II 

112TH CONGRESS 

2D SESSION S. 3620 

To amend the Securities Exchange Act of 1934 to clarify provisions relating 

to the regulation of municipal advisors, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 21, 2012 

Mr. WICKER introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To amend the Securities Exchange Act of 1934 to clarify 

provisions relating to the regulation of municipal advisors, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. REGISTRATION OF MUNICIPAL SECURITIES 

4 DEALERS. 

5 Section 15B(a)(1)(B) of the Securities Exchange Act 

6 of 1934 (15 U.S.C. 78o–4(a)(1)(B)) is amended by strik7 ing ‘‘or on behalf of’’. 


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1 SEC. 2. MUNICIPAL SECURITIES RULEMAKING BOARD; 

2 RULES AND REGULATIONS. 

3 Section 15B(b)(2)(L) of the Securities Exchange Act 

4 of 1934 (15 U.S.C. 78o–4(b)(2)(L)) is amended— 

5 (1) in clause (iii), by striking ‘‘and’’ at the end; 

6 (2) in clause (iv), by striking the period and in7 serting ‘‘; and’’; and 

8 (3) by adding at the end the following: 

9 ‘‘(v) not regulate as a municipal advi10 sor the activities of a person referred to in 

11 subparagraph (C) of subsection (e)(4), to 

12 the extent that such activities are de13 scribed under such subparagraph.’’. 

14 SEC. 3. DISCIPLINE OF MUNICIPAL SECURITIES DEALERS; 

15 CENSURE; SUSPENSION OR REVOCATION OF 

16 REGISTRATION. 

17 (a) IN GENERAL.—Section 15B(c)(1) of the Securi18 ties Exchange Act of 1934 (15 U.S.C. 78o–4(c)(1)) is 

19 amended to read as follows: 

20 ‘‘(1) No broker, dealer, or municipal securities 

21 dealer shall make use of the mails or any means or 

22 instrumentality of interstate commerce to effect any 

23 transaction in, or to induce or attempt to induce the 

24 purchase or sale of, any municipal security, and no 

25 broker, dealer, municipal securities dealer, or munic26 ipal advisor shall make use of the mails or any 


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1 means or instrumentality of interstate commerce to 

2 provide advice to or on behalf of a municipal entity 

3 or obligated person with respect to municipal finan4 cial products, the issuance of municipal securities, or 

5 to undertake a solicitation of a municipal entity or 

6 obligated person, in contravention of any rule of the 

7 Board. A municipal advisor, when acting pursuant 

8 to an engagement described in subsection 

9 (e)(4)(A)(i), and any person associated with such 

10 municipal advisor, shall be deemed to have a fidu11 ciary duty with respect to such engagement to any 

12 municipal entity for whom such municipal advisor 

13 acts as a municipal advisor, and no municipal advi14 sor may engage in any act, practice, or course of 

15 business which is not consistent with such municipal 

16 advisor’s fiduciary duty or that is in contravention 

17 of any rule of the Board. In issuing regulations to 

18 carry out the previous sentence and subsection 

19 (b)(2)(L)(i), the Board shall— 

20 ‘‘(A) require that a municipal advisor act 

21 in accordance with its fiduciary duty to its mu22 nicipal entity clients, but only in connection 

23 with those specific activities involving such mu24 nicipal entity client described under subsection 


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1 (e)(4)(A)(i) (and not excluded under subsection 

2 (e)(4)(C)); 

3 ‘‘(B) specify when such duties begin and 

4 terminate in relation to such activities; and 

5 ‘‘(C) not prohibit principal transactions by 

6 municipal advisors or the receipt of compensa7 tion based on commissions or other standard 

8 compensation in relation to the purchase or sale 

9 of a security or other instrument (including de10 posit or foreign exchange), except that the 

11 Board— 

12 ‘‘(i) may issue rules requiring a mu13 nicipal advisor to only engage in such 

14 transactions or receive such compensation 

15 in a manner that is consistent with the 

16 municipal advisor’s fiduciary duty; and 

17 ‘‘(ii) may prohibit a municipal advisor 

18 that has been engaged to provide advice 

19 with respect to an underwritten offering of 

20 securities from concurrently acting as an 

21 underwriter of such offering.’’. 

