What Banks and Trust Companies Need to Know About the SEC’s New Municipal Advisor Rules


On September 20, 2013, the SEC adopted final rules regulating municipal advisors.  This Client Alert discusses how the final rules will apply to banks and trust companies (referred to collectively in this Alert as banks).  For a more detailed discussion of the Municipal Advisor Rules and a link to the adopting release, see the October 8, 2013 Goodwin Procter Financial Services Alert.

As previously reported, the rules implement provisions in the Dodd-Frank Act amending Section 15B of the Securities Exchange Act of 1934 (“Exchange Act”) to require registration of “municipal advisors,” a new class of regulated persons that, among other things, provide advice to or on behalf of a municipal entity or “obligated person” with respect to municipal financial products or the issuance of municipal securities.

The municipal advisor provisions of Section 15B, including the registration requirements, became effective on October 1, 2010.  Since that date, municipal advisors have been required to register under temporary interim rule 15Ba2-6T, using Form MA-T. In separate rulemaking, the SEC amended rule 15Ba2-6T to provide that it will expire on December 31, 2014.

Section 15B provides exceptions from the definition of “municipal advisor” for some categories of persons, such as investment advisers and broker-dealers serving as underwriters, but does not include an exception for banks.  This raised a concern that banks could be required to register as municipal advisors for providing traditional banking and fiduciary services to municipal entities or obligated persons, and many banks have temporarily registered as municipal advisors.  The Municipal Advisor Rules as adopted contain an exemption for some activities of banks, and also permit banks that are required to register as municipal advisors to register a separately identifiable department or division.

Banks may undertake a variety of activities related to municipal entities (as defined in Section 15B(e)(8) of the Exchange Act) and must therefore pay special attention to the municipal advisor rules to ensure compliance.  For example, banks may take deposits from and issue letters of credit to municipal entities, manage collective funds, common trust funds or other investment accounts that include assets contributed by municipal entities, enter into repurchase agreements with municipal entities, advise municipal entities regarding derivatives contracts or guaranteed investment contracts (“GICs”) or enter into derivatives contracts or GICs on a principal basis with municipal entities.  Although not all of these activities require that the bank register as a municipal advisor, any bank that interacts with a municipal entity should review the final rules to ensure that its activities are in compliance.

The Municipal Advisor Rules are effective on January 13, 2014 but, as discussed below in the section on “Registration Process and Timing,” permanent registration filings will be required to be made by temporary registrants based on their temporary registration numbers in the months of July through October 2014 and by persons not previously registered beginning October 1, 2014.

Municipal Advisor Definition

The term “municipal advisor” is defined by Section 15B to mean a person, other than a municipal entity or employee of a municipal entity, that provides advice to or on behalf of a municipal entity or obligated person (a person committed to support payment of the obligations on municipal securities sold in an offering) with respect to municipal financial products or the issuance of municipal securities, or undertakes a solicitation of a municipal entity or obligated person.

“Municipal financial products” mean municipal derivatives, GICs and investment strategies.  Investment strategies include plans or programs for the investment of proceeds of municipal securities other than municipal derivatives or GICs, and the recommendation of and brokerage of municipal escrow investments.  The term “municipal entity” is defined broadly in Section 15B(e)(8) and includes any state, political subdivision of a state, or municipal corporate instrumentality of a state, including state or municipal retirement plans and issuers of municipal securities.  As a result, persons that provide advice to, or solicit the purchase of certain services by, a state or municipal subdivision or instrumentality that does not issue securities may still be considered municipal advisors.

The “municipal advisor” definition is “broad,” in the words of the SEC and, absent an exclusion, would include many ordinary banking services provided to municipal entities and obligated persons.

Limited Bank Exemption

Rule 15Ba1-1(d)(3)(iii) provides an exemption from the definition of municipal advisor for any bank to the extent that it provides advice with respect to:

  • investments held in a deposit account, savings account, certificate of deposit, or other deposit instrument issued by a bank;
  • any extension of credit to a municipal entity or obligated person, including the issuance of a letter of credit, the making of a direct loan, or the purchase of a municipal security by the bank for its own account;
  • funds held in certain sweep accounts; or
  • any investment made by a bank acting as an indenture trustee or in a similar capacity. 

Other activities of banks providing advice to municipal entities or obligated persons are not exempt.  The adopting release[1] explicitly states that “the Commission is not exempting from registration [as a municipal advisor] banks that engage in municipal advisory activities, including without limitation banks that provide advice to municipal entities or obligated persons with respect to the issuance of municipal securities, or banks that provide advice with respect to municipal derivatives, unless the bank qualifies for another exclusion or exemption.”

Advice to a Municipal Entity

The statute does not define what constitutes “advice” to a municipal entity.  Rule 15Ba1-1(d) provides an “advice standard” that excludes “the provision of general information that does not involve a recommendation regarding municipal financial products or the issuance of municipal securities (including with respect to the structure, timing, terms and other similar matters concerning such financial products or issues).”

