163 
such statutory provisions, rules, and regulations, 
another person who commits such a violation, if 
such other person is subject to his supervision; or 
‘‘(H) is subject to any final order of a State se-
curities commission (or any agency or officer per-
forming like functions), State authority that super-
vises or examines banks, savings associations, or cred-
it unions, State insurance commission (or any agency 
or office performing like functions), an appropriate 
Federal banking agency (as defined in section 3 of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(q))), 
or the National Credit Union Administration, that— 
‘‘(i) bars such person from association with 
an entity regulated by such commission, author-
ity, agency, or officer, or from engaging in the 
business of securities, insurance, banking, sav-
ings association activities, or credit union activi-
ties; or 
‘‘(ii) constitutes a final order based on vio-
lations of any laws or regulations that prohibit 
fraudulent, manipulative, or deceptive conduct. 
‘‘(5) Pending final determination whether any reg-
istration under this subsection shall be revoked, the Com-
mission, by order, may suspend such registration, if such 
suspension appears to the Commission, after notice and op-
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164 
portunity for hearing, to be necessary or appropriate in the 
public interest or for the protection of investors. Any reg-
istered municipal financial adviser may, upon such terms 
and conditions as the Commission deems necessary or ap-
propriate in the public interest or for the protection of in-
vestors, withdraw from registration by filing a written no-
tice of withdrawal with the Commission. If the Commission 
finds that any registered municipal financial adviser is no 
longer in existence or has ceased to do business as a munic-
ipal financial adviser, the Commission, by order, shall can-
cel the registration of such municipal financial adviser. 
‘‘(6)(A) With respect to any person who is associated, 
who is seeking to become associated, or, at the time of the 
alleged misconduct, who was associated or was seeking to 
become associated with a municipal financial adviser, the 
Commission, by order, shall censure, place limitations on 
the activities or functions of such person, or suspend for 
a period not exceeding 12 months, or bar such person from 
being associated with a municipal financial adviser, if the 
Commission finds, on the record after notice and oppor-
tunity for a hearing, that such censure, placing of limita-
tions, suspension, or bar is in the public interest and that 
such person— 
‘‘(i) has committed or omitted any act, or is sub-
ject to an order or finding, enumerated in subpara-
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165 
graph (A), (D), or (E) of paragraph (4) of this sub-
section; 
‘‘(ii) has been convicted of any offense specified 
in subparagraph (B) of such paragraph (4) within 10 
years of the commencement of the proceedings under 
this paragraph; or 
‘‘(iii) is enjoined from any action, conduct, or 
practice specified in subparagraph (C) of such para-
graph (4). 
‘‘(B) It shall be unlawful— 
‘‘(i) for any person as to whom an order under 
subparagraph (A) is in effect, without the consent of 
the Commission, willfully to become, or to be, associ-
ated with a municipal financial adviser in con-
travention of such order; or 
‘‘(ii) for any municipal financial adviser to per-
mit such a person, without the consent of the Com-
mission, to become or remain, a person associated 
with the municipal financial adviser in contravention 
of such order, if such municipal financial adviser 
knew, or in the exercise of reasonable care should have 
known, of such order. 
‘‘(7) No registered municipal financial adviser shall 
act as such unless it meets such standards of operational 
capability and such municipal financial adviser and all 
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166 
natural persons associated with such municipal financial 
adviser meet such standards of training, experience, com-
petence, and such other qualifications as the Commission 
finds necessary or appropriate in the public interest or for 
the protection of investors. The Commission shall establish 
such standards by rules and regulations, which may— 
‘‘(A) specify that all or any portion of such 
standards shall be applicable to any class of munic-
ipal financial advisers and persons associated with 
municipal financial advisers; 
‘‘(B) require persons in any such class to pass 
tests prescribed in accordance with such rules and 
regulations, which tests shall, with respect to any 
class of partners, officers, or supervisory employees 
(which latter term may be defined by the Commis-
sion’s rules and regulations) engaged in the manage-
ment of the municipal financial adviser, include ques-
tions relating to bookkeeping, accounting, supervision 
of employees, maintenance of records, and other ap-
propriate matters; and 
‘‘(C) provide that persons in any such class other 
than municipal financial advisers and partners, offi-
cers, and supervisory employees of municipal finan-
cial advisers, may be qualified solely on the basis of 
compliance with such standards of training and such 
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167 
other qualifications as the Commission finds appro-
priate. 
The Commission, by rule, may prescribe reasonable fees and 
charges to defray its costs in carrying out this paragraph, 
including, but not limited to, fees for any test administered 
by it or under its direction. 
‘‘(c)(1)(A) No municipal financial adviser shall make 
use of the mails or any means or instrumentality of inter-
state commerce in connection with which such municipal 
financial adviser engages in any fraudulent, deceptive, or 
manipulative act or practice or violates such rules and reg-
ulations regarding conflicts of interest or fair practices, in-
cluding but not limited to rules and regulations related to 
political contributions, as the Commission shall prescribe 
in the public interest or for the protection of investors or 
to maintain fair and orderly markets. 
