On September 19, the House of Representatives unanimously passed legislation, H.R. 2827, which would set an official definition of “municipal advisor” under federal securities law. The bill, introduced by Representative Robert Dold (R-IL), responds to a proposed rule published by the Securities and Exchange Commission (SEC) that would establish a broad definition of the term municipal advisor.
Dold’s bill would define a municipal advisor as one who is formally “engaged for compensation” by an issuer to provide advice on municipal securities or related products. It explicitly excludes brokers, dealers, state-registered investment advisors, swap advisors, financial institutions, and elected or appointed members of issuers' governing bodies. Also, municipal securities dealers who provide advice regarding underwriting activities would not be considered municipal advisors unless they receive separate compensation for such advice. Many of these employment categories would be considered municipal advisors under the SEC proposal. NCSHA previously submitted comments to the SEC requesting that it exempt issuer board members from its proposed definition.
The bill also includes a provision maintaining the fiduciary duty imposed on municipal advisors by the Dodd-Frank law. The bill originally removed this duty, but Dold agreed to reinstate it in order to gain the support of Democratic lawmakers.
Senate leaders have not yet indicated whether the Senate will consider H.R. 2827 before Congress adjourns at the end of the year.