Saturday, September 15, 2012

Banking Industry Finds Legislation Exempting Banks from SEC Municipal Advisor Registration too Narrow

While praising the House Financial Services unanimous approval of HR 2827 to clarify the scope of the Dodd-Frank SEC municipal advisory registration mandate, the banking industry said that the well-intentioned substitute legislation would not adequately cover the range of products and services that banks provide to municipalities. In a memo, the American Bankers Association also said that HR 2827 may not provide an exemption for the negotiations that banks regularly undertake with municipalities when booking loan products such as tax anticipation notes and revenue anticipation notes.

The legislation exempts banks providing “traditional banking products” from the SEC’s proposed rule implementing the Section 975. The ABA said that the bill’s narrow “traditional banking products” definition covers deposits, bankers acceptances, letters of credits, loans, certain loan participations and swap agreements. The legislation also exempts banks for trust services that are subject to a state or federal fiduciary duty, and extends to them the existing exemption for registered investment advisers.

The committee approved an amendment to H.R. 2827 eliminating the need for individuals employed by municipal advisory firms to separately register with the SEC. It also adopted panel ranking member Barney Frank’s (D-MA) amendment deleting the bill’s provision requiring municipal adviser registration only where the adviser had a written contract to provide advice for separate compensation.


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