The House Financial Services Committee unanimously approved a bill on Wednesday that clarifies the definition of “municipal adviser” and exempts certain banks from having to register with the Securities and Exchange Commission.
Under the legislation, a substitute for H.R. 2827, banks that are subject to state or federal fiduciary duty and provide “traditional banking products,” including loans, deposits, bankers acceptances, letters of credits and certain swap agreements, are exempt from SEC registration requirements, Investment News reports.
Additionally, the bill defines a municipal advisor as an individual paid by local or state governments to advise these entities on financing public works projects.
“A federal fiduciary standard is essential in order to help protect issuers and remove any confusion about what standards apply to investment advisers,” Rep. Maxine Waters (D-Calif.) of the HFSC said, according to Investment News.
Concern regarding the municipal market has increased after Stockton, Calif., filed for bankruptcy protection in June and Jefferson County, Ala., filed for the biggest municipal bankruptcy in history in 2011.
The committee also approved an amendment sponsored by Rep. Robert Dold (R-Ill.) that eliminates the need for employees of municipal advisory firms to register separately with the SEC.
Additionally, the HFSC adopted committee member Barney Frank’s amendment that eliminates the provision requiring municipal adviser registration only in cases where the adviser had a contract to provide guidance under separate compensation.
The American Bankers Association voiced concern in a Tuesday memo to the committee that the replacement legislation would not fully cover the range of financials offered by banks to municipalities.