Published on Oct 3rd, 2022 |

Brief Introduction

For the first time under the municipal advisor registration rule, the SEC fined a Registered Broker Dealer for a violation of the Rule with $100,000.00 in penalties and $5,456.73 in interest.

3 Issues Discovered By The SEC

  1. The Broker Dealer’s Registered Representative provided advice to a Municipal Entity regarding securities that were purchased with municipal bond proceeds.
    • There was a recommendation that the Municipal Entity purchase specific financial products which were ultimately acquired by the Municipal Entity with municipal bond proceeds.
  2. The Broker Dealer was not registered as a municipal advisor during the time period that the advice was provided to the Municipal Entity.
  3. The SEC found that their system was not “reasonably designed” to monitor the municipal security activity, and identify potential violations of the SEC rules registration rules.
    • Failure to maintain a system to supervise the municipal securities activities of the Broker Dealer’s associated persons that was reasonably designed to achieve compliance with applicable securities laws, regulations, and MSRB rules.

Vigilant’s Final Conclusion

The Chief of the Enforcement Division’s Public Finance Abuse Unit, LeeAnn Ghazil Gaunt, made it clear that the municipal advisor registration rules apply to all market participants and Registered Broker Dealers must either cease from engaging in municipal advisory activities or register as municipal advisors as these rules are created to protect municipal entities from abuse.

For those in need of assistance, Vigilant can help with the creation, filing, and maintenance of documentation that is needed to meet the relevant obligations in an accurate and timely manner.

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