The U.S. Securities and Exchange Commission likely will not need another full year to revise its definition of municipal adviser, despite delaying its deadline until 2013, Commissioner Elisse Walter said on Monday.
There is "no intention on the part of the staff to take anywhere near that long," Walter said during a conference in New York about the $3.7 trillion U.S. municipal bond market.
Under the 2010 Dodd-Frank financial reform law, federal securities regulators must provide guidance to municipalities and their financial advisers about who qualifies as a municipal adviser for the purposes of complying with the tougher regulations.
The SEC had proposed a temporary rule and was to have finalized a definition by September 30. But it said on September 21 that it was pushing its deadline back a year.
For years, municipal financial advisers, swap advisers, guaranteed investment contract brokers, placement agents and other consultants were largely unregulated. Critics said that helped set the stage for a wave of recent crises among cities, towns and other issuers involving complex financial instruments that panned out badly for local taxpayers.
Congress is also weighing in on the best way to define who falls under the new rules. The House approved a clarification in September, but the U.S. Senate is unlikely to act until after the November elections.
Even so, legislative action put the heat on regulators to complete their own determination, following hundreds of comments expressing concern that the proposed definition was too broad and would ensnare too many people who were only on the periphery of the market.
The House-passed law excludes securities dealers from the definition and maintains a provision specifying that municipal advisers have a fiduciary duty to their municipal clients, ensuring that they act in the best interests of the school districts, cities and counties they advise.
The Securities Industry and Financial Markets Association, which sponsored Monday's conference, had argued that the SEC's initial rule exceeded the scope of protections that Congress envisioned in its financial reform.
If enacted as first proposed, the SEC's definition would increase costs and legal burdens on Wall Street and regional financial firms, said SIFMA, which applauded the House-backed bill.
The SEC's Walter also spoke on Monday about pre-trade pricing transparency, saying that investors in the muni market get "second class treatment" compared to the protections and information investors are afforded in other markets.
Regulators need to begin a broad-based initiative to make the muni market "more transparent, efficient and fair for all investors," she said.
She said electronic trading and other newer technology could help open the door to greater transparency. And she urged the Municipal Securities Rulemaking Board, a self-regulatory organization, to consider ways to encourage disclosure of mark-ups and mark-downs in muni trading.
After November 1, underwriters in the municipal bond market will be banned from withholding important pricing information on new debt sales from market participants.