[Congressional Record Volume 156, Number 172 (Tuesday, December 21, 2010)]
[Senate]
[Page S10921]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   REGISTRATION OF MUNICIPAL ADVISERS

  Mr. DODD. Madam President, on the occasion of the Municipal 
Securities Rulemaking Board's, MSRB, implementation of congressionally 
mandated registration of municipal advisers, I would like to briefly 
speak on this important development. Congress in the Dodd-Frank Act of 
2010 sought to enhance the regulation of the $3 trillion municipal 
securities market. The law expanded the authority of the MSRB in 
recognition of the MSRB's deep and specialized expertise, and the law 
expanded the mission of the MSRB to protect issuers and other municipal 
entities. It directed the MSRB to write rules regulating municipal 
advisers--persons and firms that advise municipalities and public 
pension funds or solicit their business on behalf of others, which 
includes ``financial advisers, placement agents, swap advisers'' and 
others. The law also reaffirmed the MSRB's authority to regulate the 
conduct of municipal securities dealers. At the same time, Congress 
required municipal advisers to exercise a higher, fiduciary standard of 
care to those municipal entities that seek their advice about municipal 
securities and other related financial matters.
  During the Senate-House Conference for the Dodd-Frank Act, the 
conferees carefully considered and debated alternative approaches for 
overseeing municipal advisers and strengthening municipal securities 
market regulation. We recognized that the MSRB has written a 
comprehensive set of rules on key issues and said that the MSRB is 
well-equipped and experienced to write rules regulating participants in 
the municipal markets. Over the past decades, the MSRB has accumulated 
knowledge and hired specialized expertise to write rules regulating the 
complex and varied municipal securities market. In addition, the 
Banking Committee in its report, S. Report No. 111-176 accompanying S. 
3217, said that the MSRB is in the best position to assure that rules 
are consistent with other rules governing the municipal markets.
  Under the new law, the MSRB is expected to develop a robust system of 
regulation for intermediaries, including swap advisers, as it has for 
dealers. Swap advisers were specifically identified in the statute and 
made subject to MSRB rulemaking. The financial press has reported about 
State and local governments that received bad advice from advisers and 
entered into swaps and other derivatives that they did not fully 
understand, that are not performing as promised, and that are now 
costing them tremendous amounts to unwind. Those swaps are often tied 
to municipal securities issued by those same State and local 
governments and Congress recognized the experience of the MSRB in the 
regulation of the municipal markets.
  The act, which authorizes MSRB regulation over municipal advisers, 
has limited exceptions, including an exception for commodity trading 
advisers registered under the Commodity Exchange Act or their 
associated persons who provide advice related to swaps. This exception 
covers swap dealers and major swap participants regulated by the CFTC. 
It does not extend to independent swap advisers or other types of 
municipal advisers not explicitly exempted, which are meant to be 
subject to the MSRB rules. I expect that the regulators of municipal 
swaps advisers would adopt rules governing advisory practices that are 
consistent with each other as well as relevant and appropriate for the 
municipal markets. Thus, municipal swaps advisers would be subject to 
practice rules embodying common principles, since they have the same 
types of clients.

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