WASHINGTON - Securities and Exchange Commission officials confirmed Wednesday that the commission will carry the responsibility of enforcement for all of the more than 1,100 registered municipal advisors, though the Financial Industry Regulatory Authority will also police dealer-MAs who are FINRA members.
In addition, banking regulators will have enforcement responsibility for MAs affiliated with banks.
SEC muni chief John Cross and Mark Zehner, deputy chief of the SEC enforcement division's municipal securities and public pensions unit, provided the explanation of the enforcement structure during a conference call hosted by the National Association of Bond Lawyers.
Cross said that most MAs are not affiliated with broker dealers, while about 20% are dealer-affiliated and a handful are separately registered as investment advisors with the SEC or governed by bank regulators.
"The lion's share of the municipal advisors are not FINRA registered broker dealers," Cross said, adding that MAs will face exams by the SEC's Office of Compliance Inspections and Examinations (OCIE) as well as any appropriate civil actions by the enforcement division.
Zehner said that many current SEC enforcement proceedings grow from OCIE examinations, and that most MA violations of securities laws and Municipal Securities Rulemaking Board Rules will be handled by a combination of his office and FINRA.
Firms providing targeted municipal bond-related advice to state and local government entities are required to register with the SEC under its registration rule, and are bound by a fiduciary duty to put the interests of those clients ahead of their own. They must also register with the MSRB and abide by its rules, many of which have not yet been adopted.
"We have jurisdiction over all municipal advisors," Zehner said. "FINRA will be bringing such actions as well with respect to their members."
The SEC recently shifted the compliance date of the MA rule to July 1 from Jan. 13, citing a need for additional guidance released Jan. 10 to resonate with stakeholders. Cross said during Wednesday's call that the SEC may release additional guidance on the rule later this year if it is necessary.
