The Securities and Exchange Commission has delayed until July 1, 2014, the date on which the first set of municipal advisors will be required to register under final rules issued by the commission. 

The SEC said it took this action to give market participants additional time to analyze, implement, and comply with the final rules, balancing the goals of enhancing the quality of municipal securities advice and protecting investors and municipalities in the municipal securities market.

The SEC approved the final rules last year under the Dodd-Frank Act to provide an effective municipal advisor registration regime. The rules require municipal advisors to register with the Commission if they provide advice to municipal entities or certain other persons on the issuance of municipal securities, or about certain investment strategies or municipal derivatives.

Last Friday, the SEC’s Office of Municipal Securities also issued interpretive guidance on the municipal advisor registration rules to address questions it had received from market participants.

The staff guidance, in the form of answers to frequently asked questions, or FAQs, covers topics including the advice standard, including the general information exclusion and the treatment of business promotional materials used by underwriters; the request for proposals-request for qualifications exemption; the exemption for independent municipal advisors; the exclusion for registered investment advisers; the underwriter exclusion, including engagements as underwriters; issuance of municipal securities and post-issuance advice; remarketing agent services; opinions by citizens in public discourse; and the effective date of the final rules and the compliance period for using the final registration forms.

State and local governments frequently use paid advisors to help them decide how and when to issue municipal securities and how to invest proceeds from the sales, the SEC noted. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act required these advisors to register with the SEC like other market intermediaries.  The SEC’s final rule was adopted in September 2013. Presently, more than 1,100 municipal advisors are registered with the SEC under a temporary registration regime. The SEC staff may provide periodic updates to the interpretive guidance issued today.

Last September, the SEC voted to approve rules that exempt many CPA services from the activities requiring registration as a municipal advisor. CPAs are not required to register as municipal advisors if they provide audit or attest services, prepare financial statements, or issue letters for underwriters, according to the American Institute of CPAs.

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