Regulatory Update: SEC’s First-Ever Enforcement Actions Regarding Duties of Municipal Advisors

The SEC has charged a Muni Advisory firm and its two principals with violating numerous duties under MSRB Rule G-42.

The allegations include, among other things, the following:

• Violation of fiduciary duties and engaged in unregistered municipal advisory activities;

• Engaging in municipal advisory activities when not registered with the SEC or the MSRB;

• Prohibited fee-splitting arrangement with their former employer;

• Engaging in muni underwriting and muni advisory for same client;

• Lack of conflict of interest disclosures regarding fee-splitting arrangement and relationship with the underwriting firm;

• Excessive fees charged to client for underwriting and advisory services.

Please see the SEC compliant and release for additional details, which include allegations that the Principals violation Sections 15B(a)(5) and 15B(c)(1) of the Securities Exchange Act of 1934 (“Exchange

Act”) and MSRB Rules G-17 and G-42. Additionally, the allegations that the Firm  violated Section 15B(a)(1) of the Exchange Act and MSRB Rule A-12, and the Principals aided and abetted the Firm’s violations of Sections 15B(a)(1) and 15B(c)(1) of the Exchange Act and MSRB Rule A-12.

Ref: SEC Compliant – https://www.sec.gov/litigation/complaints/2021/comp-pr2021-188.pdf

Ref: SEC Release – https://www.sec.gov/news/press-release/2021-188?utm_medium=email&utm_source=govdelivery

Ref: SEC Order – https://www.sec.gov/litigation/admin/2021/34-93105.pdf