Senate Measure Seeks to Exempt Banks for Having to Register with the SEC As Municipal Advisors & House Bill Looks to Enhance Public Pension Plans’ Disclosures

Many banks are reportedly greeting bipartisan Senate bill S. 710 with satisfaction, as it would exempt them from provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act related to regulating municipal advisers. The bill was introduced by US Senators Patrick Toomey (R-Pa) and Mark Warner (D-VA) last month.

The Dodd-Frank Act established municipal advisers as a new class of regulated individuals that advise local and state governments about financial matters, such as the use of derivatives and bond issuances. Per the law’s Section 975, municipal advisers must register with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. Critics, however, have called the SEC’s proposed definition of what constitutes a municipal adviser as too broad.

The senators’ legislation makes it clear that banks and those that work for them are not municipal advisers unless they actually take part in municipal adviser activities. It is similar to HR 797, which was proposed by US Representatives Gwen Moore (D-Wis.) and Steve Stivers (R-Ohio) earlier this year.

In other securities law news, three Republican lawmakers have unveiled a bill that would make public pension plans reveal more information or risk the tax status of bonds that were put out by municipalities and states. Per HR 1628, certain municipality issued-bonds would no longer have tax-exempt status if retirement plans did not abide by disclosure requirements.

The measure, by Representatives Paul Ryan (R-Wis.), Darrell Issa (R-Calif.), and Devin Nunes (R-Calif.), seeks to address worries related to local and state pension plans, including the concern that some public pension plans may be determining liabilities and debt with “unreasonably high discount rates,” perhaps even distorting the asset values to hide debt. The three men believe that these “accounting gimmicks” has resulted in unfunded liabilities being under-reported by trillions of dollars.

The proposed legislation would also modify the Internal Revenue Code so that plans would have to report not just their financial information but also what assumptions and methods they used to make their calculations. Plans would also have to apply a uniform accounting standard to make disclosures. Disclosed data would be made available online by the Secretary of the Treasury. Meantime, the federal government would not be able to rescue plans that couldn’t fulfill their obligations.

Securities Fraud
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