MSRB Expresses Concern About Municipal Advisor Registration Compliance and Recommends Municipal Entities Check the Status of Their Advisors

Date: July 5, 2011

Contact: Jennifer A. Galloway, Chief Communications Officer
             (703) 797-6600

Alexandria, VA − The Municipal Securities Rulemaking Board (MSRB) today expressed concern that some municipal advisor firms engaging in municipal advisory activities may not be registered both with the MSRB and the Securities and Exchange Commission (SEC). Unregistered municipal advisor firms providing municipal advisory services may be in violation of federal securities laws and MSRB rules if they are not registered as municipal advisors with both regulatory organizations.

Unregistered municipal advisory firms may be unaware that they – and individuals associated with them – owe a federal fiduciary duty to municipal entity clients for whom they provide municipal advisory services. The MSRB encourages municipal entities and obligated persons that retain municipal advisor firms to verify their registration status with the MSRB and the SEC.

“It has come to our attention that some municipal advisors are providing municipal advisory services without first registering with the SEC and MSRB, as required by law,” said MSRB Executive Director Lynnette Kelly Hotchkiss. “The MSRB is concerned that these firms may not be aware of their legal obligations, including the federally established fiduciary duty owed their municipal entity clients.”

Firms engaged in municipal advisory activities were required to be registered with the MSRB as of December 31, 2010 as a result of the MSRB’s expanded regulatory authority over municipal advisors established by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Prior to registering with the MSRB, municipal advisors must register with the SEC. In addition, brokers, dealers and municipal securities dealers that also act as municipal advisors are required to register with both regulators as municipal advisors even if they previously registered with the MSRB as dealers.

The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is overseen by the Securities and Exchange Commission and Congress.