WASHINGTON — The Securities and Exchange Commission may not finalize its final registration requirements and definition of municipal advisors until Sept. 30, 2012, effectively delaying several related Municipal Securities Rulemaking Board rules until then.
The SEC’s interim muni advisor rule was scheduled to expire on Dec. 31, but the commission announced Wednesday that it would extend the interim rule for nine months.
In a 10-page notice outlining its decision, the SEC said the extension would allow muni advisors to continue to comply with the statutory requirement, imposed by the Dodd-Frank Act, that they register with the commission. That requirement became effective Oct. 1, 2010.
The expiration would also “prevent a regulatory gap from developing” between the expiration of the temporary rule and the issuance of a permanent one, the SEC said.
Leslie Norwood, managing director and co-head of the muni securities division at the Securities Industry and Financial Markets Association, said the industry group is pleased with the SEC’s move.
“Certainly, this is a very complex issue,” Norwood said, adding that the agency’s permanent muni advisor rule is “the foundation” on which all muni advisor regulation will be built, including several MSRB rules.
In September, the MSRB pulled five proposed muni advisor rules that had been pending with the SEC. The board said it would repropose them after the commission releases the permanent rule and definition.
The SEC was criticized in many of the 1,000 comment letters it received on its interim rule for proposing an overly broad definition of muni advisors that could cover individuals appointed to state and local government boards.
Broker-dealer groups complained the definition could cover their members as well and impose a fiduciary duty requiring them to act in their clients’ best interest, even though they are already regulated.
Michael Nicholas, CEO of Bond Dealers of America wrote in an e-mail that he was concerned about the SEC’s delay because “the vast majority of non-dealer financial advisors remain unregulated and without the strict rules in place - from record keeping and continuing education to pay-to-play” that govern dealer FAs.
