IIB 

112TH CONGRESS 

2D SESSION H. R. 2827 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 20, 2012 

Received; read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

AN ACT 

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, 


pwalker on DSK7TPTVN1PROD with BILLS
2 

HR 2827 RFS

1 SECTION 1. REGISTRATION OF MUNICIPAL SECURITIES 

2 DEALERS. 

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

4 of 1934 (15 U.S.C. 78o–4(a)(1)(B)) is amended by strik5 ing ‘‘or on behalf of’’. 

6 SEC. 2. MUNICIPAL SECURITIES RULEMAKING BOARD; 

7 RULES AND REGULATIONS. 

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

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

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

11 (2) in clause (iv), by striking the period and in12 serting ‘‘; and’’; and 

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

14 ‘‘(v) not regulate as a municipal advi15 sor the activities of a person referred to in 

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

17 the extent that such activities are de18 scribed under such subparagraph.’’. 

19 SEC. 3. DISCIPLINE OF MUNICIPAL SECURITIES DEALERS; 

20 CENSURE; SUSPENSION OR REVOCATION OF 

21 REGISTRATION. 

22 (a) IN GENERAL.—Section 15B(c)(1) of the Securi23 ties Exchange Act of 1934 (15 U.S.C. 78o–4(c)(1)) is 

24 amended to read as follows: 

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

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


pwalker on DSK7TPTVN1PROD with BILLS
3 

HR 2827 RFS

1 instrumentality of interstate commerce to effect any 

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

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

4 broker, dealer, municipal securities dealer, or munic5 ipal advisor shall make use of the mails or any 

6 means or instrumentality of interstate commerce to 

7 provide advice to or on behalf of a municipal entity 

8 or obligated person with respect to municipal finan9 cial products, the issuance of municipal securities, or 

10 to undertake a solicitation of a municipal entity or 

11 obligated person, in contravention of any rule of the 

12 Board. A municipal advisor, when acting pursuant 

13 to an engagement described in subsection 

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

15 municipal advisor, shall be deemed to have a fidu16 ciary duty with respect to such engagement to any 

17 municipal entity for whom such municipal advisor 

18 acts as a municipal advisor, and no municipal advi19 sor may engage in any act, practice, or course of 

20 business which is not consistent with such municipal 

21 advisor’s fiduciary duty or that is in contravention 

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

23 carry out the previous sentence and subsection 

24 (b)(2)(L)(i), the Board shall— 


pwalker on DSK7TPTVN1PROD with BILLS
4 

HR 2827 RFS

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

2 in accordance with its fiduciary duty to its mu3 nicipal entity clients, but only in connection 

4 with those specific activities involving such mu5 nicipal entity client described under subsection 

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

7 (e)(4)(C)); 

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

9 terminate in relation to such activities; and 

10 ‘‘(C) not prohibit principal transactions by 

11 municipal advisors or the receipt of compensa12 tion based on commissions or other standard 

13 compensation in relation to the purchase or sale 

14 of a security or other instrument (including de15 posit or foreign exchange), except that the 

16 Board— 

17 ‘‘(i) may issue rules requiring a mu18 nicipal advisor to only engage in such 

19 transactions or receive such compensation 

20 in a manner that is consistent with the 

21 municipal advisor’s fiduciary duty; and 

22 ‘‘(ii) may prohibit a municipal advisor 

23 that has been engaged to provide advice 

24 with respect to an underwritten offering of 


pwalker on DSK7TPTVN1PROD with BILLS
5 

HR 2827 RFS

1 securities from concurrently acting as an 

2 underwriter of such offering.’’. 

3 (b) TECHNICAL CORRECTION.— 

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

5 Dodd-Frank Wall Street Reform and Consumer Pro6 tection Act is amended to read as follows: 

7 ‘‘(5) in paragraph (4), by inserting ‘or munic8 ipal advisor’ after ‘municipal securities dealer’ each 

9 place that term appears;’’. 

10 (2) EFFECTIVE DATE.—The amendment made 

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

12 enactment of the Dodd-Frank Wall Street Reform 

13 and Consumer Protection Act, as if included in such 

14 Act. 

15 SEC. 4. DEFINITION OF INVESTMENT STRATEGIES. 

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

17 1934 (15 U.S.C. 78o–4(e)(3)) is amended to read as fol18 lows: 

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

20 ‘‘(A) means plans or programs for the in21 vestment of the direct proceeds of municipal se22 curities (but not other public funds) that are 

23 not municipal derivatives or guaranteed invest24 ment contracts, and the recommendation of and 

25 brokerage of municipal escrow investments, 


pwalker on DSK7TPTVN1PROD with BILLS
6 

HR 2827 RFS

1 where, with respect to the municipal advisor of2 fering such plans, programs, or recommenda3 tions, such proceeds of municipal securities and 

4 municipal escrow investments— 

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

6 the municipal advisor to be comprised of 

7 funds or investments maintained in a seg8 regated account that is exclusively for the 

9 purpose of maintaining such proceeds or 

10 escrow investment; or 

11 ‘‘(ii) have been identified to the mu12 nicipal advisor, in writing, as funds or in13 vestments that constitute the proceeds of 

14 municipal securities or municipal escrow 

15 investments; and 

16 ‘‘(B) does not include— 

17 ‘‘(i) merely acting as a broker or prin18 cipal with respect to the purchase or sale 

19 of a security or other instrument (includ20 ing deposit or foreign exchange); 

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

22 quotations for, investment options or secu23 rities or other instruments which may be 

24 available for purchase or investment or 


pwalker on DSK7TPTVN1PROD with BILLS
7 

HR 2827 RFS

1 which satisfy investment criteria specified 

2 by a municipal entity; 

3 ‘‘(iii) acting as a custodian; 

4 ‘‘(iv) providing generalized informa5 tion concerning investments which are not 

6 tailored to the specific investment objec7 tives of the municipal entity; or 

8 ‘‘(v) providing advice with respect to 

9 matters other than the investment of funds 

10 or financial products;’’. 

