Unregistered MA activity remains a problem, says NAMA executive director

Unregistered municipal advisory activity — the focus of some recent Securities and Exchange Commission enforcement — remains a "significant" problem that warrants a greater SEC crackdown, the National Association of Municipal Advisors' executive director said. 

"I mean a week doesn't go by when I don't get a call about this," NAMA Executive Director Susan Gaffney said in an interview last week. "So it's absolutely huge … and you know we've been very vocal in our concerns about this with the SEC that we think that this could use a lot more focus and effort." 

The two most recent SEC municipal securities enforcement actions listed in the Office of Municipal Securities section of the SEC's website involved municipal advisors charged with failing to register with the commission. In addition, Dave Sanchez, director of the office, on a variety of occasions has expressed concerns regarding unregistered municipal advisory activity.

In a September 2024 speech, Sanchez highlighted concerns relating to unregistered municipal advisory activity in public-private partnerships. More recently, at the National Association of Bond Lawyers' annual conference in Washington, D.C., in September, Sanchez identified some areas where lawyers were seen to be engaging in structuring that could be problematic.

"It is a big problem across the board with all types of deal participants perhaps venturing into unregistered MA activity … whether it's the engineers or other types of professionals," Gaffney said. "We hear in some pockets of the country that this includes bond counsel."

According to section 15B of the Securities Exchange Act of 1934, the term "municipal advisor" excludes "attorneys offering legal advice or providing services that are of a traditional legal nature." 

Gaffney referenced the exclusion pertaining to attorneys during the interview. The question, however, is when does legal work an attorney might be doing for a client "cross over into municipal advisory activity," she said. 

"And so we have heard anecdotally of that happening," Gaffney said. "We know that the SEC's aware of that." 

Municipal advisors are regulated in order to protect issuers, so having unregulated MAs working on a deal – whether they are special consultants, lawyers or other participants – calls into question whether issuers indeed will be protected, she said. 

"We really think this continues to be a major problem," Gaffney said, adding that NAMA wishes " there could be a greater crackdown on these unregistered MAs."

Asked for comment, an SEC spokesperson said that "due to a lapse in appropriations, the SEC is currently operating in accordance with the agency's plan for operating during a shutdown." 

"During the shutdown, the SEC's public affairs office is not able to respond to many inquiries from the press," the spokesperson said.