22 (b) TECHNICAL CORRECTION.— 

23 (1) IN GENERAL.—Section 975(c)(5) of the 

24 Dodd-Frank Wall Street Reform and Consumer Pro25 tection Act is amended to read as follows: 


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1 ‘‘(5) in paragraph (4), by inserting ‘or munic2 ipal advisor’ after ‘municipal securities dealer’ each 

3 place that term appears;’’. 

4 (2) EFFECTIVE DATE.—The amendment made 

5 by paragraph (1) shall take effect on the date of the 

6 enactment of the Dodd-Frank Wall Street Reform 

7 and Consumer Protection Act, as if included in such 

8 Act. 

9 SEC. 4. DEFINITION OF INVESTMENT STRATEGIES. 

10 Section 15B(e)(3) of the Securities Exchange Act of 

11 1934 (15 U.S.C. 78o–4(e)(3)) is amended to read as fol12 lows: 

13 ‘‘(3) the term ‘investment strategies’— 

14 ‘‘(A) means plans or programs for the in15 vestment of the direct proceeds of municipal se16 curities (but not other public funds) that are 

17 not municipal derivatives or guaranteed invest18 ment contracts, and the recommendation of and 

19 brokerage of municipal escrow investments, 

20 where, with respect to the municipal advisor of21 fering such plans, programs, or recommenda22 tions, such proceeds of municipal securities and 

23 municipal escrow investments— 

24 ‘‘(i) are known or should be known to 

25 the municipal advisor to be comprised of 


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1 funds or investments maintained in a seg2 regated account that is exclusively for the 

3 purpose of maintaining such proceeds or 

4 escrow investment; or 

5 ‘‘(ii) have been identified to the mu6 nicipal advisor, in writing, as funds or in7 vestments that constitute the proceeds of 

8 municipal securities or municipal escrow 

9 investments; and 

10 ‘‘(B) does not include— 

11 ‘‘(i) merely acting as a broker or prin12 cipal with respect to the purchase or sale 

13 of a security or other instrument (includ14 ing deposit or foreign exchange); 

15 ‘‘(ii) providing a list of, or price 

16 quotations for, investment options or secu17 rities or other instruments which may be 

18 available for purchase or investment or 

19 which satisfy investment criteria specified 

20 by a municipal entity; 

21 ‘‘(iii) acting as a custodian; 

22 ‘‘(iv) providing generalized informa23 tion concerning investments which are not 

24 tailored to the specific investment objec25 tives of the municipal entity; or 


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1 ‘‘(v) providing advice with respect to 

2 matters other than the investment of funds 

3 or financial products;’’. 

4 SEC. 5. DEFINITION OF MUNICIPAL ADVISOR. 

5 Section 15B(e)(4) of the Securities Exchange Act of 

6 1934 (15 U.S.C. 78o–4(e)(4)) is amended to read as fol7 lows: 

8 ‘‘(4) the term ‘municipal advisor’— 

9 ‘‘(A) means a person (who is not a munic10 ipal entity or obligated person, or an employee 

11 of a municipal entity or obligated person) 

12 that— 

13 ‘‘(i) is engaged, for compensation, by 

14 a municipal entity or obligated person to 

15 provide advice to a municipal entity or ob16 ligated person with respect to municipal fi17 nancial products or the issuance of munic18 ipal securities, including advice with re19 spect to the structure, timing, terms, and 

20 other similar matters concerning such fi21 nancial products or issues; or 

22 ‘‘(ii) undertakes a solicitation of a 

23 municipal entity; 

24 ‘‘(B) includes financial advisors, guaran25 teed investment contract brokers, third-party 


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1 marketers, placement agents, solicitors, finders, 

2 and swap advisors, if such persons are de3 scribed in either of clauses (i) or (ii) of sub4 paragraph (A) and are not excluded under sub5 paragraph (C); and 

6 ‘‘(C) does not include, solely as a result of 

7 their performing the following activities— 

8 ‘‘(i) any broker, dealer, or municipal 

9 securities dealer registered with the Com10 mission, to the extent that such broker, 

11 dealer, or municipal securities dealer is 

12 serving or is seeking to serve as an under13 writer, placement agent, remarketing 

14 agent, dealer-manager, or in a similar ca15 pacity, or is providing advice related to or 

16 in connection with any such activities and 

17 not for separate compensation, or any per18 son associated with such a broker, dealer, 

