PROPOSAL COULD REQUIRE SOME APPOINTED CITY BOARD MEMBERS TO REGISTER WITH SECURITIES AND EXCHANGE COMMISSION
On December 20, 2010, the Securities and Exchange Commission (SEC) released a proposed rule that could require appointed board members of municipal entities that issue municipal securities or that invest public funds to register as “municipal advisors” with the SEC and Municipal Securities Rulemaking Board (MSRB). Those who are required to register would be subject to accompanying record-keeping and administrative compliance requirements, as well as a heightened fiduciary standard of care.
The term “municipal advisor” is defined in the proposed rule to exclude city employees, elected city officials, and elected ex-officio members of a board (e.g., a councilmember serving on a city board). But according to the SEC, the rule should apply to appointed members of a municipal entity because appointed members, unlike employees or elected officials, are not held sufficiently accountable for their actions.
The MSRB currently requires municipal advisers to pay $600 in annual registration fees. Needless to say, volunteers appointed to serve on city boards that issue bonds or invest public funds would likely find the price of serving their communities to be cost prohibitive if the proposed rule were adopted.
The League is coordinating with national municipal groups to determine how best to respond to the proposed rule. For more information, or to submit comments to the SEC online, please visit http://sec.gov/news/press/2010/2010-253.htm. Comments must be submitted to the SEC no later than February 22, 2011.