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ICBA Policy Resolutions for 2013
Track I: Legislation and Regulation
MUNICIPAL ADVISOR REGISTRATION
Position
- ICBA urges the SEC to use its broad authority under Section 975 of the Dodd-Frank Act to exempt community banks from registration as municipal advisors with the SEC and the Municipal Securities Rulemaking Board (MSRB).
- ICBA supports legislation that would completely exempt banks from the requirement to register as a municipal advisor or that would exempt a broad range of traditional banking products and services that banks offer to municipalities.
Background
Community banks have safely provided traditional banking services to municipalities for decades. Municipalities appreciate the ability to support local community banks and ensure that their funds are reinvested in the community. However, recent incidents in which Wall Street firms sold municipalities opaque financial derivatives, causing them to lose significant sums, led Congress to create a municipal advisor registration requirement. ICBA supports the intent of Section 975 of the Dodd Frank Act which is to require the registration of those entities with the Securities and Exchange Commission that are unregulated, not subject to the supervision of the banking agencies, and that perform advisory services to municipalities.
Municipal Advisor Rules. ICBA is concerned that SEC rules under Section 975 of the Dodd-Frank Act, if interpreted broadly, could require thousands of community banks and their employees to register with the SEC and the Municipal Securities Rulemaking Board (MSRB) for doing nothing more than offering traditional bank products and services to municipal customers such as advising municipalities about interest rates on deposits, making loans to municipalities, or entering into a cash management arrangement with them. Such an interpretation could lead community banks to stop offering services to municipalities, which would increase the cost of banking for them. The intent of Section 975 of the Dodd-Frank Act was to require the registration of unregulated entities that act as municipal advisors and that are paid a fee for their advisory services. Accordingly, ICBA urges the SEC to use its broad authority to exempt community banks from registration under the SEC rules.
Legislative Exemption. ICBA supports legislation that would completely exempt banks and their employees from the requirement to register as a municipal advisor or that would exempt a broad range of traditional banking products and services that banks offer to municipalities. These products and services would include making loans and deposits to municipalities, offering cash management services, trust and custody services, and interest rate swaps. Generally, any product or services offered by a bank to a municipality where the bank does not receive a separate fee for advising the municipality should be exempt. During 2012, ICBA supported H.R. 2827, introduced by Rep. Robert J. Dold, which would have exempted financial institutions and their employees from registering under the new SEC rules.
Staff contact: Chris Cole
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