Dodd-Frank Financial Reform Gives Public Entities New Rights as the SEC Seeks Comment

With the ink barely dry on the Dodd-Frank financial reform law, a new world dawns as municipal and other public agencies get new rights and protections formerly reserved to the investor community. The legislation comprises the most massive and sweeping changes to the financial markets since the Great Depression, and its effects will be multiplied through hundreds of mandated rulemaking and studies that are already underway. From independent research and consultation with clients and industry experts, Meyers Nave has identified two of the highest priorities public agencies should begin working on now.

First, clients are formulating ideas and guidance for rule-makers to consider even before any proposed rules are published. The Securities and Exchange Commission has led the way with its new web site specifically established for this purpose. Meyers Nave’s diverse government clientele offers a wealth of experience and circumstances that suggest how the SEC and other rule-making agencies should approach the specific mandates in Dodd-Frank. The firm is helping public agencies develop proposals that will merit consideration by the SEC, which has asked that proposals (a) be as specific as possible and (b) present a basic analysis of the costs and burdens of new rules as weighed against their prospective benefits and protections. Now is the time for public agencies to speak up so the new rules afford them all the benefits of financial reform, and Meyers Nave is prepared to assist.

The second priority addresses perhaps the most important benefit the new rules will implement: for the first time, virtually all financial and investment advisors will owe a fiduciary duty to their public agency clients, making state and local government express beneficiaries of many of the rights and protections long established for private sector investors. This new duty extends to the full spectrum of financial, investment and related products, services and transactions, and any professionals not already registered with the SEC will be required to register and be held accountable for their fiduciary conduct and their adherence to the rules. Meyers Nave is helping public agencies realize these new benefits with the important process of updating procurement of financial services, whether in RFPs, RFQs or longstanding relationships. Each public agency needs to update its RFPs, RFQs and terms of engagement for financial services to reflect the new registration and compliance requirements, while making sure that any errors and omissions coverage (or similar insurance) does not exclude fiduciary liability or other securities matters. This goes beyond bond issuance services and extends to investment and financial contract activity of all kinds, including general and enterprise funds as well as pension and other retirement benefit trust funds.

The financial reform law has created a new protected class – municipal and public agencies – and now comes the opportunity to make sure Wall Street serves Main Street. By presenting concrete proposals and updating procurement materials that hold finance professionals to higher standards, public agencies will be doing their part as the municipal finance market reforms and recovers.

For more information on the Dodd-Frank financial reforms, contact Sky Woodruff at 800.464.3559.