WASHINGTON BUREAU – The American Society of Pension Professionals and Actuaries (ASPPA) and the National Tax Sheltered Accounts Association (NTSAA) say a U.S. Securities and Exchange Commission (SEC) municipal advisor regulation proposal exceeds the intent of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Officials at ASPPA, Falls Church, Va., and the NTSAA, an ASPPA affiliate, make that argument in a comment submitted to the SEC in connection with proposed rules 15Ba1-1 through 15Bal-7.
The proposed municipal advisor registration rules could push away some of the retirement plan professionals who work with governmental sponsored retirement plans, ASPPA and NTSAA officials say in the comment letter.
The groups believe that the Dodd-Frank Act was not intended to extend the municipal advisor registration requirements to those who work with governmental retirement and savings plans, the group officials say.
“If the act’s registration requirements were to be applied in this context, it would have a severe chilling effect on the availability of this much needed service, and may cause a market disruption in favor of larger, SEC-registered investment advisors by subjecting only smaller, local investment advisors to the municipal advisor registration requirements and associated [Municipal Securities Rulemaking Board] rules,” the officials say.
“Clearly, a law aimed at regulating the practices associated with municipal bonds should not be applied inappropriately and inconsistently to those advising participants in governmental retirement and savings arrangements,” the officials say.
The officials say this is particularly true for governmental retirement savings plans funded exclusively with employee contributions.
“Similarly, providers of advice and information to the participants in governmental retirement and savings plans should not be subject to registration as municipal advisors,” the officials say.
ASPPA and NTSAA members recommend that the proposed rule be clarified to exclude
advice given to participants in governmental retirement or savings arrangements sponsored by municipal entities, and that state-registered investment advisors be exempt from the definition of “municipal advisor” to the extent that they are providing advice that otherwise would be subject to the Investment Advisers Act, but for the operation of a prohibition to, or exemption from, SEC registration, the officials say.
Many professionals that work with participants in governmental defined contribution 403(b), 401(a), 457 and traditional retirement plans are not engaging in “municipal advisory activities,” the officials add.
For example, the officials say, many ASPPA and NTSAA members work with teachers in public schools who participate in 403(b) savings plans sponsored by their school districts.
“In many cases, these plans require employees to direct how their accounts will be invested among the options that are offered,” the officials say.
In situations such as these, “our members provide a wide range of participant advisory services such as general investment education, computer investment modeling and individual investment advice which may be provided by investment advisers and their associated persons which are not required (or permitted) to register with the [SEC],” the officials say.