BDA supports H.R. 2827 because it paves the way for the SEC and the MSRB to regulate currently unregulated municipal advisors, while providing needed clarification that underwriters are not captured by the definition. Being defined as a municipal advisor entails a fiduciary duty that does not fit the role of the underwriter, who owes a fair dealing duty to both issuers and investors that is not compatible with a fiduciary duty to just an issuer.
BDA testified on the topic before the Capital Markets and Government Sponsored Enterprises Subcommittee July 20, represented by Michael Marz of FirstSouthwest. In his testimony, Marz called for a level regulatory playing field to protect the public interest saying, “[a]lmost two years after Dodd-Frank, virtually anyone can act as a non-dealer municipal financial advisor to an issuer of municipal securities, regardless of qualifications, while more and more restrictions are focused on broker dealers, including regulated dealer advisors.”
While House passage is a significant step that may push the SEC in a positive direction as it potentially finalizes its rules, the Senate has not and will not act on the issue this year. There is a more limited bill introduced by Senators Toomey (R-PA), McCaskill (D-MO) and others that simply exempts banks and elected or appointed members of municipal boards from registration, but it has not been considered by the Senate Banking Committee.
A copy of H.R. 2827 is available [here].
A copy of S. 3492 is available [here].