The Securities and Exchange Commission approved the establishment of new Municipal Securities Rulemaking Board Rule G-46, setting up the core standards of conduct for solicitor municipal advisors.
Solicitor municipal advisors typically solicit for pension funds and have little to do with traditional municipal advisors. They both fall under the MSRB’s jurisdiction following Dodd-Frank.
The new rule also includes amendments to existing Rule G-8 on books and records, adding the recordkeeping requirements for Rule G-46. Solicitor municipal advisors registered with the commission must be in compliance by March 1, 2024.
“This rule change serves as an important bulwark against potential improper practices in the municipal market and also provides greater certainty and transparency to solicitor municipal advisors regarding regulatory expectations,” the MSRB said.
The new rule defines certain terms such as “solicitation,” “solicited entity,” “solicitor client” as well as “solicitor municipal advisor.”
It also requires a solicitor municipal advisor to provide disclosures in writing for all material conflicts of interest, any legal or disciplinary event that would be material to a solicitor client’s evaluation of the solicitor MA and facts related to the solicitation including the advisors’ role and compensation.
Rule G-46 also permits solicitor MAs who are registered as brokers or investment advisors to reference other publicly available information.
The rule prohibits solicitor municipal advisors from delivering an invoice for fees or expenses for activities that is materially inaccurate in its reflection of activities performed and prohibits making payments for the purpose of obtaining or retaining an engagement, subject to exceptions.
“Happy to hear that the SEC approved the ongoing rulemaking for solicitor MAs which will help those professionals understand their responsibilities under MSRB rules,” said Susan Gaffney, executive director of the National Association of Municipal Advisors.
Amendments to Rule G-8 add record keeping obligations for those in compliance with new Rule G-46 and require solicitor municipal advisors to make and keep books and records evidencing compliance with the disclosure and documentation requirements.