SEC will scrutinize municipal advisers’ rules compliance

BY KEN TYSIAC
August 19, 2014

A new SEC examination initiative will scrutinize municipal advisers’ compliance with new rules and regulations that are under implementation.

The SEC announced Tuesday that its Office of Compliance Inspections and Examinations (OCIE) will examine a significant percentage of municipal advisers for compliance.

“The municipal adviser examination initiative will focus on the areas that are most important to protecting issuers, investors, and municipal taxpayers,” Kevin Goodman, national associate director of the OCIE’s broker-dealer examination program, said in a news release.

The SEC also plans to promote compliance through outreach to municipal advisers.

SEC rules that took effect July 1 generally require municipal advisers to register with the SEC during a four-month phase-in period that ends Oct. 31.

Many CPA services—including audit and attest services, financial statement preparation, and issuing letters for underwriters—are exempted activities that do not require registration. But CPAs and others who provide certain advice to municipalities—including tax advice on municipal securities offerings—are required to register as municipal advisers under the new rules.

Possible areas for scrutiny under the examination program include the municipal adviser’s compliance with its fiduciary duty to municipal entity clients, books and recordkeeping obligations, disclosure, fair dealing, supervision, and employee qualifications and training.

The SEC is coordinating with the Municipal Securities Rulemaking Board (MSRB) and the Financial Industry Regulatory Authority in oversight over municipal advisers. Once MSRB rules are approved by the SEC and take effect, the OCIE will examine municipal advisers for compliance with SEC and MSRB rules.

More information on the examination initiative is available in a letter released Tuesday.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.

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