by Steve Apfelbacher, Senior Financial Advisor/President
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The Dodd Frank Act, passed by Congress in July 21, 2010, regulated all parties that meet the definition of a Municipal Advisor.
In Section 15B of the Act, a Municipal Advisor is defined to mean a person "that provides advice to or on behalf of a municipal entity...with respect to municipal financial products or the issuance of municipal securities including advice with the respect to the structure, timing, terms and other similar matters concerning such financial products or issues." See http://www.sec.gov/about/laws/wallstreetreform-cpa.pdf.
Since October 1, 2010, municipal market participants who believed they fall under this definition have been registering with the Securities and Exchange Commission (SEC) under a temporary registration rule. Ehlers falls under this definition and has registered as a Municipal Advisor. In December, 2010, the SEC published a notice, as part of their mandate to establish permanent registration rules, to clarify who is a Municipal Advisor. The proposed permanent rule was written broad enough that some attorneys believed appointed members to special units of governments, like the Economic Development Administration's (EDA) or Housing and Redevelopment Authority's (HRA), would need to register with the SEC as Municipal Advisors. Numerous cities and the League of Minnesota Cities submitted comment letters requesting appointed members to special units of governments not be included within Municipal Advisor definition. See http://www.sec.gov/comments/s7-45-10/s74510-449.pdf.
At this point, no decision has been on this issue by the SEC. The temporary regulation rules will expire December 31, 2011. The SEC's target is to have permanent regulations in place starting January 1, 2012. The SEC is currently reviewing all 1000 comment letters that have been submitted. We believe later this summer or early fall the SEC will publish another draft of permanent regulation rules. If successful, the next SEC draft could exclude appointed members to special units of governments. If unsuccessful, there likely will be another comment period on this issue. We will update you on this issue when the SEC publishes the next draft.
To read more about the SEC and impacts to Municipal Advisors, visit http://www.sec.gov/news/press/2010/2010-162.htm.