The Securities and Exchange Commission Monday extended the compliance date for the agency’s final municipal advisor rule from Jan. 13 to July 1. On Friday, the SEC issued interpretive guidance to address questions from industry trade groups about implementing the agency’s final rules requiring municipal advisors to register with the SEC.
Both the Investment Adviser Association and the Securities Industry and Financial Markets Association’s asset management group queried the SEC’s Office of Municipal Securities on a number of issues.
The IAA notes that one of the clarifications among the interpretive guidance, which came in a Q&A format, is that advisors that use swaps or security-based swaps in municipal entity portfolios do not have to register as municipal advisors.
IAA and the Asset Management Group of the Securities Industry and Financial Markets Association said in a release that they had “actively advocated to obtain certain relief for SEC-registered investment advisors that may have been affected by the municipal advisor registration rule.”
In particular, the IAA and SIFMA argued that the RIAs’ exclusion should be read in light of the statutory background and context to cover investment management of portfolios that may include derivatives as “investment advice,” rather than as “advice concerning municipal derivatives.”
In September, the SEC issued final rules on municipal advisors, including defining what municipal advisory activity requires registration with the SEC. The SEC also designated FINRA as the examination and enforcement authority for municipal advisors that are regulated by FINRA. The final rules become effective July 1.
On Friday, the Municipal Securities Rulemaking Board released for comment its rule proposal, Rule G-42, which states that “irrespective of any fiduciary duties, draft Rule G-42 subjects municipal advisors to a duty of care in the conduct of their municipal advisory activities.” In addition, the draft rule requires municipal advisors “to disclose conflicts of interest and certain other information to their clients and document their municipal advisory relationship.”