The SEC announced that its Office of Compliance Inspections and Examinations, or OCIE, is launching an examination initiative directed at newly regulated municipal advisors. It also sent this letter to registered municipal advisors advising them of the program.
SEC rules that took effect on July 1, 2014 generally require municipal advisors to register with the SEC through the SEC’s EDGAR system under the final registration process during a four-month phase-in period by October 31, 2014. The examinations are designed to establish a presence with the newly regulated municipal advisors. Over the next two years, OCIE plans to examine a significant percentage of these advisors using an approach that focuses on identified risks. Areas targeted for scrutiny may include the municipal advisor’s compliance with its fiduciary duty to its municipal entity clients, books and recordkeeping obligations, disclosure, fair dealing, supervision, and employee qualifications and training.
The SEC is working with the Municipal Securities Rulemaking Board, or MSRB, and the Financial Industry Regulatory Authority, or FINRA, to facilitate a coordinated approach to oversight of municipal advisors. OCIE will examine municipal advisors for compliance with applicable SEC rules and applicable final MSRB rules once the MSRB rules are approved by the SEC and become effective.