‘‘(B) The Commission shall, for the purposes of this 
paragraph as the Commission finds necessary or appro-
priate in the public interest or for the protection of inves-
tors, by rules and regulations define, and prescribe means 
reasonably designed to prevent, such acts and practices as 
are fraudulent, deceptive, or manipulative. 
‘‘(2) If the Commission finds, after notice and oppor-
tunity for a hearing, that any person subject to the provi-
sions of this section or any rule or regulation thereunder 
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168 
has failed to comply with any such provision, rule, or regu-
lation in any material respect, the Commission may pub-
lish its findings and issue an order requiring such person, 
and any person who was a cause of the failure to comply 
due to an act or omission the person knew or should have 
known would contribute to the failure to comply, to comply, 
or to take steps to effect compliance, with such provision 
or such rule or regulation thereunder upon such terms and 
conditions and within such time as the Commission may 
specify in such order. 
‘‘(d) Every registered municipal financial adviser 
shall establish, maintain, and enforce written policies and 
procedures reasonably designed, taking into consideration 
the nature of such municipal financial adviser’s business, 
to prevent the misuse in violation of this title, or the rules 
or regulations thereunder, of material, nonpublic informa-
tion by such municipal financial adviser or any person as-
sociated with such municipal financial adviser. The Com-
mission, as it deems necessary or appropriate in the public 
interest or for the protection of investors, shall adopt rules 
or regulations to require specific policies or procedures rea-
sonably designed to prevent misuse in violation of this title 
(or the rules or regulations thereunder) of material, non-
public information. 
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169 
‘‘(e) A municipal financial adviser and any person as-
sociated with such municipal financial adviser shall be 
deemed to have a fiduciary duty to any municipal securi-
ties issuer for whom such municipal financial adviser acts 
as a municipal financial adviser. A municipal financial 
adviser may not engage in any act, practice, or course of 
business which is not consistent with a municipal financial 
adviser’s fiduciary duty. The Commission shall, for the pur-
poses of this paragraph, by rules and regulations define, 
and prescribe means reasonably designed to prevent, such 
acts, practices, and courses of business as are not consistent 
with a municipal financial adviser’s fiduciary duty to its 
clients.’’. 
(b) DEFINITION.—Section 3(a) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78c(a)) is amended by add-
ing at the end the following new paragraphs: 
‘‘(65) MUNICIPAL FINANCIAL ADVISER.— 
‘‘(A) The term ‘municipal financial adviser’ 
means a person who, for compensation, engages 
in the business of— 
‘‘(i) providing advice to a municipal 
securities issuer with respect to— 
‘‘(I) the issuance or proposed 
issuance of securities, including any 
remarketing of municipal securities di-
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170 
rectly or indirectly by or on behalf of 
a municipal securities issuer; 
‘‘(II) the investment of proceeds 
from securities issued by such munic-
ipal securities issuer; 
‘‘(III) the hedging of any risks as-
sociated with subclauses (I) or (II), in-
cluding advice as to swap agreements 
(as defined in section 206A of the 
Gramm-Leach-Bliley Act regardless of 
whether the counterparties constitute 
eligible contract participants); or 
‘‘(IV) preparation of disclosure 
documents in connection with the 
issuance, proposed issuance, or pre-
vious issuance of securities issued by a 
municipal securities issuer, including, 
without limitation, official statements 
and documents prepared in connection 
with a written agreement or contract 
for the benefit of holders of such securi-
ties described in section 240.15c2–12 of 
title 17, Code of Federal Regulations; 
‘‘(ii) assisting a municipal securities 
issuer in selecting or negotiating guaranteed 
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171 
investment contracts or other investment 
products; or 
‘‘(iii) assisting any municipal securi-
ties issuer in the primary offering of securi-
ties not involving a public offering. 
‘‘(B) Such term does not include— 
‘‘(i) an attorney, if the attorney is of-
fering advice or providing services that are 
of a traditional legal nature; 
‘‘(ii) a nationally recognized statistical 
rating organization to the extent it is in-
volved in the process of developing credit 
ratings; 
‘‘(iii) a registered broker-dealer when 
acting as an underwriter, as such term is 
defined in section 2(a)(11) of the Securities 
Act of 1933 (15 U.S.C. section 77b(a)(11)); 
or 
‘‘(iv) a State or any political subdivi-
sion thereof. 
‘‘(66) MUNICIPAL
SECURITIES
ISSUER.—The 
term ‘municipal securities issuer’ means— 
‘‘(A) any entity that has the ability to issue 
a security the interest on which is excludable 
from gross income under section 103 of the Inter-
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172 
nal Revenue Code of 1986 and the regulations 
thereunder; or 
‘‘(B) any person who receives the proceeds 
generated from the issuance of municipal securi-
ties. 
