Aug 1 Legislation to define municipal advisers
moved forward in the U.S. House of Representatives on Wednesday,
a key step in tightening oversight of those who give issuers
advice on selling their debt and turning up the heat on
regulators who have stalled in making their own determination.
Tougher regulation of adviser to cities, states and other
municipal borrowers was put in place nearly two years with the
enactment of the Dodd-Frank financial reforms, but efforts to
actually define who qualifies as a municipal adviser have proved
Approval of the legislation by a key House subcommittee on
Wednesday means it will now move to the full Financial Services
A proposed definition by the Securities and Exchange
Commission released in December 2010 of who qualified as an
adviser spawned hundreds of comments, almost all of which said
the definition would ensnare too many people in the regulation,
many of whom were only on the periphery for the market. The SEC
pulled the proposal and has been revising it.
"We need to give the SEC further legislative guidance to
ensure that the rules aren't overly broad, unduly burdensome,
unworkable, or damaging to municipal governments trying to raise
capital to fund projects and operations on which their
constituents depend," said Representative Robert Dold about the
legislation he introduced, before it was approved.
Dold, a Republican from Illinois, added that the bill would
be amended later to give advisers fiduciary duties, ensure
appointed and elected officials are exempt from the definition,
and also to keep accountants and auditors who provide basic
services from being considered advisers.
If the legislation is passed by the Financial Services
committee it will move on to the full Republican-controlled
House. A corresponding bill has not been introduced in the
Democrat-dominated Senate, which could make it hard for the
legislation to reach the president's desk. Still, members of
both parties in the House have expressed support for the bill.
"This is an entirely worthy goal and one I support,
especially as I have seen in Jefferson County, Alabama, how
unscrupulous municipal advisers pocketed the lucrative fees
associated with the county's sewer bond offerings while ignoring
the welfare of the taxpayers," said Financial Services Committee
Chairman Spencer Bachus, in a statement.
Jefferson County became the largest municipal bankruptcy in
U.S. history after soured sewer-system debt ravaged its
Bachus added that he plans to hold a hearing in the fall on
an SEC report released on Tuesday that included a list of
recommended legislation on increasing transparency in the
municipal bond market.