19 or municipal securities dealer; 

20 ‘‘(ii) an investment adviser registered 

21 under the Investment Advisers Act of 1940 

22 (15 U.S.C. 80b–1 et seq.) or with any 

23 State or territory of the United States that 

24 is providing investment advice (whether or 

25 not of a type that would subject a person 


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1 to registration under such Act), or any 

2 person associated with such an investment 

3 adviser; 

4 ‘‘(iii) any person registered under the 

5 Commodity Exchange Act (7 U.S.C. 1 et 

6 seq.) or this Act in relation to such per7 son’s activities with respect to swaps or se8 curity-based swaps that is providing advice 

9 related to swaps or security-based swaps, 

10 or providing advice that is related to or in 

11 connection with any such activities and not 

12 for separate compensation, or any person 

13 associated with such person; 

14 ‘‘(iv) a financial institution engaging 

15 in any of the activities referred to in clause 

16 (i), (ii), or (iii) pursuant to an exemption 

17 from registration, acting as a dealer or 

18 principal with respect to deposits, foreign 

19 exchange, or identified banking products 

20 (as defined in paragraphs (1) through (5) 

21 of section 206(a) of the Gramm-Leach-Bli22 ley Act (15 U.S.C. 78c(a))), providing 

23 other traditional banking or trust services 

24 otherwise subject to a fiduciary duty under 

25 State or Federal law, providing administraVerDate Mar 15 2010 16:24 Sep 27, 2012 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3620.IS S3620

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1 tive or operational services or support, or 

2 providing advice that is related to or in 

3 connection with any such activities and not 

4 for separate compensation; 

5 ‘‘(v) any person subject to regulation 

6 by a State insurance regulator providing 

7 insurance products or services or providing 

8 advice that is related to or in connection 

9 with any such activities and not for sepa10 rate compensation; 

11 ‘‘(vi) an accountant (or person associ12 ated with such accountant) providing cus13 tomary and usual accounting services, in14 cluding any attestation or audit service or 

15 issuing letters for underwriters for a mu16 nicipal entity or providing advice that is 

17 related to or in connection with any such 

18 activities and not for separate compensa19 tion; 

20 ‘‘(vii) any attorney offering legal ad21 vice or providing services that are of a tra22 ditional legal nature; 

23 ‘‘(viii) an engineer providing engineer24 ing advice; or 


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1 ‘‘(ix) any elected or appointed member 

2 of a governing body of a municipal entity 

3 or obligated person, with respect to such 

4 member’s role on the governing body;’’. 

5 SEC. 6. DEFINITION OF SOLICITATION OF A MUNICIPAL EN6 TITY OR OBLIGATED PERSON. 

7 Section 15B(e)(9) of the Securities Exchange Act of 

8 1934 (15 U.S.C. 78o–4(e)(9)) is amended by striking ‘‘or 

9 on behalf of a municipal entity; and’’ and inserting the 

10 following: ‘‘a municipal entity, but communications on be11 half of a fund or other collective investment vehicle shall 

12 not be deemed to be on behalf of any investment adviser 

13 that advises or manages such fund or investment vehicle;’’. 

14 SEC. 7. DEFINITION OF MUNICIPAL DERIVATIVE. 

15 Section 15B(e) of the Securities Exchange Act of 

16 1934 (15 U.S.C. 78o–4(e)) is amended— 

17 (1) in paragraph (10), by striking the period on 

18 the end and inserting a semicolon; and 

19 (2) by adding at the end the following: 

20 ‘‘(11) the term ‘municipal derivative’ means a 

21 swap or security-based swap in which a municipal 

22 entity is a counterparty; and’’. 


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1 SEC. 8. DEFINITION OF ON BEHALF OF. 

2 Section 15B(e) of the Securities Exchange Act of 

3 1934 (15 U.S.C. 78o–4(e)), as amended by section 7, is 

4 further amended by adding at the end the following: 

5 ‘‘(12) the term to provide advice ‘on behalf of 

6 a municipal entity or obligated person’ means to 

7 provide advice to a person that is known to be en8 gaged by a municipal entity or obligated person to 

9 provide services to such municipal entity or obligated 

10 person in connection with the issuance of municipal 

11 securities.’’. 

Æ 


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