‘‘(67) PERSON ASSOCIATED WITH A MUNICIPAL 
FINANCIAL ADVISER; ASSOCIATED PERSON OF A MU-
NICIPAL FINANCIAL ADVISER.—The term ‘person asso-
ciated with a municipal financial adviser’ or ‘associ-
ated person of a municipal financial adviser’ means 
any partner, officer, director, or branch manager of 
such municipal financial adviser (or any person oc-
cupying a similar status or performing similar func-
tions), any person directly or indirectly controlling, 
controlled by, or under common control with such 
municipal financial adviser, or any employee of such 
municipal financial adviser, except that any person 
associated with a municipal financial adviser whose 
functions are solely clerical or ministerial shall not be 
included in the meaning of such term for purposes of 
section 15F(b) (other than paragraph (6) thereof).’’. 
SEC. 802. CONFORMING AMENDMENTS. 
(a) SECURITIES EXCHANGE ACT OF 1934 .—The Secu-
rities Exchange Act of 1934 is amended— 
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173 
(1) 
in 
section 
15(b)(4)(B)(ii) 
(15 
U.S.C. 
78o(b)(4)(B)(ii)), by inserting ‘‘municipal finance 
adviser,’’ after ‘‘nationally recognized statistical rat-
ing organization,’’; 
(2) 
in 
section 
15(b)(4)(C) 
(15 
U.S.C. 
78o(b)(4)(C)), by inserting ‘‘municipal finance ad-
viser,’’ after ‘‘nationally recognized statistical rating 
organization,’’; and 
(3) in section 17(a)(1) (15 U.S.C. 78q(a)(1)), by 
inserting ‘‘registered municipal financial adviser,’’ 
after ‘‘nationally recognized statistical rating organi-
zation,’’. 
(b) INVESTMENT COMPANY ACT OF 1940.—The Invest-
ment Company Act of 1940 is amended— 
(1) in section 2(a) (15 U.S.C. 80a–2(a)), by in-
serting at the end the following new paragraph: 
‘‘(54) The term ‘municipal finance adviser’ has 
the same meaning as in section 3 of the Securities 
Exchange Act of 1934.’’; 
(2) in section 9(a)(1) (15 U.S.C. 80a–9(a)(1)), 
by inserting ‘‘municipal finance adviser,’’ after ‘‘cred-
it rating agency,’’; and 
(3) in section 9(a)(2) (15 U.S.C. 80a–9(a)(2)), 
by inserting ‘‘municipal finance adviser,’’ after ‘‘cred-
it rating agency,’’. 
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174 
(c) INVESTMENT ADVISERS ACT OF 1940.—The Invest-
ment Advisers Act of 1940 is amended— 
(1) in section 202(a) (15 U.S.C. 80b–2(a)), by 
inserting at the end the following new paragraph: 
‘‘(29) The term ‘municipal finance adviser’ has 
the same meaning as in section 3 of the Securities 
Exchange Act of 1934.’’; 
(2) in section 203(e)(2)(B) (15 U.S.C. 80b– 
3(e)(2)(B)), by inserting ‘‘municipal finance adviser,’’ 
after ‘‘credit rating agency,’’; and 
(3) in section 203(e)(4) (15 U.S.C. 80b–3(e)(4)) 
is amended by inserting ‘‘municipal finance adviser,’’ 
after ‘‘credit rating agency,’’. 
SEC. 803. EFFECTIVE DATES. 
(a) IN GENERAL.—The amendments made by this title 
shall take effect 30 days after the date of the enactment of 
this Act. 
(b) EFFECTIVE DATE AND REQUIREMENTS FOR REGU-
LATIONS.—Notwithstanding subsection (a), the Securities 
and Exchange Commission shall, within 120 days after the 
date of the enactment of this Act, publish for notice and 
public comment such regulations as are initially required 
to implement this title, and shall take final action with re-
spect to such regulations not later than 270 days after the 
date of enactment of this Act. 
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(c) REGISTRATION DATE.—No person may continue to 
act as a municipal financial adviser, as such term is de-
fined in section 3(a)(65) of the Securities Exchange Act of 
1934 (as added by this title), after 30 days after the date 
the regulations described in subsection (b) become effective 
unless such person has been registered as required by the 
amendment made by section 701 of this title. 
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Union Calendar No. 408 
111TH CONGRESS 
2D SESSION 
H. R. 3817 
[Report No. 111–687, Part I] 
A BILL 
To provide the Securities and Exchange Commis-
sion with additional authorities to protect inves-
tors from violations of the securities laws, and 
for other purposes. 
DECEMBER 17, 2010 
Committee on the Judiciary discharged; committed to the 
Committee of the Whole House on the State of the 
Union and ordered to be printed 
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