WASHINGTON Feb 14 A long-delayed definition of U.S. municipal advisers will be more narrow than originally proposed, the U.S. Securities and Exchange Commission's chairman said on Thursday, acknowledging criticism that the commission's first version would have subjected too many people to regulation.
"We anticipate that the final rules would address, among other things, the well-publicized concerns about the need for an exception from registration for appointed board members of municipal entities," commissioner Elisse Walter said at a Senate hearing. Walter spearheaded moves to tighten oversight of the $3.7 trillion municipal bond market.
"In addition, the staff is continuing to discuss...a final rule that requires appropriate registration of parties engaging in municipal advisory activities without unnecessarily imposing additional regulation."
The Dodd-Frank financial reform law brought municipal advisers under federal regulation and required them to register, alongside brokers and dealers, with the Securities and Exchange Commission.
The law, however, did not identify who counted as an adviser. When the SEC released a proposed definition in December 2010, it received thousands of comments that it was "overbroad" and would force volunteers and others on the edges of municipal finance to abide by tough regulations.
The House of Representatives went so far as to take up legislation defining an adviser, but the lead lawmaker, Robert Dold of Illinois, lost his seat in November's election.
More than two years after the first definition was released - and the requirement to register was supposed to come into effect - the market is still awaiting a final version. Walter did not indicate the timing of a release, but said it is "now the highest immediate priority of the SEC's newly established Office of Municipal Securities."
The Securities Industry and Financial Markets Association said last month it expects federal securities regulators to release a definition in the first half of 2013.