Federal Advocacy

Securities and Exchange Committee Relaxes Rules on Municipal Advisors and Private Placements

At last week’s SEC Office of Municipal Securities Conference, Chairman Jay Clayton announced a relaxation of the rules that require broker-dealer registration for certain circumstances. Further clarification of the order will be discussed at a free conference hosted by the SEC. Click here to register. Click here to read more about the announcement.

Has GFOA commented on MAs and Placement Agents in the direct lending space?

Yes, click here to view our comments.

What does the announcement do?

The Temporary Conditional Exemption released by the SEC on June 16, 2020, allows MAs to be exempt from broker-dealer registration requirements in the following circumstances:

  • MAs may solicit a defined set of banks, wholly-owned subsidiaries of banks and credit unions in connection with direct placements of municipal securities by their municipal issuer clients.
  • Only for transactions that do not exceed $20 million.
  • The Temporary Order is in place until December 31, 2020.
  • The MA must report to the SEC’s Office of Trading and Markets certain details of the transaction within 30 days of the completion of the transaction.
  • The MA must represent to the Qualified Provider (investor) in writing that: it solely represents the interests of the Municipal Issuer and not the investor, that this solicitation is being done in connection with the Temporary Order; the MA has not conducted due diligence on behalf of the Qualified Provider; the MA nor issuer has engaged a broker-dealer as placement agent; acknowledges that the Qualified Provider may choose to engage the services of a broker-dealer to represent their interests.
  • MA must receive written representations from the Qualified Provider (investor) that they meet the Order's Qualified Provider definition, they are capable of independently evaluating the investment risks of the transaction, is not purchasing with a view of distributing the securities, and will not transfer any portion of the direct placement within one year of the date of the issuance except to another Qualified Provider.