A major sticking point in a House bill to regulate municipal advisors was overcome on Wednesday, September 12. The bill was introduced last year by Rep. Robert Dold, R-IL and included a provision that municipal advisors (MAs) have written agreements with issuers.
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The in-writing aspect of the bill caused the greatest controversy and has now been deleted from the bill in an amendment introduced by Rep. Barney Frank, D-MA.
The bill now defines an MA as a person who is engaged by a municipality to provide financial advice.
Another controversial aspect of the bill provides an exception to those who provide advice related to underwriting. Critics say this provision allows an advisor to offer a wide range of advice to a municipality without being formally recognized as an MA.
Recognition as an MA brings the advisor under the fiduciary standard. The bill will mandate that MAs become registered with the SEC under their firm’s name.
The bill passed in the in the House Financial Services Committee and is now expected to go to the full House for a vote, although a specific time has not been designated.
The Senate has not passed similar legislation. Many predict the House bill will not be approved in the Senate but will send a message that will guide the SEC as it attempts to define a municipal advisor.
Municipal market groups have been rather quiet about the bill, which leads some to conclude the groups do not believe such a bill will become law.
Opponents to the bill claim that it the former provisions would have brought bank tellers, attorneys, engineers and others under the MA designation. The new Dold version does not define those professionals as advisors.