The American Institute of CPAs has expanded to Congress its ongoing push for a narrower definition of “municipal advisor” than what the U.S. Securities and Exchange Commission proposed in 2010 in order to implement Section 975 of the Dodd-Frank Act.
Section 975 of the Dodd-Frank Act requires the SEC to regulate advisors to state and local governments who issue municipal securities. The law defined “municipal advisors” to include, among others, financial advisors. The AICPA supports the change as a means to strengthen investor protections in the municipal securities market and believes that the establishment of a permanent registration regime with the Commission for municipal advisors, including the imposition of certain record-keeping requirements, will further the goals of accountability and transparency in the financial system.
However, the AICPA believes the SEC’s proposed rules create too broad a definition of “municipal advisor.” The SEC did not completely carve out accountants from the definition of “municipal advisor” because it believes that some of the services accountants may provide would constitute advice that should require accountants to register (such as advice about the structure, timing, terms and other similar matters concerning the issuance of municipal securities).
The SEC did acknowledge though that some of the services CPA firms perform, such as the preparation or audit of financial statements, or the issuance of letters for underwriters by accountants, would not constitute the provision of advice (hence they would not have to register if performing only these services).
The AICPA’s Feb. 25, 2011 comment letter on the SEC’s proposed rules raised concerns that the definition of “municipal advisor” was still overly broad and would encompass accountants who are performing “customary and usual” accounting services. The letter concluded that such customary and usual services should not be subject to the required registration.
The SEC has not yet issued a final regulation resolving the applicability of the registration requirement to accountants. The AICPA is continuing to work to encourage the SEC to modify the final rule based on the profession’s input.
On Aug. 26, 2011, Congressman Robert Dold, an Illinois Republican, introduced H.R. 2827, a bill to narrow the definition of municipal advisors. AICPA has worked closely with the Congressman to fashion an appropriate definition that will not encompass accountants performing customary and usual services.
A markup of the bill was held in the Subcommittee on Capital Markets of the House Committee on Financial Services on Aug. 1, 2012. Congressman Dold noted, in his opening statement that he is talking with Congresswoman Gwen Moore, a Democrat from Wisconsin, and with other members of the Committee, on a bipartisan basis, to create a substitute bill that would further refine the definition of a municipal advisor. The final details had not been worked out in time for the markup, but Congressman Dold said he intended to offer it at the full Committee markup of the bill, which will occur in September. Both Congressman Dold and Congresswoman Moore, in their opening statements, noted that the definition of” municipal advisor” must be narrowed so that a number of professions, including accounting, are not covered by the definition.
The AICPA will continue to work with members of Congress and SEC officials to achieve a solution.
For more information see the municipal advisors page on the AICPA’s website.