The Municipal Securities Rulemaking Board (MSRB) on Tuesday proposed a rule that would mandate and govern a fiduciary duty owed by municipal advisors to over 50,000 state and local government clients, including municipal entities such as counties, school boards or port authorities.
Arising out of Dodd-Frank’s direction to protect “municipal entities,” proposed rule G-36 would require municipal advisors “to put the interests of state and local governments first,” in the words of MSRB Executive Director Lynnette Kelly Hotchkiss in a statement.
“This goes a long way,” she said, “in ensuring the interests of state and local governments are protected and lays a solid foundation for disclosing conflicts of interest and establishing an appropriate duty of care for financial transactions.”
According to the Securities and Exchange Commission, Section 975 of Title IX of Dodd-Frank Act made it “unlawful for municipal advisors to provide certain advice to, or solicit, municipal entities or certain other persons without registering with the Commission,” and thus it required registration with the SEC.
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RIAs registered under the Advisers Act of 1940 and broker-dealers as underwriters were specifically excluded from the SEC registration rule and the commission’s proposed definition of municipal advisors.