Municipal Advisory Activities, Engagements, and Documentation
Why the engagement letter matters
Rule G-42(b) requires a municipal advisor to evidence its engagement in writing before, or promptly after, the start of municipal advisory activities. The writing is not a formality - it is the first document examiners and enforcement attorneys read, and it defines the scope of the fiduciary duty.
Required content
Typically: identification of the municipal entity client; the date; the nature and scope of the services, described specifically enough to be understood; the fees and the basis for them (contingent versus fixed); disclosure of material conflicts; and the terms of termination. Scope creep is a supervision failure - advice outside the written scope may still create fiduciary exposure.
Related documentation
The file should also contain the reasonable-inquiry record supporting the advice: the issuer's financials, debt profile, capital plan, rating reports, and the alternatives considered. The issuer owns the official statement, but the advisor must not supply inaccurate information to the issuer, underwriter, or bond counsel.
Traps
- Believing a verbal engagement followed by an invoice satisfies G-42(b).
- Describing scope only as “financial advisory services.”
- Keeping conflict disclosures in the file but out of the engagement letter.
- Assuming a fee paid by the underwriter removes the need for a written engagement with the issuer.
Rule of thumb
If it is not in the engagement letter, assume you cannot bill for it - and assume you may still be responsible for it. Draft the scope, fee, and conflicts sections before the first substantive conversation with the issuer.