Donna Aberico
Unregistered municipal advisory activity in the public-private partnership space as well as insufficient oversight by state and local governments of joint powers authorities they create are persistent concerns for the Securities and Exchange Commission, the director of the SEC’s Office of Municipal Securities said Monday.
Dave Sanchez, who spoke during a debt committee meeting that was part of the Government Finance Officers Association’s 2025 Winter Meeting in Washington, D.C., told issuer officials that unregistered municipal advisory activity has been a concern of both SEC and the Municipal Securities Rulemaking Board “for a good while,” Sanchez said. He has delivered
“One of the places where we have seen a lot of issues – or have heard of a lot of issues – is in the P3 space,” he said, adding there are some consultants operating in that space who aren’t public finance professionals and may not be as aware of the SEC’s rule regarding municipal advisor registration. The SEC’s municipal advisor rule took effect in 2014.
The Dodd-Frank Wall Street Reform and Consumer Protection Act amended Section 15B of the Securities Exchange Act of 1934 to add a requirement that municipal advisors register with the SEC.
Prior to Dodd-Frank’s passage, advisors to municipal entities largely were unregulated and generally not required to register with the SEC or any other federal, state, or self-regulatory body with regard to their municipal advisory activity. The law imposed a fiduciary duty on MAs, and brought them into a regulatory regime similar to the one for broker-dealers.
“I think it is really important for issuers in particular to be aware of that rule because you know, one, when you have a registered municipal advisor it does offer you some protections,” Sanchez said, adding that there is also “pretty consistent documentation of the fact that some of the P3 advisors – not necessarily through malice but just through ignorance – do not really know the least cost of borrowing for state and local governments.”
In addition, the SEC wants to ensure that those who have dutifully registered as municipal advisors aren’t subject to an “unfair playing field” because of people who aren’t playing by the same rules, he said.
“And so that is the reason why we talk about this area,” Sanchez said, adding that the SEC is ” letting people know that we’re looking at it and giving them time to come into compliance.”
As for joint powers authorities, “I think we’ve explained our concern with these arrangements, our concern with state and local governments who form these authorities and then do not engage in sufficient oversight,” he said, adding that “the proof (is) in the pudding when you look at the default rates of these agencies.”
Sanchez was asked during his remarks regarding JPAs whether enforcement actions could be imminent.
“That’s not a statement that we’d make,” he said, adding, however, that “it is an area of concern.”
“There’s potential for people to be found to be lacking in their oversight of these entities that they’ve created,” Sanchez said.