WASHINGTON — The Government Finance Officers Association has released model language for issuer officials to use when interacting with broker-dealers and other entities under the municipal advisor rule.
The model language, released May 14, is designed to allow dealers to give bond and bond proceed-related advice to state and local governments without falling under the auspices of the Securities and Exchange Commission's new MA regulatory regime, which takes full effect July 1. The language is tailored to allow dealers to take advantage of exemptions from the rule available when the issuer has its own municipal advisor, when a dealer is responding to a request for proposals, and when a dealer has already been selected as underwriter for a specific transaction.
The model language for the independent registered municipal advisor exemption states that the issuer has and will rely on its own MA. The SEC has said issuers could place such a statement on their website to allow dealers to use the exemption, and the model language includes a website preface: "By publicly posting the following written disclosure, [State or local government] intends that market participants receive and use it for purposes of the independent registered municipal advisor exemption to the SEC municipal advisor rule," it states.
Without utilizing an exemption, dealers that give issuers traditional business pitches might be forced to register as MAs and owe a fiduciary duty to the issuer. The SEC has said MAs may not underwrite bonds on the same transaction. While non-dealer MAs and some other market participants have generally viewed this industry development favorably, dealer MAs and larger issuers have said it restricts the ability of investment bankers to send beneficial ideas to issuer officials.
The GFOA will hold its annual meeting over the next few days in Minneapolis, and is expected to discuss the MA rule at length.
