The Securities and Exchange Commission (SEC) unanimously approved the regulatory regime for municipal advisors on September 18, 2013 and allayed concerns raised in the proposed rule regarding the treatment of appointed issuer officials. After considering more than 1,000 comment letters, the SEC exempted from the rule “all members of a municipal entity’s governing body, its advisory boards and its committees, as well as persons serving in a similar official capacity with respect to the municipal entity, to the extent they are acting within the scope of their official capacity, regardless of whether such members or officials are employees of the municipal entity.”
Although the SEC clearly reviewed and understood the concerns raised in the comment letters submitted following release of the proposed rule in late 2010, there remains uncertainty regarding the extent of the rule and its application to certain activities commonly performed by attorneys and underwriters, including the following:
- Unsolicited pitches by underwriters to municipal issuers may be limited (or eliminated), which may impede the ability of municipal issuers to receive, review and respond to refunding and/or restructuring opportunities.
- Frank analysis and discussion by attorneys regarding financial aspects of a transaction may be chilled, thereby denying municipal issuers the opinions and observations of their counsel, who already has a fiduciary duty to the municipal issuer.
These and other questions raised may only be resolved through additional guidance from the SEC and/or the MSRB.