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SEC’s Muni Advisor Regulatory Rollback Would Undermine Investor Protections

The regulatory exemption for municipal advisors in this proposal will gut needed investor protections and leave our local communities, school districts, and other municipal entities highly vulnerable to bad actors


WASHINGTON – The American Securities Association (ASA) today sent a letter to the Securities and Exchange Commission (SEC) strongly opposing its proposal to deregulate municipal advisor activities in a way that would weaken important investor protections and empower bad actors to harm hardworking Americans on Main Street.


“The regulatory exemption for municipal advisors in this proposal will gut needed investor protections and leave our local communities, school districts, and other municipal entities highly vulnerable to bad actors,” ASA CEO Chris Iacovella said. “The SEC should not create a new loophole that would increase fraud and make it easier to take advantage of hardworking Americans on Main Street.”

Specifically, the Proposed Exemptive Order would allow municipal advisors to participate in the direct placement of municipal securities with investors and receive transaction-based compensation without having to register as a broker-dealer.


“We care deeply about the reputation of our industry and we refuse to support a policy that will paint us with the same brush as the firms who would benefit from the Proposal when things go south, and investors are harmed,” Iacovella wrote.


“Equally troubling, the Commission’s consideration of fundamental changes to the broker-dealer regulatory regime through a request for exemptive relief instead of through a formal rule, is an end-run around the transparency and accountability requirements governing federal agency rulemaking.”


The Proposed Exemptive Order is legally deficient and suffers from several irredeemable flaws. Specifically, the Proposed Exemptive Order:


  • Harms investors by empowering bad actors in the municipal market who are not be subject to a robust regulatory regime; 

  • Provides no empirical justification for why an exemption for municipal advisors from broker-dealer registration requirements is necessary or in the public interest;

  • Will set a damaging precedent that fundamentally weakens regulation of broker-dealer activities in the future; and

  • Directly contravenes Congressional intent regarding the regulation of broker-dealers in the area of municipal securities. 


“No evidence exists to suggest that exempting certain entities from complying with regulations intended to protect investors is a good idea, will result in a good outcome, or will improve the functioning of the municipal bond market,” Iacovella cautioned. “The SEC should stick to its Congressional mandate and focus on ensuring that those who act on behalf of municipalities are complying with all applicable rules.”



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ASA’s regional financial services companies work in communities across the country to create jobs, grow the economy, and increase prosperity for all Americans. The ASA exclusively represents the capital market and private client interests of its members and seeks to promote free market principles making it easier to access financial advice and capital. ASA members help Americans save for retirement, provide Main Street businesses with capital to grow, and advise hardworking Americans how to create and preserve wealth. For the latest updates follow @AmerSecurities and learn more at http://americansecurities.org/.