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SEC Establishes Registration Regime for Municipal Advisors


Sept 23 - Rules were adopted by the Securities and Exchange Commission establishing a permanent registration regime for municipal advisors as required by the Dodd-Frank Act. Prior to passage of the Dodd-Frank Act, municipal advisors were not required to register with the SEC. This left many municipalities
relying on advice from unregulated advisors and they were often unaware of any conflicts of interest a municipal advisor may have had.

After the Dodd-Frank Act became law, the SEC established a temporary registration regime. The new rules approved by the SEC require a municipal advisor to permanently register with the SEC if it provides advice on the issuance of municipal securities or about certain “investment strategies” or municipal derivatives.

Banks do not have to register to the extent they provide advice on certain identified banking products and services (such as deposit accounts, extensions of credit or bond indenture trustee services), according to the SEC’s announcement of the final rules. However, this exemption does not apply to banks that engage in other municipal advisory activities such as providing advice on municipal derivatives or the issuance of municipal securities; or provide advice on municipal derivatives, in part because municipal derivatives were a source of significant losses by municipalities in the financial crisis.

The new rules become effective 60 days after they are published in the Federal Register.