate on other government boards and committees as part of their job. The rule also specifically states that, if a government official is also a municipal advisor outside of his or her government responsibilities (e.g., a part time city council member may have a career as a financial advisor), those professionals are still bound by the municipal advisor rules for their work unrelated to their official government capacity. Click here for an overview of the rule, as well as more extensive information.