Published on Aug 19th, 2014 | Posted in Articles

The Securities and Exchange Commission today announced that its Office of Compliance Inspections and Examinations (OCIE) is launching an examination initiative directed at newly regulated municipal advisors.

SEC rules that took effect on July 1 generally require municipal advisors to register with the SEC through the SEC’s EDGAR system under the final registration process during a four-month phase-in period by October 31.  The examinations are designed to establish a presence with the newly regulated municipal advisors.  Over the next two years, OCIE plans to examine a significant percentage of these advisors using an approach that focuses on identified risks.  Areas targeted for scrutiny may include the municipal advisor’s compliance with its fiduciary duty to its municipal entity clients, books and recordkeeping obligations, disclosure, fair dealing, supervision, and employee qualifications and training. 

Additional details about the examinations are available in a letter released today.

“The municipal advisor examination initiative will focus on the areas that are most important to protecting issuers, investors, and municipal taxpayers,” said Kevin Goodman, national associate director of OCIE’s broker-dealer examination program. “We also will promote compliance by engaging these new municipal advisor registrants through outreach.” 

John Cross, director of the SEC’s Office of Municipal Securities, added, “The Office of Municipal Securities is committed to the protection of municipal issuers and investors.  We look forward to continuing to collaborate with OCIE to support this municipal advisor examination initiative and work closely with other market participants to ensure effective implementation of this important new regulatory regime for municipal advisors.”

The SEC is working with the Municipal Securities Rulemaking Board (MSRB) and the Financial Industry Regulatory Authority (FINRA) to facilitate a coordinated approach to oversight of municipal advisors.  OCIE will examine municipal advisors for compliance with applicable SEC rules and applicable final MSRB rules once the MSRB rules are approved by the SEC and become effective.

Starting later this year, OCIE in coordination with FINRA and the MSRB will hold a Compliance Outreach Program for newly regulated municipal advisors where they will learn more about the examination process and their obligations under the Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules.