February 23, 2011
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On February 22, NCSHA asked the Securities and Exchange Commission (SEC) to exclude all municipal entity board members, including appointed board members, from its municipal advisor registration requirements. 

NCSHA submitted its comment letter on a recently published proposed rule that would create a registration system for municipal advisors, impose a federal fiduciary standard on such advisors, and expand the SEC’s definition of the term, “municipal advisor,” to include appointed board members of governmental finance authorities, including HFAs.

NCSHA’s letter argues that applying registration and related requirements to appointed board members of municipal entities would impose substantial, unnecessary burdens on board members whose fundamental purpose is deliberative, not advisory, and who are clearly accountable for their actions and performance under state law and other federal regulations.  The proposed rule’s additional burdens would discourage otherwise willing and qualified candidates from agreeing to serve as appointed board members, undermining municipal entities’ ability to function effectively. 

In December, the SEC proposed the rule in order to implement Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which requires municipal advisors to register with the SEC and establishes a fiduciary duty between a municipal advisor and the municipal entity for which it is acting as an advisor.  The Dodd-Frank Act specifically excludes a person who is a “municipal entity” or an “employee of a municipal entity” from the definition of “municipal advisor.” 

In the proposed rule, the SEC defines the term “employees of a municipal entity” to include elected and ex officio board members, but not appointed board members, thereby subjecting appointed board members to the rule’s registration requirements and other regulations.

Other comments on the proposed rule, including several HFA comments, are available on the SEC website.