[ by Howard Haykin ]

The wait for a viable definition of U.S. Municipal Advisers," while long overdue, is at least not forgotten.  SEC Chairman Elisse Walter on Thursday, acknowledged that the SEC's first version was widely criticized because it would have required too many people to register.  A second definition will be forthcoming in the foreseeable future, and this time it will be more narrow than the original version. 

Ms. Walter further noted at yesterday's Senate hearing:  "We anticipate that the final rules would address, among other things, the well-publicized concerns about the need for an exception from registration for appointed board members of municipal entities."  Walter has spearheaded moves to tighten oversight of the $3.7 trillion municipal bond market.

The SEC staff ultimately seeks to reach an new acceptable definition for "Municipal Adviser," as well as a final rule that requires appropriate registration of parties engaging in municipal advisory activities without unnecessarily imposing additional regulation."   The Dodd-Frank reform act brought municipal advisers under federal regulation and required them to register, alongside brokers and dealers, with the SEC.

Dodd-Frank, however, provided no guidance for identifying who is considered an an adviser.  And when the SEC released a proposed definition more than 2 years ago - in December 2010 - it was buried in comment letters saying the definition was "overbroad" and would force volunteers and others on the edges of municipal finance to abide by tough regulations. 

The House of Representatives jumped in and went so far as to take up legislation defining an adviser - but that lost steam when the lead lawmaker, Robert Dodd of Illinois, lost his seat in November's election. 

So, we're more than 2 years down the road after the first definition was released.  While neither SEC Chairman Walter nor her commission staff are indicating when a final definition will be released, SIFMA wrote last month that it expects federal securities regulators to release a definition in the first half of 2013.

[ Reuters, 2/14/13 ]