[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3620 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 3620

  To amend the Securities Exchange Act of 1934 to clarify provisions 
    relating to the regulation of municipal advisors, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 21, 2012

  Mr. Wicker introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
  To amend the Securities Exchange Act of 1934 to clarify provisions 
    relating to the regulation of municipal advisors, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. REGISTRATION OF MUNICIPAL SECURITIES DEALERS.

    Section 15B(a)(1)(B) of the Securities Exchange Act of 1934 (15 
U.S.C. 78o-4(a)(1)(B)) is amended by striking ``or on behalf of''.

SEC. 2. MUNICIPAL SECURITIES RULEMAKING BOARD; RULES AND REGULATIONS.

    Section 15B(b)(2)(L) of the Securities Exchange Act of 1934 (15 
U.S.C. 78o-4(b)(2)(L)) is amended--
            (1) in clause (iii), by striking ``and'' at the end;
            (2) in clause (iv), by striking the period and inserting 
        ``; and''; and
            (3) by adding at the end the following:
                            ``(v) not regulate as a municipal advisor 
                        the activities of a person referred to in 
                        subparagraph (C) of subsection (e)(4), to the 
                        extent that such activities are described under 
                        such subparagraph.''.

SEC. 3. DISCIPLINE OF MUNICIPAL SECURITIES DEALERS; CENSURE; SUSPENSION 
              OR REVOCATION OF REGISTRATION.

    (a) In General.--Section 15B(c)(1) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78o-4(c)(1)) is amended to read as follows:
            ``(1) No broker, dealer, or municipal securities dealer 
        shall make use of the mails or any means or instrumentality of 
        interstate commerce to effect any transaction in, or to induce 
        or attempt to induce the purchase or sale of, any municipal 
        security, and no broker, dealer, municipal securities dealer, 
        or municipal advisor shall make use of the mails or any means 
        or instrumentality of interstate commerce to provide advice to 
        or on behalf of a municipal entity or obligated person with 
        respect to municipal financial products, the issuance of 
        municipal securities, or to undertake a solicitation of a 
        municipal entity or obligated person, in contravention of any 
        rule of the Board. A municipal advisor, when acting pursuant to 
        an engagement described in subsection (e)(4)(A)(i), and any 
        person associated with such municipal advisor, shall be deemed 
        to have a fiduciary duty with respect to such engagement to any 
        municipal entity for whom such municipal advisor acts as a 
        municipal advisor, and no municipal advisor may engage in any 
        act, practice, or course of business which is not consistent 
        with such municipal advisor's fiduciary duty or that is in 
        contravention of any rule of the Board. In issuing regulations 
        to carry out the previous sentence and subsection (b)(2)(L)(i), 
        the Board shall--
                    ``(A) require that a municipal advisor act in 
                accordance with its fiduciary duty to its municipal 
                entity clients, but only in connection with those 
                specific activities involving such municipal entity 
                client described under subsection (e)(4)(A)(i) (and not 
                excluded under subsection (e)(4)(C));
                    ``(B) specify when such duties begin and terminate 
                in relation to such activities; and
                    ``(C) not prohibit principal transactions by 
                municipal advisors or the receipt of compensation based 
                on commissions or other standard compensation in 
                relation to the purchase or sale of a security or other 
                instrument (including deposit or foreign exchange), 
                except that the Board--
                            ``(i) may issue rules requiring a municipal 
                        advisor to only engage in such transactions or 
                        receive such compensation in a manner that is 
                        consistent with the municipal advisor's 
                        fiduciary duty; and
                            ``(ii) may prohibit a municipal advisor 
                        that has been engaged to provide advice with 
                        respect to an underwritten offering of 
                        securities from concurrently acting as an 
                        underwriter of such offering.''.
    (b) Technical Correction.--
            (1) In general.--Section 975(c)(5) of the Dodd-Frank Wall 
        Street Reform and Consumer Protection Act is amended to read as 
        follows:
            ``(5) in paragraph (4), by inserting `or municipal advisor' 
        after `municipal securities dealer' each place that term 
        appears;''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of the Dodd-
        Frank Wall Street Reform and Consumer Protection Act, as if 
        included in such Act.

SEC. 4. DEFINITION OF INVESTMENT STRATEGIES.

    Section 15B(e)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o-4(e)(3)) is amended to read as follows:
            ``(3) the term `investment strategies'--
                    ``(A) means plans or programs for the investment of 
                the direct proceeds of municipal securities (but not 
                other public funds) that are not municipal derivatives 
                or guaranteed investment contracts, and the 
                recommendation of and brokerage of municipal escrow 
                investments, where, with respect to the municipal 
                advisor offering such plans, programs, or 
                recommendations, such proceeds of municipal securities 
                and municipal escrow investments--
                            ``(i) are known or should be known to the 
                        municipal advisor to be comprised of funds or 
                        investments maintained in a segregated account 
                        that is exclusively for the purpose of 
                        maintaining such proceeds or escrow investment; 
                        or
                            ``(ii) have been identified to the 
                        municipal advisor, in writing, as funds or 
                        investments that constitute the proceeds of 
                        municipal securities or municipal escrow 
                        investments; and
                    ``(B) does not include--
                            ``(i) merely acting as a broker or 
                        principal with respect to the purchase or sale 
                        of a security or other instrument (including 
                        deposit or foreign exchange);
                            ``(ii) providing a list of, or price 
                        quotations for, investment options or 
                        securities or other instruments which may be 
                        available for purchase or investment or which 
                        satisfy investment criteria specified by a 
                        municipal entity;
                            ``(iii) acting as a custodian;
                            ``(iv) providing generalized information 
                        concerning investments which are not tailored 
                        to the specific investment objectives of the 
                        municipal entity; or
                            ``(v) providing advice with respect to 
                        matters other than the investment of funds or 
                        financial products;''.

