There are several exceptions to the general prohibition, including for advice provided by an underwriter. The SEC also approved an interpretive guidance on when a firm would be considered to be an underwriter and not a financial advisor. The BDA has prepared suggested language for firms to use to be considered an underwriter and we will be updating that language in light of the SEC and MSRB actions.
The BDA’s summary of the new Rule G-23 is available here.
The SEC and MSRB Notices describing the new rule make clear that this is only a conflict of interest rule. The new Rule does not establish substantive rules of conduct and the Notices make a point of distinguishing between “financial advisor” under this rule and “municipal advisor” under Dodd-Frank. A firm might not be considered a financial advisor, and thus could underwrite an issue, but it could at the same time be considered a municipal advisor – depending on how the SEC ends up defining that term – requiring registration as such and imposing a fiduciary duty on the firm. Dodd-Frank also may impose specific requirements for swap “advisors” under the CFTC. A firm that is considered an underwriter for the purposes of Rule G-23 may nevertheless be considered to be a municipal advisor by the SEC or a swap advisor by the CFTC and as a result have the associated substantive obligations.
