In September of 2013, the Securities and Exchange Commission (SEC) gave final approval to the definition of municipal advisor (MA), and in January of 2014 the SEC released guidance (FAQs) to assist municipal market participants prepare for implementation of the new MA Rule. The Rule, which took effect on July 1, 2014, specifies which activities will be covered by the Dodd-Frank Act imposed fiduciary duty of a municipal advisor to its government client, may result in the need for new written representations by issuers, and may limit the manner in which the underwriters and other professionals interact with issuers. While the Rule does not regulate issuers directly, there are numerous indirect implications.
The practical effect of the MA Rule on issuers is to limit the ability of underwriters to provide advice to issuers. However, a few exemptions to the Rule may apply, thus allowing underwriters to continue to provide such advice. The GFOA has developed several resources to assist our members in understanding the Rule and increase awareness about the Rule's impact on future debt issuance practices. These materials include a 10-page issue brief , which provides a more comprehensive summary of the Rule, MA Rule Alert (2014), and MA Rule Primer (2016), which familiarizes debt issuers with the core components of and terms used in the Rule, and provides model language for issuers use to solicit advice from underwriters and financial services firms in compliance with the Rule.
The GFOA has also updated three Best Practices to pair advice to members on various aspects of debt management with important details that issuers need to be aware of in the Rule. These include:
- GFOA Best Practice, Selecting and Managing the Engagement of Municipal Advisors (2014)
- GFOA Best Practice, Selecting and Managing the Engagement of Underwriters for Negotiated Bond Sales (2014)
- GFOA Best Practice, Selecting and Managing the Method of Sale of State and Local Government Bonds (2014)