Burr & Forman

06.25.2020   |   Blog Articles, Securities Litigation

SEC Temporarily Allows Municipal Advisors to Solicit Direct Placements

On June 16, the SEC issued a temporary exemptive order, allowing registered municipal advisors to solicit banks, their wholly-owned commercial lenders and credit unions in connection with direct placements by municipal-issuer clients.  Ordinarily, that placement-agent activity would require broker-dealer registration under ’34 Act Section 15 (15 U.S.C. § 78o).

The Commission granted the temporary exemption to allow MAs to assist municipal issuers – especially smaller municipalities not otherwise eligible for the Fed’s Municipal Liquidity Facility – with direct placements in response to muni-market disruptions and unbudgeted expenses due to the COVID-19 pandemic.

The exemption carries a number of conditions, among them:

  • MAs must provide written representations to Qualified Providers of the MA’s duties and obligations;
  • MAs must obtain written representations from Qualified Providers regarding investor eligibility and agreement to hold (not transfer, except to other Qualified Providers) the credit for at least a year;
  • MAs relying on the exemption must notify the Commission.
  • Direct placements under the exemption may not exceed $20 million

The SEC had proposed a similar exemption last Fall, see Release No. 34-87204 (Oct. 2, 2019), but is not moving forward with it at this point, instead adopting the temporary conditional exemption in response to COVID-19 circumstances.

SEC Release No. 34-89074 is here.

Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas, and Louisiana. He has over 34 years of experience representing financial institutions in litigation, regulatory, and compliance matters. See attorney profile.

Subscribe to our Blog RSS Feed

Receive the latest Burr news and insights delivered straight to you.

Related Attorneys