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
- Tax law
- Practice Issues
- Due diligence obligation(s)
- What to include in marketing materials?
- What representatives are used from issuers?
- Use of investor letters?
- 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!