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SIFMA Seeks to Vacate Muni Advisor BD Exemption's picture
Commentary by Nihal Patel

SIFMA filed suit seeking to vacate a recently adopted SEC temporary exemption for municipal advisors from broker-dealer registration. The exemption (which was previously covered here) permits municipal advisors to make limited solicitations to certain banks and similar entities to invest in "direct placements" of municipal issuers without being subjected to broker-dealer registration.

SIFMA stated that existing market data do not support the purported need for the exemption, which harms investors and other market competitors by "eliminating investor protections and critical reporting requirements." SIFMA President and CEO Kenneth Bentsen Jr. asserted that "through the [exemption], the SEC allows municipal advisors to engage in broker-dealer activity without the attendant legal and regulatory requirements that apply when a broker-dealer is engaged."

The SIFMA petition - filed for review in the D.C. Circuit Court of Appeals - has yet to be made public.


As suggested when this exemption was announced, the SEC knew or should have known that it was likely to inspire controversy given comments on past rulemaking efforts and the potential effect on competitive balances. Regardless of the policy merits of the exemption, the SEC essentially granted, on an ad hoc basis and without APA-style rulemaking, one class of persons the ability to engage in the business of a broker-dealer without registration as such. Persons currently registered as broker-dealers were likely to feel aggrieved given that they are required to comply with a wide range of additional legal requirements in order to engage in the same conduct.

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