NAIFA Blog

As part of the Dodd-Frank Act, Congress asked the Securities and Exchange Commission to ensure that currently unregulated individuals and firms providing securities and investment advice to municipalities are properly regulated. Unfortunately, the SEC has proposed “municipal advisor” regulations that go way too far.

As written, the proposed rules would require financial advisors who are already heavily regulated to be subject to additional overlapping and unnecessary regulation by the SEC if they happen to work with municipal entities. This would include, for example, advisors who administer municipal employee pension plans.

Yesterday, a bipartisan group of 35 members of the House of Representatives sent a letter to SEC Chairman Mary Schapiro urging the Commission to reconsider the proposals. According to the letter, “…the Commission’s proposed rules go far beyond the statute’s intent and scope by capturing, in the ‘municipal advisor’ definition, parties and activities that were not anticipated by Congress or authorized by the statute.”

The Representatives go on to say that the law was intended to affect only municipal advisors who “were not already regulated by a federal or state regulatory body.” Therefore, broker-dealers, registered reps, investment adviser representatives, insurance companies, and others who are already regulated by the SEC, FINRA, state insurance departments, or other established regulatory bodies should not fall within the scope of the rule.

“NAIFA members who advise municipalities are already so heavily regulated that this new layer of rules would do nothing but increase the cost and difficulty of serving their municipal clients,” said NAIFA President Robert Miller. “Some would likely shy away from that type of business. We’re grateful to the members of Congress, both Democrats and Republicans, who have pointed out that the proposed rules go too far, and we are hopeful that the SEC will reconsider.”

The members of Congress ask the SEC to redraft the rules to “define the term ‘municipal advisor’ as Congress intended.”

NAIFA agrees. President Obama pledged earlier this year to reduce the number of redundant federal regulations, so we certainly don’t need the SEC creating new ones. NAIFA would like to thank the Representatives who signed the letter: