Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The final municipal advisor rules and associated guidance provide what many consider to be workable relief for energy services and solar energy companies to structure their business in such a fashion that registration as a municipal advisor should not be required.  We believe that businesses that wish to avoid registration should perform a start-to-end review of their business processes to make sure their operations are in accordance with applicable guidance.  Our thoughts are set forth below.

Understand the Exclusion From Advice:  If you are not giving “advice” you do not need to register as a municipal advisor.  Rule 15Ba1-1(d)(1)(ii) provides that advice excludes, among other things, the provision of general information that does not involve a recommendation regarding municipal financial products or the issuance of municipal securities, including with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues.

Review Generalized Information and Educational Materials.  The SEC believes that educational materials constitute general information, and not “advice”, if the content is limited to instructional or explanatory information, such as materials that describe the general nature of financial products or strategies, do not include past or projected performance figures, and do not include a recommendation to purchase or sell any product or utilize any particular strategy.  General market and financial information describing various types of debt financing structures (e.g., fixed rate debt, variable rate debt, general obligation debt, debt secured by various types of revenues, or insured debt), including a comparison of the general characteristics, risks, advantages, and disadvantages of these debt financing structures is acceptable.

It is best if information provided to customers is uniform, either as to all customers or specific customer segments.  In most circumstances the information should not be tailored.  In some circumstances the SEC believes that information can be particularized to a municipal entity provided that the information is factual in nature and does not contain or express subjective assumptions, opinions, or views, or constitute a recommendation.

Make sure you have appropriate processes in place to review any new material or revised material.

Review Contracts, RFPs and Advertising Materials.  Customer contracts, requests for proposals and advertising materials should be reviewed so that companies are not promising to provide advice related to the issuance of municipal securities.

Use Disclaimers Liberally.  Education and general materials, contracts, RFPs and advertising materials should disclaim that no materials or services provided constitute advice regarding municipal securities.  The SEC believes that disclosures and disclaimers regarding a person’s intentions in providing information to a municipal entity are factors that bear upon whether or not the person’s communications would be a recommendation that constitutes advice under the final rules.

Limit Scope of Feasibility Studies and Projections.  The Dodd-Frank Act includes an exception for engineering services.  Feasibility studies and projections should have narrow objectives to stay within that exception.  An engineer can provide funding schedules and cash flow models that anticipate the need for funding at certain junctures in a project and can also provide engineering feasibility studies based on analysis of engineering aspects of the project.  An engineer can advise a municipal entity about whether a project can be safely or reliably completed with the available funds and provide engineering advice about other alternative projects, cost estimates, or funding schedules without engaging in municipal advisory activity.

Monitor Introductions to Financing Sources.  Energy services and solar energy companies often provide introductions to financing sources.  According to the SEC,  if an introduction does not result in direct or indirect compensation to the engineer, the introduction will not constitute a solicitation and the engineer will not be required to register as a municipal advisor.  Appropriate policies should be prepared and implemented.

Train Staff.  Once you have evaluated your processes and identified appropriate modifications, train appropriate staff about the changed processes and limitations imposed by the municipal advisor rules. Training should not be a one-time event but should occur at appropriate intervals.

Assign Accountability.  Accountability for compliance with the rules should be assigned to designated individuals and performance should be monitored and evaluated where appropriate.


Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 75 largest firms in the U.S., Stinson Leonard Street has more than 520 attorneys and offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.