- SEC Clarifies Bank Exemptions in Municipal Advisor Registration FAQs
- May 27, 2014 | Author: Neal C. Wise
- Law Firm: Jones Walker LLP - Jackson Office
On May 19, 2014, the Securities and Exchange Commission's ("SEC") Office of Municipal Securities updated its Frequently Asked Questions ("FAQs") regarding the municipal securities registration rules discussed in our prior Banking and Financial Services E*Lert of October 17, 2013. The SEC had previously extended the compliance date for these rules to July 1, 2014, which we also discussed in our E*Lert of March 6, 2014. Among other issues, the SEC staff clarified two important exemptions as they relate to the banking and financial services industry.
First, the SEC staff clarified the situation in which an individual is employed by a bank and is also an associated person of the bank's broker-dealer affiliate. Specifically, the clarification addresses whether a dual employee may provide advice to a municipal entity or obligated person within the scope of the bank exemption when acting in the employee's capacity as a bank employee and advice within the scope of the underwriter exclusion when acting in the employee's capacity as a broker-dealer. The SEC stated that a dual employee may provide advice within the scope of both exemptions so long as the dual employee (1) discloses to the municipal entity or obligated person the capacity in which the dual employee is acting in advance of providing any advice and (2) meets the requirement of both exemptions.
Second, the SEC staff clarified that the bank may rely on the bank exemption from the final municipal advisor rules when the bank is purchasing municipal securities directly for the bank's own account. Relying on language from its adopting release accompanying the final rules, the SEC stated that banks providing municipal entities or obligated persons with the terms under which they would purchase securities for their own account are not engaging in municipal advisory activity. Therefore, the bank may give advice to a municipal entity regarding the structure, timing, and terms under which the bank would purchase securities for its own account. However, the staff did clarify that if a bank provides such advice that extends beyond the securities that the bank plans to purchase - such as securities to be offered in the public markets - such advice would constitute municipal advisory activity and would require registration.