Proposed SEC Rule Could Affect Municipal Officials

The Securities and Exchange Commission is proposing a new rule that could require certain municipal officials to register as “municipal advisors” prior to the issuance of bonds or other debt instruments.  The Dodd-Frank Act requires the SEC to regulate and require the registration of persons who advise municipalities on the incursion of debt.  As currently drafted, the rule would exempt “municipal employees,” which would include not only staff but elected officials as well.  However, the definition of a “municipal employee” would not cover appointed officials under the existing draft of the rule.  Appointed members of utility boards and commissions, as well as officials appointed to urban renewal boards, would likely be subject to the registration requirement if the definition is not ultimately amended. Various municipal advocacy groups will submit comments on the proposed rule and will urge the SEC to include exempt appointed officials as well.  Comments are due on February 22, 2011.  Look for updates on this issue in the weeks and months ahead.