SEC. 5. DEFINITION OF MUNICIPAL ADVISOR.

    Section 15B(e)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o-4(e)(4)) is amended to read as follows:
            ``(4) the term `municipal advisor'--
                    ``(A) means a person (who is not a municipal entity 
                or obligated person, or an employee of a municipal 
                entity or obligated person) that--
                            ``(i) is engaged, for compensation, by a 
                        municipal entity or obligated person to provide 
                        advice to a municipal entity or obligated 
                        person with respect to municipal financial 
                        products or the issuance of municipal 
                        securities, including advice with respect to 
                        the structure, timing, terms, and other similar 
                        matters concerning such financial products or 
                        issues; or
                            ``(ii) undertakes a solicitation of a 
                        municipal entity;
                    ``(B) includes financial advisors, guaranteed 
                investment contract brokers, third-party marketers, 
                placement agents, solicitors, finders, and swap 
                advisors, if such persons are described in either of 
                clauses (i) or (ii) of subparagraph (A) and are not 
                excluded under subparagraph (C); and
                    ``(C) does not include, solely as a result of their 
                performing the following activities--
                            ``(i) any broker, dealer, or municipal 
                        securities dealer registered with the 
                        Commission, to the extent that such broker, 
                        dealer, or municipal securities dealer is 
                        serving or is seeking to serve as an 
                        underwriter, placement agent, remarketing 
                        agent, dealer-manager, or in a similar 
                        capacity, or is providing advice related to or 
                        in connection with any such activities and not 
                        for separate compensation, or any person 
                        associated with such a broker, dealer, or 
                        municipal securities dealer;
                            ``(ii) an investment adviser registered 
                        under the Investment Advisers Act of 1940 (15 
                        U.S.C. 80b-1 et seq.) or with any State or 
                        territory of the United States that is 
                        providing investment advice (whether or not of 
                        a type that would subject a person to 
                        registration under such Act), or any person 
                        associated with such an investment adviser;
                            ``(iii) any person registered under the 
                        Commodity Exchange Act (7 U.S.C. 1 et seq.) or 
                        this Act in relation to such person's 
                        activities with respect to swaps or security-
                        based swaps that is providing advice related to 
                        swaps or security-based swaps, or providing 
                        advice that is related to or in connection with 
                        any such activities and not for separate 
                        compensation, or any person associated with 
                        such person;
                            ``(iv) a financial institution engaging in 
                        any of the activities referred to in clause 
                        (i), (ii), or (iii) pursuant to an exemption 
                        from registration, acting as a dealer or 
                        principal with respect to deposits, foreign 
                        exchange, or identified banking products (as 
                        defined in paragraphs (1) through (5) of 
                        section 206(a) of the Gramm-Leach-Bliley Act 
                        (15 U.S.C. 78c(a))), providing other 
                        traditional banking or trust services otherwise 
                        subject to a fiduciary duty under State or 
                        Federal law, providing administrative or 
                        operational services or support, or providing 
                        advice that is related to or in connection with 
                        any such activities and not for separate 
                        compensation;
                            ``(v) any person subject to regulation by a 
                        State insurance regulator providing insurance 
                        products or services or providing advice that 
                        is related to or in connection with any such 
                        activities and not for separate compensation;
                            ``(vi) an accountant (or person associated 
                        with such accountant) providing customary and 
                        usual accounting services, including any 
                        attestation or audit service or issuing letters 
                        for underwriters for a municipal entity or 
                        providing advice that is related to or in 
                        connection with any such activities and not for 
                        separate compensation;
                            ``(vii) any attorney offering legal advice 
                        or providing services that are of a traditional 
                        legal nature;
                            ``(viii) an engineer providing engineering 
                        advice; or
                            ``(ix) any elected or appointed member of a 
                        governing body of a municipal entity or 
                        obligated person, with respect to such member's 
                        role on the governing body;''.

SEC. 6. DEFINITION OF SOLICITATION OF A MUNICIPAL ENTITY OR OBLIGATED 
              PERSON.

    Section 15B(e)(9) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o-4(e)(9)) is amended by striking ``or on behalf of a municipal 
entity; and'' and inserting the following: ``a municipal entity, but 
communications on behalf of a fund or other collective investment 
vehicle shall not be deemed to be on behalf of any investment adviser 
that advises or manages such fund or investment vehicle;''.

SEC. 7. DEFINITION OF MUNICIPAL DERIVATIVE.

    Section 15B(e) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o-4(e)) is amended--
            (1) in paragraph (10), by striking the period on the end 
        and inserting a semicolon; and
            (2) by adding at the end the following:
            ``(11) the term `municipal derivative' means a swap or 
        security-based swap in which a municipal entity is a 
        counterparty; and''.

SEC. 8. DEFINITION OF ON BEHALF OF.

    Section 15B(e) of the Securities Exchange Act of 1934 (15 U.S.C. 
78o-4(e)), as amended by section 7, is further amended by adding at the 
end the following:
            ``(12) the term to provide advice `on behalf of a municipal 
        entity or obligated person' means to provide advice to a person 
        that is known to be engaged by a municipal entity or obligated 
        person to provide services to such municipal entity or 
        obligated person in connection with the issuance of municipal 
        securities.''.
                                 <all>