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Compliance Concepts

Municipal Advisors Weak on Regulatory Obligations - SEC

November 14, 2017

OCIE, the SEC Office of Compliance Inspections and Examinations, launched in 2014 the Municipal Advisor (“MA”) Examination Initiative to conduct examinations of newly registered MAs. Since then, OCIE has conducted over 110 MA examinations - evaluating compliance with regulatory obligations including registration, statutory fiduciary standard of care, fair dealing, recordkeeping, and supervision, among other things.


BACKGROUND.    Prior to the passage of the Dodd-Frank Act, the activities of MAs were largely unregulated, and MAs were generally not required to register with the SEC or any other federal, state, or self-regulatory entity with respect to their municipal advisory activities. Section 975 of Title IX of the Dodd-Frank Act required MAs to register with the Commission as of October 2010. In September 2013, the Commission adopted final MA registration rules, which became effective in July 2014. The Dodd-Frank Act also assigned the MSRB with regulatory authority over MAs and imposed a fiduciary duty on MAs when advising municipal entities.


KEY OBSERVATIONS.    OCIE staff observed that MAs were generally unfamiliar with many of their regulatory obligation - in particular. related to registration, recordkeeping, and supervision. The OCIE staff recommends that MAs take steps to educate themselves regarding these compliance obligations. 



  • Failure to register with the Commission or the MSRB prior to engaging in MA Activities;
  • Failure to file annual updates to Form MA;
  • Failure to file amendments to Form MA, Form MA-I, and MSRB Form A-12 when required;
  • Failure to complete Form MA with accurate and complete information, particularly with respect to compensation arrangements and outside business activities;
  • Failure to pay MSRB registration fees and late fees; and
  • Failure to file a Form MA-W and withdraw MSRB Form A-12 when withdrawing from MA registration.



  • Failure to maintain copies of written communications sent or received by the firm related to MA Activities, including those sent electronically;
  • Failure to make and keep documents material to a recommendation made to a client;
  • Failure to prepare and maintain accurate general ledgers. For example, the staff often observed that MAs’ general ledgers did not accurately reflect assets, liabilities, reserves, capital, and income and expense accounts; and
  • Failure to maintain accurate records of cash receipts and disbursements.



  • Failure to have a system to supervise the MA Activities of employees that was reasonably designed to achieve compliance with all applicable rules;

►   Failure to monitor gifts, travel, and entertainment expenses, including the failure to maintain accurate records of travel and entertainment expenses either indexed or capable of being searched by recipient;

►   Failure to oversee the firm’s responses to requests for proposals;

  • Failure to have WSPs reasonably designed to ensure compliance with applicable rules;

►   Failure to tailor WSPs to the firm’s business activities and conflicts of interest; and

  • Failure to designate one or more principals to be responsible for supervisory activities.