Legal Alerts

SEC Launches New "Focused, Risked-based" Municipal Advisor Exam Initiative


In late August, the Securities and Exchange Commission formally announced its new municipal advisor exam initiative. As of July 1, 2014, municipal advisors are required to register with the SEC. The examination initiative, headed up by the SEC’s Office of Compliance Inspection and Examinations (“OCIE”) is designed to establish a presence with the newly regulated municipal advisors. The SEC has indicated that 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.

According to the OCIE, “The municipal advisor examination initiative will focus on the areas that are most important to protecting issuers, investors, and municipal taxpayers,” and “will promote compliance by engaging these new municipal advisor registrants through outreach.” The hope is that these examinations will identify of high-risk areas, industry trends, and significant issues.

The SEC is working with the Municipal Securities Rulemaking Board (MSRB) as well as Financial Industry Regulatory Authority (FINRA) to facilitate and ensure a coordinated approach to oversight of these newly regulated advisors. The 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.

The OCIE, in coordination with FINRA and the MSRB will begin holding a Compliance Outreach Program for newly regulated municipal advisors later this year 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.

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