Registration of Municipal Advisors

A Small Entity Compliance Guide¹

Introduction

On September 20, 2013, the Securities and Exchange Commission adopted new rules and forms to establish a registration regime for municipal advisors.  These new rules and forms implement Section 975 of the Dodd-Frank Act, which amended Section 15B of the Securities Exchange Act of 1934.  Section 15B of the Exchange Act requires municipal advisors to register with the SEC.

The new rules and forms will take effect on January 13, 2014, and there will be staggered compliance dates for using the final forms to register under the permanent registration regime based on a municipal advisor’s temporary municipal advisor registration number:

• If a municipal advisor’s temporary registration number falls between 866-00001-00 and 866-00400-00, the municipal advisor must file a complete application for registration under the permanent registration regime between July 1, 2014 and July 31, 2014.
   
• If a municipal advisor’s temporary registration number falls between 866-00401-00 and 866-00800-00, the municipal advisor must file a complete application for registration under the permanent registration regime between August 1, 2014 and August 31, 2014.
   
• If a municipal advisor’s temporary registration number falls between 866-00801-00 and 866-01200-00, the municipal advisor must file a complete application for registration under the permanent registration regime between September 1, 2014 and September 30, 2014.
   
• If a municipal advisor’s temporary registration number falls after 866-01200-00, the municipal advisor must file a complete application for registration under the permanent registration regime between October 1, 2014 and October 31, 2014.
   
• If a municipal advisor enters the municipal advisory business on or after October 1, 2014 and does not have a temporary registration number as of October 1, 2014, the municipal advisor must file a complete application for registration under the permanent registration regime on or after October 1, 2014, and be registered with the SEC before engaging in municipal advisory activities.

Who is required to register as a municipal advisor?

You are required to register if you are a “municipal advisor.”  A municipal advisor is a person (who is not a municipal entity or an employee of a municipal entity) that provides advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, or that undertakes a solicitation of a municipal entity or obligated person.

However, as provided by the statute, the following types of people are excluded from the definition of municipal advisor, but only if they engage in the specific activities set out in Rule 15Ba1-1(d)(2):

• Broker, dealer, or municipal securities dealer serving as an underwriter of a particular issuance of municipal securities.
   
• Investment adviser registered under the Investment Advisers Act of 1940 or persons associated with a registered investment adviser.
   
• Commodity trading advisor registered under the Commodity Exchange Act or persons associated with a registered commodity trading advisor.
• Attorney.
   
• Engineer.

The Commission has exempted the following types of people from the definition of municipal advisor, but only if they engage in the specific activities set out in Rule 15Ba1-1(d)(3):

• Accountant.
   
• Official and employee of a municipal entity or obligated person.
   
• Bank.
   
• Person responding to a request for proposals or qualifications from a municipal entity or obligated person in connection with a municipal financial product or issuance of municipal securities.
   
• Swap dealer registered under the Commodity Exchange Act or associated persons of the swap dealer.
   
• Person engaging in municipal advisory activities where a municipal entity or obligated person is represented by an independent registered municipal advisor.
   
• Person providing advice with respect to investment strategies that are not plans or programs for the investment of the proceeds of municipal securities or the recommendation of and brokerage of municipal escrow investments.
   
• Person undertaking a solicitation of a municipal entity or obligated person for or in connection with municipal financial products that are investment strategies to the extent that those investment strategies are not plans or programs for the investment of the proceeds of municipal securities or the recommendation of and brokerage of municipal escrow investments.

The Commission has also exempted natural person municipal advisors if the advisor is an associated person of a SEC-registered municipal advisor and engages in municipal advisory activities solely on behalf of the registered municipal advisor.

What are the filing requirements related to municipal advisor registration?

A partnership, corporation, trust, limited liability company, limited liability partnership, sole proprietorship, or other organized entity that engages in municipal advisory activities (“municipal advisory firm”) must register with the SEC on Form MA.  A municipal advisory firm must file annual updates to Form MA, and file an amendment whenever a material event has occurred that changes the information provided in the form.  A non-resident municipal advisory firm must promptly file an amendment to Form MA to attach an updated opinion of counsel after any changes in the legal or regulatory framework or the firm’s physical facilities that would impact the ability of the firm, as a matter of law, to provide the SEC with access to its books and records or to inspect and examine the firm.

A municipal advisory firm must complete and file Form MA-I for each natural person associated with the firm who engages in municipal advisory activities on the firm’s behalf.  A natural person doing business as a sole proprietor must complete and file Form MA-I in addition to Form MA.  Form MA-I must be promptly amended whenever any information previously provided on Form MA-I becomes inaccurate.

A municipal advisory firm that is a non-resident of the United States must file a completed and executed Form MA-NR.  Also, a municipal advisory firm must file a separate Form MA-NR for every general partner and/or managing agent of the firm that is a non-resident, and every non-resident natural person associated with the firm and engaged in municipal advisory activities on the firm’s behalf.  A new Form MA-NR must be filed promptly if a previously-filed Form MA-NR becomes invalid or the information in it becomes inaccurate.

A business entity (including a sole proprietorship) that is registered as a municipal advisor but is no longer required to be registered must file Form MA-W to withdraw its registration.

Detailed instructions for registration, amendments, and withdrawal are set out in Instructions for the Form MA Series, available at http://www.sec.gov/rules/final/2013/34-70462.pdf.

What other requirements have been adopted for municipal advisors?

All registered municipal advisors are required comply with the books and records requirements set out in Rule 15Ba1-8.

Other Resources

The adopting release for the registration of municipal advisors can be found on the SEC’s website at http://www.sec.gov/rules/final/2013/34-70462.pdf.

The proposing release can be found on the SEC’s website at http://www.sec.gov/rules/proposed/2010/34-63576.pdf.

The text of the rules can be accessed through http://www.sec.gov/about/laws/secrulesregs.htm#sea34.

Contacting the SEC

The SEC’s Office of Municipal Securities is available to assist small municipal advisors and others with questions regarding the municipal advisor registration requirements.  You can contact the Office for this purpose at (202) 551-5680.

¹ This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a "small entity compliance guide" under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains rules adopted by the SEC, but is not a substitute for any rule itself. Only the rule itself can provide complete and definitive information regarding its requirements.