In the aftermath of the financial collapse of 2008, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”). The Act is potentially the largest overhaul of financial regulation since the Great Depression, though many provisions must be enacted and enforced through regulatory bodies. The process of issuing those regulations, staffing new offices, accepting public comment, and issuing final versions of the new regulations is still on-going.

Municipal securities have historically been subject to less supervision than other publicly traded securities. The SEC requires publicly traded companies to make large annual disclosures that have never been required for municipal securities. The Act is an effort to reform the municipal securities market, along with the rest of the financial system.

The Act attempts to further control the municipal securities market through the creation of an Office of Municipal Securities (the “Office”) at the Securities and Exchange Commission. The Office will administer the new rules related to municipal securities brokers and dealers, municipal securities advisors, municipal securities investors, and municipal securities issuers. The Office will also conduct studies to determine the most effective ways to further regulate the municipal markets.

Changes at the MSRB

Another regulatory body, the Municipal Securities Rulemaking Board (the “MSRB”), was given greater rulemaking authority in the Act. The Act requires municipal advisors to register both with the SEC and the MSRB. The definition of municipal advisor, currently a topic of heated debate, is quite broad under the SEC’s proposed rules. If the proposed rules become permanent, many persons who are not currently regulated by the SEC or MSRB will be pulled under the umbrella of both agencies. All municipal advisors have a fiduciary duty to any municipal entity for whom such person acts as a municipal advisor, meaning that the municipal advisor cannot “engage in any act… which is not consistent with a municipal advisor’s fiduciary duty.”