Lanny Schwartz, a partner with Davis, Polk and Wardwell, described the municipal adviser rule as the Dodd-Frank Act's “worst drafted” provision, crowd during a morning session on the far-reaching financial reform law.
Among the Dodd-Frank Act's many provisions were a handful (including the municipal adviser registration) that underscore the interest in Congress and among regulators for greater oversight of the municipal market, a regular source of financing for not-for-profit hospital and health system construction, renovation and other capital projects, such as information technology.
The Dodd-Frank Act also calls for an independent office of municipal securities within the SEC and creates an office of credit ratings. Congress also required the Government Accountability Office to undertake two studies of the transparency and operations of municipal markets, one of which will review whether to change laws that limit SEC oversight of tax-exempt borrowers.
Schwartz told the crowd it's unclear under Dodd-Frank who must register and what constitutes advice that would fall under the new rule. Ambiguity in the provision prompted a meeting last week between the SEC and the trade group's associate general counsel to raise questions and seek guidance, he said.
Martha Haines, chief of the SEC office of municipal securities, who spoke shortly after Schwartz, acknowledged regulators had to move quickly to enable advisors to register or face the possibility they would have to stop doing business.
Haines' comments suggested that not everyone subject to the new requirement would be prepared; she noted that the rule has been met with some surprise and she urged attendees to spread word of the new rule.
The agency said on Sept. 2 it had adopted temporary registration that would last until Dec. 31, 2011 or until regulators establish a permanent rule.
Haines also urged advisers to comment as regulators seek to draft rules for the newly regulated group. It's not the only avenue by which the SEC is seeking public comment on the market. The regulator also began hearings earlier this month for a broader review of transparency and disclosure in the $2.8 trillion municipal market, which the agency said would result in recommendations, potentially for legislation.
Melanie Evans covers healthcare finance for Modern Healthcare.