Accordingly, a person may provide such general information to a municipal entity or obligated person without registering as a municipal advisor. However, specific advice to a municipal entity or obligated person, for example, about the purchase of GICs, municipal derivatives or investment strategies other than bank deposit and savings accounts could cause a bank to be deemed a municipal advisor.

Investment Strategies

The limited bank exemptions the final rules do not cover investment advisory or management services.  A bank that manages, or provides investment advice with respect to, assets of a municipal entity would need to determine whether such assets constitute proceeds of municipal securities or municipal escrow investments, in evaluating whether the bank is a municipal advisor.

Moreover, the adopting release clarified that the term “investment strategies” includes not only the provision of advice to a separately managed account but also the management of pooled investment vehicles, as when acting as a trustee of collective investment or common trust funds, so that an advisor to a pooled investment vehicle is a municipal advisor if the vehicle contains proceeds of an issuance of municipal securities or municipal escrow investments, regardless of whether the vehicle also contains investments from persons that are not municipal entities.  Therefore, a bank that manages or advises a pooled investment vehicle (including a collective investment fund or common trust fund) would be required to register as a municipal advisor if the vehicle includes proceeds of municipal securities or municipal escrow investments.

In determining whether or not advised or managed assets include proceeds of municipal securities, a bank may rely on representations in writing made by a knowledgeable official of the municipal entity or obligated person whose funds are to be invested regarding the nature of such funds, provided the bank has a reasonable basis for such reliance.  Banks that are municipal advisors should register on the temporary registration form by January 13, 2014, the effective date of the final rules.

Obligated Persons

A bank may be a municipal advisor if it provides non-exempted advisory services to an obligated person.  An obligated person, as noted above, is a person—often, but not always, a bank—committed to support payment of the obligations on municipal securities sold in an offering.  Rule 15Ba1-1(k) excludes the following from the definition of obligated person:

  • a person who provides municipal bond insurance, letters of credit or other liquidity facilities;
  • a person whose financial information or operating data is not material to a municipal securities offering, without reference to any municipal bond insurance, letter of credit, liquidity facility or other credit enhancement (for consistency with Rule 15c2-12 disclosure obligations for municipal securities); or
  • the federal government.

The adopting release provides guidance about when a person becomes an obligated person, stating that a bank or other person that advises a client about conduit financing or other financing options would not be providing municipal advisory services to an “obligated person” until the client has begun the process of applying to, or negotiating with, a municipal entity to issue conduit bonds on behalf of the client.  Similarly, the SEC has clarified that a person is not an obligated person with respect to unrelated matters.

Banks should have processes to determine whether persons to whom they provide financial advice or services other than exempted services are obligated persons with respect to the subject matter of the advisory services.

Registration of Separately Identifiable Departments or Divisions

Rule 15Ba1-1(d)(4) provides that if a bank engages in municipal advisory activities exclusively through a “separately identifiable department or division” (“SID”) that meets certain requirements, the SID will be deemed to be the municipal advisor rather than the bank as a whole.  A SID is that unit of the bank that conducts all of the municipal advisory activities of the bank, provided that the following requirements are met:

  • Supervision. The unit is under the direct supervision of an officer or officers designated by the board of directors of the bank as responsible for the day-to-day conduct of the bank’s municipal advisory activities, including the supervision of all bank employees engaged in the performance of such activities.
  • Separate Records. All of the records relating to the bank’s municipal advisory activities are separately maintained in, or extractable from, the unit’s own facilities or the facilities of the bank, and such records are so maintained or otherwise accessible as to permit independent examination thereof and enforcement of applicable provisions of the Exchange Act, the SEC rules and regulations under the Act and the rules of the Municipal Securities Rulemaking Board (“MSRB”) relating to municipal advisors.

Registration Process and Timing

Municipal advisors must submit registration applications on newly adopted Form MA through EDGAR.  The SEC has staggered the timing during the four-month period in which municipal advisors must register, with registration of advisors previously registered on temporary Form MA-T required during the months of July, August, September or October 2014, depending on the temporary registration number that a municipal advisor received when it registered pursuant to Rule 15Ba2-6T.

Firms that begin municipal advisory activities before October 1, 2014 must register on temporary Form MA-T and then on new Form MA during the applicable period as described above.  Firms that begin municipal advisory activities on or after October 1, 2014 and do not have a temporary registration number as of October 1, 2014 must register with the SEC on Form MA prior to engaging in municipal advisory activities.  Registered municipal advisors must also become members of the MSRB.

Banks that registered on temporary Form MA-T but determine that they are exempt under the new rules or are otherwise no longer required to be registered may withdraw by filing a Form MA-T indicating withdrawal.  If a person that is registered on temporary Form MA-T does not withdraw and does not register on Form MA by the end of the filing period applicable to it, the person’s temporary registration will expire 45 days after the end of the applicable filing period. 

*     *     *

The new rules are complex and will give rise to many interpretive questions.

[1] SEC Release No. 34-70462.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:


Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.