11 SEC. 5. DEFINITION OF MUNICIPAL ADVISOR. 

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

13 1934 (15 U.S.C. 78o–4(e)(4)) is amended to read as fol14 lows: 

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

16 ‘‘(A) means a person (who is not a munic17 ipal entity or obligated person, or an employee 

18 of a municipal entity or obligated person) 

19 that— 

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

21 a municipal entity or obligated person to 

22 provide advice to a municipal entity or ob23 ligated person with respect to municipal fi24 nancial products or the issuance of munic25 ipal securities, including advice with reVerDate Mar 15 2010 00:53 Sep 21, 2012 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2827.RFS H2827

pwalker on DSK7TPTVN1PROD with BILLS
8 

HR 2827 RFS

1 spect to the structure, timing, terms, and 

2 other similar matters concerning such fi3 nancial products or issues; or 

4 ‘‘(ii) undertakes a solicitation of a 

5 municipal entity; 

6 ‘‘(B) includes financial advisors, guaran7 teed investment contract brokers, third-party 

8 marketers, placement agents, solicitors, finders, 

9 and swap advisors, if such persons are de10 scribed in either of clauses (i) or (ii) of sub11 paragraph (A) and are not excluded under sub12 paragraph (C); and 

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

14 their performing the following activities— 

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

16 securities dealer registered with the Com17 mission, to the extent that such broker, 

18 dealer, or municipal securities dealer is 

19 serving or is seeking to serve as an under20 writer, placement agent, remarketing 

21 agent, dealer-manager, or in a similar ca22 pacity, or is providing advice related to or 

23 in connection with any such activities and 

24 not for separate compensation, or any perVerDate Mar 15 2010 00:53 Sep 21, 2012 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2827.RFS H2827

pwalker on DSK7TPTVN1PROD with BILLS
9 

HR 2827 RFS

1 son associated with such a broker, dealer, 

2 or municipal securities dealer; 

3 ‘‘(ii) an investment adviser registered 

4 under the Investment Advisers Act of 1940 

5 (15 U.S.C. 80b–1 et seq.) or with any 

6 State or territory of the United States that 

7 is providing investment advice (whether or 

8 not of a type that would subject a person 

9 to registration under such Act), or any 

10 person associated with such an investment 

11 adviser; 

12 ‘‘(iii) any person registered under the 

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

14 seq.) or this Act in relation to such per15 son’s activities with respect to swaps or se16 curity-based swaps that is providing advice 

17 related to swaps or security-based swaps, 

18 or providing advice that is related to or in 

19 connection with any such activities and not 

20 for separate compensation, or any person 

21 associated with such person; 

22 ‘‘(iv) a financial institution engaging 

23 in any of the activities referred to in clause 

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

25 from registration, acting as a dealer or 


pwalker on DSK7TPTVN1PROD with BILLS
10 

HR 2827 RFS

1 principal with respect to deposits, foreign 

2 exchange, or identified banking products 

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

4 of section 206(a) of the Gramm-Leach-Bli5 ley Act (15 U.S.C. 78c(a))), providing 

6 other traditional banking or trust services 

7 otherwise subject to a fiduciary duty under 

8 State or Federal law, providing administra9 tive or operational services or support, or 

10 providing advice that is related to or in 

11 connection with any such activities and not 

12 for separate compensation; 

13 ‘‘(v) any person subject to regulation 

14 by a State insurance regulator providing 

15 insurance products or services or providing 

16 advice that is related to or in connection 

17 with any such activities and not for sepa18 rate compensation; 

19 ‘‘(vi) an accountant (or person associ20 ated with such accountant) providing cus21 tomary and usual accounting services, in22 cluding any attestation or audit service or 

23 issuing letters for underwriters for a mu24 nicipal entity or providing advice that is 

25 related to or in connection with any such 


pwalker on DSK7TPTVN1PROD with BILLS
11 

HR 2827 RFS

1 activities and not for separate compensa2 tion; 

3 ‘‘(vii) any attorney offering legal ad4 vice or providing services that are of a tra5 ditional legal nature; 

6 ‘‘(viii) an engineer providing engineer7 ing advice; or 

8 ‘‘(ix) any elected or appointed member 

9 of a governing body of a municipal entity 

10 or obligated person, with respect to such 

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

12 SEC. 6. DEFINITION OF SOLICITATION OF A MUNICIPAL EN13 TITY OR OBLIGATED PERSON. 

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

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

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

17 following: ‘‘a municipal entity, but communications on be18 half of a fund or other collective investment vehicle shall 

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

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

21 SEC. 7. DEFINITION OF MUNICIPAL DERIVATIVE. 

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

23 1934 (15 U.S.C. 78o–4(e)) is amended— 

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

25 the end and inserting a semicolon; and 


pwalker on DSK7TPTVN1PROD with BILLS
12 

HR 2827 RFS

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

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

3 swap or security-based swap in which a municipal 

4 entity is a counterparty; and’’. 

5 SEC. 8. DEFINITION OF ON BEHALF OF. 

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

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

8 further amended by adding at the end the following: 

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

10 a municipal entity or obligated person’ means to 

11 provide advice to a person that is known to be en12 gaged by a municipal entity or obligated person to 

13 provide services to such municipal entity or obligated 

14 person in connection with the issuance of municipal 

15 securities.’’. 

Passed the House of Representatives September 19, 

2012. 

Attest: KAREN L. HAAS, 

Clerk. 


pwalker on DSK7TPTVN1PROD with BILLS