BDA, Nixon Peabody Publish MA Paper

WASHINGTON — The Bond Dealers of America released a paper prepared by Nixon Peabody LLP that aims to explain to issuers how their relationships with the brokers that handle their investments will change now that the Securities and Exchange Commission's municipal advisor registration rule is in effect.

The rule's requirement that any firm providing advice on the investment of muni proceeds or escrows register as an MA was a sticking point for the industry until SEC guidance released in May clarified that firms could make a good faith effort to make that determination if there was evidence to support the conclusion. Brokers said that issuers often do not keep track of which funds are muni proceeds and which are not. The paper released Tuesday provides detailed explanations on how interactions between brokers and issuers will change with the rule's July 1 effectiveness, and why.

The paper also explains how issuers can utilize two exemptions in the rule to continue to receive investment advice from their brokers. The request for qualifications/proposals or RFP/RFQ exemption applies to firms responding to a request for advice that an issuer sends out to at least three competitive firms. The independent registered municipal advisor exemption can shield brokers from the rule if the issuer has its own muni advisor independent from the brokerage firm and has certified that it will rely on the IRMA's advice.

Now that the MA rule has taken full effect, firms that perform MA services without being properly registered may be subject to disciplinary action from the SEC and the Financial Industry Regulatory Authority. Issuers have no obligations under the rule.

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Law and regulation
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