On August 3, 2011, the MSRB issued a notice reminding financial advisors that they may be considered brokers, and have to comply with the MSRB’s rules concerning brokers, in certain cases of private placements and also bank loans. All financial advisors, whether or not they are currently registered with the SEC as brokers, dealers or municipal securities dealers are covered. Click the link here to get the full regulatory notice.
In particular, financial advisors that introduce potential investors to issuers or negotiate with investors in exchange for “transaction-based compensation” may be considered placement agents and subject to MSRB rules, include recently revised Rule G-23, which prohibits a financial advisor from serving as an underwriter or placement agent with respect to a specific issue. As brokers, they would also be subject to the assessments on brokers and reporting of trades, among other requirements.
The MSRB said that it will issue more guidance on just when a bank loan is considered a municipal security.
The SEC has focused more closely on increased use of technology, including the internet, which has allowed broader involvement among the various players of securities-related services.
Financial advisor placement agents would be required to register with the MSRB as broker-dealers if they have not previously done so, even if they were already registered as municipal advisors.
BDA CEO Mike Nicholas said, “The BDA views this MSRB notice as another step towards increased market transparency and a leveling of the playing field for all parties active in the municipal securities market and we look forward to the MSRB clearly differentiating bank loans from municipal securities.”
