Registration, Compliance, Supervision, and Recordkeeping
Registration mechanics
A firm registers as a municipal advisor on SEC Form MA, and each natural person who engages in municipal advisory activities on its behalf is listed on Form MA-I. Registration is not complete until it is also effective with the MSRB. Amendments are required promptly for material changes, and the annual updating amendment is due within 90 days of fiscal year end. Withdrawal is made on Form MA-W; records and disciplinary obligations survive withdrawal.
Supervision and compliance
Rule G-44 requires written supervisory and compliance policies reasonably designed to achieve compliance, a designated compliance officer with real authority, annual review and updating of the procedures, and appropriate training. Supervision must target the specific risks of this business: conflicts of interest, pay-to-play, gifts, engagement documentation, and the accuracy of advice delivered to issuers.
Records
The SEC's books-and-records requirements for municipal advisors require preservation - generally five years, with the most recent two readily accessible - of engagement records, correspondence, conflict disclosures, and the basis for advice. Retention obligations survive the end of an engagement and typically the end of the firm.
Other obligations
Rule G-37 restricts political contributions and solicitation of contributions from issuer officials; Rule G-43 limits gifts and payments to issuer personnel. Firms also need an anti-money-laundering program and privacy safeguards.
Traps
- Assuming MSRB registration substitutes for SEC registration - both are needed.
- Creating a compliance-officer title with no authority or resources.
- Delegating the annual review to a checklist with no testing.
- Destroying engagement files once the financing closes.
Rule of thumb
Document as if the examination starts tomorrow: every engagement letter, conflict disclosure, and recommendation memo should stand alone, be dated, and name the responsible person.