The US Securities and Exchange Commission (SEC) is set to finalize long-delayed rules to rein in advisors who help states and localities raise cash in the US$3.7 trillion municipal-bond market, according to The Wall Street Journal.
The move aims at protecting taxpayers from the types of complex transactions that soured during the financial crisis.
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The SEC is expected to finalize rules that would require the federal registration and oversight of municipal financial advisors in this month.
The SEC has cracked down on municipalities for failing to keep investors apprised of their financial health. Muni issuers currently are exempt from the disclosures corporations must make when they sell securities.
As part of the 2010 Dodd-Frank law, municipal advisers must register with the SEC, adhere to a series of upcoming rules from the Municipal Securities Rulemaking Board and adhere to a fiduciary duty to place their clients’ interests ahead of their own.
The new rules will seek to prevent similar occurrences by ensuring municipalities have competent financial advisors.
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By GlobalDataThe agency now is expected to exempt individuals appointed by governors and other elected state officials to serve on the governing boards of bond-issuing authorities in the country.
SEC chairman Mary Jo White said: "The staff is developing a recommendation for final rules that we anticipate will address these concerns. The agency also plans to clarify the rules’ impact on banks offering traditional banking products and services to municipalities as well as the handling of municipal investments unrelated to muni bonds.
Thomas Gleason, executive director of the Massachusetts Housing Finance Agency, said: "Dodd-Frank’s intent was to regulate true third-party advisors.
"It just seems like common sense to exclude board members of municipal-bond issuers from the definition of municipal advisors," Gleason added.
