As of October 1, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) broadened the mission of the Municipal Securities Rulemaking Board (MSRB) to include the protection of state and local issuers, public pension plans and others whose credit stands behind municipal bonds, in addition to protecting investors. The Dodd-Frank Act also expanded the MSRB’s jurisdiction to include the regulation of municipal advisors.
Click here to read the municipal securities provisions in the Dodd-Frank Act.
Municipal advisors include a variety of different types of firms and individuals that provide advice to state and local governments and other municipal entities, as well as to certain private beneficiaries of municipal bond issues (such as hospitals, colleges and other obligated persons), on a range of municipal securities or investment-related matters. Municipal advisors include financial advisors that provide advice to issuers and obligated persons regarding municipal bond offerings, swap advisors that provide municipal entities with advice in connection with derivatives transactions, and brokers and other advisors that provide advice or assistance to issuers regarding guaranteed investment contracts or the investment of municipal bond proceeds.
Municipal advisors also include firms and individuals that solicit business from municipal entities on behalf of broker-dealers, banks, other municipal advisors or investment advisers to secure certain types of investment banking, financial advisory or investment advisory work with municipal entities, such as public pension funds, 529 plans, local government investment pools and other state and local governmental entities or funds. These municipal advisors are sometimes referred as consultants, third-party marketers, placement agents, solicitors or finders.
Application of MSRB Rules
MSRB registration rules apply to municipal advisors. Effective November 15, 2010, municipal advisors are required to register with the MSRB.
The MSRB plans to implement its broadened statutory mandate under the Dodd-Frank Act by adopting a comprehensive set of rules for municipal advisors that seek to prohibit fraudulent and manipulative practices, set forth municipal advisors’ fiduciary obligation to their municipal clients, require fair treatment of investors, municipal entities, and other market participants, and restrict real and perceived conflicts of interest. They will also ensure rigorous standards of professional qualifications and promote market efficiency. An important element of this rulemaking program is an outreach effort to key market participants to allow participants to provide input to the MSRB during this transition period.
Read recent updates for municipal advisors.