The Securities and Exchange Commission (SEC) has proposed a registration rule for volunteer board members that would have a chilling effect on local governments' ability to recruit volunteers to serve on entities such as Downtown Development Authority boards, Tax Increment Financing boards, EDC boards, etc.
The rule would require such persons to register as "municipal advisors" with the SEC. The proposed rule is the result of federal legislation enacted after the credit crisis to require formerly unregistered, non-broker dealer advisors to register, similar to broker-dealers so they can be regulated. The problem is that the SEC has defined "municipal advisor" so broadly that it includes every non-elected official who is some way might question or comment upon a potentiall debt issuance.
Thus, the un-elected members of local boards would come within the scope of the rules, meaning volunteer members of the DDA, EDC, or TIF boards would have to register with the SEC.
Reports are that the SEC is serious about pressing forward and the National League of Cities has submitted a letter to the SEC opposing the rule and local officials are urged to write their members of Congress to bring this to their attention and prevent the SEC from over-reaching as it puts a rule in place. Comments can also be submitted on-line directly to the SEC.
Arnold Weinfeld is Director of Strategic Initiatives and Federal Affairs for the Michigan Muncipal League. He can be reached at 517-908-0304 or by e-mail.
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