The House Financial Services Committee yesterday approved by voice vote a substitute version of a bill (H.R. 2827) that would clarify what constitutes a municipal adviser and would exempt banks providing “traditional banking products” from the SEC’s proposed rule implementing the Dodd-Frank Act’s Section 975.
The bill’s narrow “traditional banking products” definition covers deposits, bankers acceptances, letters of credits, loans, certain loan participations and swap agreements. The legislation also exempts banks for trust services that are subject to a state or federal fiduciary duty, and extends to them the existing exemption for registered investment advisers.
The committee approved an amendment—offered by H.R. 2827’s sponsor, Rep. Robert Dold—that would eliminate the need for individuals employed by municipal advisory firms to separately register with the SEC. It also adopted panel ranking member Barney Frank’s amendment deleting the bill’s provision requiring municipal adviser registration only where the adviser had a written contract to provide advice for separate compensation.
ABA expressed concern Tuesday in a memo to the committee that the well-intentioned substitute legislation wouldn’t adequately cover the range of products and services that banks provide to municipalities. It also may not provide an exemption for the negotiations that banks regularly undertake with municipalities when booking loan products such as tax anticipation notes and revenue anticipation notes, ABA said.
Read the legislation.