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July 20, 2012 at 09:40 AM
The Securities and Exchange Commission’s (SEC) proposed rule requiring registration of municipal advisors, and the rule’s broad definintion of who is a municipal advisor, was one of the main focuses of a Congressional gathering Friday to discuss how Dodd-Frank is affecting municipal finance.
At the hearing of the House Financial Services Capital Markets Subcommittee, “The Impact of the Dodd-Frank Act on Municipal Finance,” panelists and some lawmakers took issue with the as-yet unfinished SEC rule, which was required under Section 975 of Dodd-Frank.
Kenneth Gibbs, president of the Municipal Securities Group at Jefferies & Co., and chairman of the Securities Industry and Financial Markets Association’s (SIFMA) Municipal Securities Division, said the proposed rule includes “numerous provisions that would go against congressional intent and statutory authority.”
H.R. 2827, proposed by Rep. Robert Dold, R-Ill., which would amend Section 975 of Dodd-Frank, “would help address these issues by clarifying key provisions of the statute,” Gibbs said.
Rep. Steve Garrett, R-N.J., chairman of the subcommittee, said at the hearing that defining a municipal advisor “is critical because once a market participant is defined as an advisor, those market participants are subject to a statutory fiduciary duty and additional antifraud provisions as well as registration and the new MSRB rules.”
The SEC released its first draft of the rule in December 2010, and Garrett noted that after more than “1,000 mostly negative comment letters were received,” the SEC went back to redraft a “more workable” rule.
