On December 20, 2010, the Securities and Exchange Commission (SEC) released proposed rules (the “Proposed Rules”) that would require appointed board members of a municipal bond issuer or other municipal entity that invests governmental funds to register as municipal advisors with the SEC and the Municipal Securities Rulemaking Board (MSRB) if they provide “advice” to the municipal entity as to the issuance of municipal securities, swap transactions, and/or investment strategy relating to state or municipal funds. Although not expressly addressed by the SEC’s release, it appears that board members and even employees of conduit borrowers from municipal issuers also would need to register if they provide “advice” to such borrowers relating to the issuance of municipal securities, swap transactions, and/or investment strategy relating to municipal bond proceeds. The Proposed Rules do not address what constitutes “advice.”

Proposed Rules 15Ba1-1 through 15Ba1-7 implement provisions of Section 15B of the Securities Exchange Act of 1934, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Section 15B”). The statutory provisions, requiring registration with the SEC and MSRB of “municipal advisors,” became effective on October 1, 2010. The SEC adopted interim rule 15Ba2-6T on September 1, 2010, specifying temporary registration procedures for municipal advisors. Such temporary registrations expire on December 31, 2011. The Proposed Rules, when and as adopted, will replace the temporary registration procedures. The rules and registration form relating to the temporary registration procedures with the SEC can be found at http://www.sec.gov/info/municipal/form_ma-t.htm. The rules and registration form relating to the registration procedures with the MSRB can be found at http://www.msrb.org/Rules-and-Interpretations/MSRB Registration.aspx.

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