Heads of Public Finance

June 21, 2018

Quarles & Brady, Chicago, IL


On Thursday, June 21st, the BDA held its Heads of Public Finance Roundtable in Chicago, Illinois, which was hosted by Quarles & Brady. The roundtable was attended by over 20 representatives at BDA member firms, which provided a venue for information sharing and discussion on the most recent market and regulatory topics.

Discussion at the roundtable focused on the issues facing middle-market banks and dealers in public finance securities, including competitive vs. negotiated sales, use of underwriters counsel and G-17 disclosures, private placement and bank loan procedures, and the challenges of an aging workforce. You can view the roundtable agenda here and a full recap of the day follows.

The roundtable was sponsored by Quarles & Brady and Lumesis.

Market and Regulatory Discussion Topics

The Impact of Tax Reform on the Municipal Markets

  • Additional details coming soon!

The Relationship Between Public Finance and the Sales Floor

  • Salespeople are the point for institutional accounts
  • In project finance, bankers have relationships with analysts rather than the sales floor
  • Bank placements are generally handled by regional banks
  • Loan vs. Security: it's a security unless you can prove it is not
  • No clarity coming from the regulators

Challenges of an Aging Workforce

  • Impact on issuer clients: 10,000 baby boomers retiring every day
  • As people retire, their spending habits change substantially
  • Co-workers: statistics say 55 is the average retirement age when most are actually waiting until 65
  • The average age of registered FA's is between 52 and 57
  • 60 percent of revenue is produced by workers at the age of 55 in one BDA member firm
  • The average age of a public finance banker is 52
  • The younger workforce has trouble building relationships in the business

Competitive vs. Negotiated Sales (Michigan Legislation)

  • Requires competitive deals for all transactions over $500k
  • Only applies to municipalities
    • Not the state or state-entity
    • Not conduit issuers
  • Only applies to bonds secured by taxes, assessments, or GO pledge
  • You can view the Brookings Institution report here
  • You can view the BDA's advocacy strategyhere

Private Placements and Bank Loan Procedures

  • Regulatory Landscape
    • Loan vs. Security: categorize everything as a security unless deemed not
    • What role do we play as placement agent vs MA?
    • Do not want to violate MSRB Rule G23 (as broker-dealer)
    • What guidance is out there?
      •  Solicitation of investors = placement agent
      • Negotiation of terms--avoid if MA
    • Guidance may be forthcoming
    • SEC expected to bring clarity through enforcement
  • Business Issues
    • Tax law
      • Covenant regarding the change in tax law
  • Practice Issues
    • Due diligence obligation(s)
    • What to include in marketing materials?
    • What representatives are used from issuers?
    • Use of investor letters?

Additional Information:

  • Networking Dinner: After the roundtable, participants continued networking over beverages and dinner at RPM Steak. Quarles & Brady and Lumesis sponsored the dinner
  • Upcoming Event: The next Heads of Public Finance Roundtable will be held at our National Fixed Income Conference in October 2018 (details here)

A special Thank You to the Heads of Public Finance Roundtable sponsors!

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