Notes on Municipal Advisor regulations, part two

In our last blog post of the “Notes from a Registered Municipal Advisor” series, we summarized the Municipal Advisor rule being imposed by the Securities and Exchange Commission (SEC) and Municipal Securities Rulemaking Board (MSRB). Now that you have a general understanding of what the rule means, we’d like to explain why it’s being imposed.

 

A/E firms have provided financial advice to clients – both formally and informally – for decades. Those same firms have virtually always acted with their clients best interests in mind, but there have undoubtedly been instances where a consultant has recommended a municipal project or financing mechanism to finance a project that falls outside of the client’s need or far exceeds that community’s available budget. There’s never been a mechanism to protect municipal clients from the implications of those recommendations…until now!

 

As of July 1, 2014, firms providing any of the services listed in our previous blog post as well as other services regulated identified in the regulations will have a formal, fiduciary duty to protect and preserve the financial interests of municipal clients. Engineers may provide information about the project schedule and anticipated funding requirements without needing to be a registered municipal advisor. However, a firm that provides advice or recommendations to municipalities on the financing of projects that might lead to debt should be registered as a municipal advisor.

 

The Municipal Advisor regulations stem from the passage of the 2010 Dodd-Frank Wall Street Reform Act. These regulations are federal requirements, not state mandates or general guidelines. A/E firms across the country have to comply with the same regulations.

 

Some A/E firms, like MSA, are taking the steps necessary to achieve Municipal Advisor compliance, so that we can continue providing our clients with the same level of service we’ve always provided. In cases where an A/E firm has not registered as a Municipal Advisor, municipalities should seek the services of an outside consultant who is a registered Municipal Advisor.

 

Additional information is surfacing almost daily form the SEC and MSRB and MSA is dedicated to staying ahead of the regulatory curve. If you’d like additional information pertaining to how these new regulations might impact your community, we’re more than happy to help. Contact our funding team with any questions or concerns you might have relative to the new Municipal Advisor regulations.