Securities Litigation

On June 16, the SEC issued a temporary exemptive order, allowing registered municipal advisors to solicit banks, their wholly-owned commercial lenders and credit unions in connection with direct placements by municipal-issuer clients.  Ordinarily, that placement-agent activity would require broker-dealer registration under ’34 Act Section 15 (15 U.S.C. § 78o).

The Commission granted the temporary exemption to allow MAs to assist municipal issuers – especially smaller municipalities not otherwise eligible for the Fed’s Municipal Liquidity Facility – with direct placements in response to muni-market disruptions and unbudgeted expenses due to the COVID-19 pandemic.

The exemption carries a number of conditions, among them:

• MAs must provide written representations to Qualified Providers of the MA’s duties and obligations;
• MAs must obtain written representations from Qualified Providers regarding investor eligibility and agreement to hold (not transfer, except to other Qualified Providers) the credit for at least a year;
• MAs relying on the exemption must notify the Commission.
• Direct placements under the exemption may not exceed $20 million

The SEC had proposed a similar exemption last Fall, see Release No. 34-87204 (Oct. 2, 2019), but is not moving forward with it at this point, instead adopting the temporary conditional exemption in response to COVID-19 circumstances.

SEC Release No. 34-89074 is here.

Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas, and Louisiana. He has over 34 years of experience representing financial institutions in litigation, regulatory, and compliance matters. See attorney profile.