Ehlers, Inc.

Fiduciary Duty and Regulatory Compliance

Federal Registration as a Municipal Advisor

Ehlers as a firm and our municipal advisors are registered with the SEC (Registration No. 866-00266-00. Central Key Index (CKI) # 0001604197) and the MSRB (Registration No. K0165). Ehlers’ registration can be viewed on the agencies’ respective websites (https://www.sec.gov/edgar/searchedgar/companysearch.html & http://www.msrb.org/MARegistrants.aspx.) Our financial advisors are now called Municipal Advisors to reflect the fact that they meet the requirements under the Dodd Frank Act as set forth by the SEC and MSRB.

As of September 12, 2017, the MSRB requires all municipal advisors to pass the MSRB’s Municipal Advisor Representative Qualification Examination (Series 50) to engage in municipal advisor activities. To view a list of Series 50-qualified municipal advisors representatives and their associated municipal advisor firms, click here.

Additionally, Ehlers is a member of the National Association of Municipal Advisors (NAMA). Many Ehlers team members have completed the training, passed the exam and become Certified Independent Professional Municipal Advisors (CIPMA) designated. All of us at Ehlers are committed to our profession and meeting the needs of our clients.

The Dodd-Frank Wall Street Reform and Consumer Protection Act

Since 1955, Ehlers has been committed to a fiduciary relationship with our clients. This means that we serve only your community’s best interests in any financial transaction – not the interests of investors, underwriters, or banks. An idea as simple as that has now come into its own.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law on July 21, 2010, and impacts how financial advisory firms like Ehlers provide advisory services. All Financial Advisors are now regulated as Municipal Advisors. It makes clear that only a Municipal Advisor represents the interests of a municipality. A municipality’s interests are not represented by a Broker/Dealer.

The legislation requires a fiduciary responsibility to you by Ehlers – which is how we have always viewed our relationship. So far, the major requirement has been to complete a registration process with the Securities and Exchange Commission (SEC) and Municipal Securities Rulemaking Board (MSRB); we have complied with this requirement.

How does this impact you today? Probably not much at the current time if you are an Ehlers client, because you are already using an independent financial advisor that has always viewed its relationship as one of a fiduciary responsibility to you and your community.

There are certain requirements Ehlers needs to follow as a regulated “Municipal Advisor”. The MSRB rules require the following of all Municipal Advisors:

  • Provide service to the municipality in a manner that is consistent with fiduciary duty.
    • Duty of Loyalty
      • Disclose all material conflicts of interest that might impair the MA’s ability to satisfy the duty of loyalty to the municipality
      • Receive written “informed” consent to conflicts by officials of the municipality
      • Not work for municipality if there is an unmanageable conflict
      • Cannot charge excessive compensation
    • Duty of Care
      • MA has necessary knowledge and expertise to provide the municipality with informed advice
      • Must investigate and advise the municipality of alternatives that are reasonably feasible
      • Duty to make reasonable inquiries into the facts relevant to the municipality’s determination to proceed
  • Require written evidence of a municipal advisory relationship.
    • Outlines the scope of services and basis for compensation including direct and indirect
    • Disclosure of “Conflicts of Interest” with various forms of compensation
    • Disclosure of manageable and unmanageable “Conflicts of Interest”
    • Disclosure of affiliates of the MA directly or indirectly related to the MA engagement
    • Disclosure of other engagements or relationships that might impair the MA’s ability to act in the best interests of its municipal client
    • The firm being hired as a MA is registered with SEC and MSRB

While some of these requirements could change, bear in mind they are being developed to make certain your financial interests as an issuer are protected.

Ehlers’ fiduciary responsibility to you has always been our commitment to you, and as independent financial advisors. We have always recommended financial solutions that are in solely in your best interests. Therefore we support efforts to ensure that fiduciary duty is the standard that of all advisors in our industry follow.

We encourage you to speak to your Ehlers Municipal Advisor should you have any further questions, and for specific information about the Act and up-coming activities, visit the MSRB and SEC websites provided below.

http://www.sec.gov/spotlight/dodd-frank.shtml

http://www.msrb.org/EducationCenter/Investors/Preparing.aspx

 

Resources

This is a partial list of press releases, articles and sites to help direct your information-gathering related to regulatory compliance of the municipal securities market.

http://www.msrb.org/Home/News-and-Events/Press-Releases.aspx

https://www.sec.gov/news/pressreleases


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