Municipal Advisor

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 02, 2024

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What Is a Municipal Advisor?

A municipal advisor is a financial professional who offers guidance to or on behalf of a municipal entity or obligated person concerning municipal financial products or the issuance of municipal securities.

Further, such professional also provides recommendations on the structure, scheduling, terms, and other comparable matters about such financial products or matters.

Conducting a solicitation of a municipal entity is another crucial function of this type of advisor.

Financial advisors, guaranteed investment contract brokers, third-party marketers, placement agents, solicitors, finders, and swap advisors are all included in the definition.

Overall, municipal advisors help to ensure that the financial well-being of the public entities they serve is protected.

Roles of a Municipal Advisor

A municipal advisor is the first point of contact for an issuer wanting to issue municipal bonds unless the issuer is an expert on the matter.

The issuer can gather an outsider's opinion from a municipal advisor on matters related to the debt issuance process. A fiduciary obligation towards the issuer governs the advisor.

Bond issuers are the entities that issue the bonds that investors buy. Bond issuers can include government entities, corporations, municipalities, special-purpose vehicles, and so on.

Although the role of a municipal advisor changes with projects, the fundamental ones are as follows:

Project Feasibility. Preparation of financing options for the issuer's evaluation considering current and future capital needs.

Approach for Sale. Provide information to the issuer to determine the best method of sale for the transaction. For arranged sales, they assist in the underwriter selection.

Marketing of Bond. Preparation of offering documents appropriate for the type of issuance and assisting with a bond rating as applicable.

Selling of Bond. Evaluate bond market conditions and compile information on comparable bonds to aid in bond pricing.

After-sale. Create a closing memorandum with important deal information, ongoing disclosure filings, and option pricing calculations.

Further, municipal advisors ensure that their clients comply with the regulations set forth by the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB).

Municipal Advisor Registration Forms

Municipal advisors must register with the SEC and the MSRB. To complete this registration process, several forms must be filled out, such as the following:

Form MA

Any type of organized entity, including a corporation, partnership, limited liability company, limited liability partnership, or sole proprietorship participating in municipal advisory activities, must register with the SEC through Form MA.

This form includes information about the advisor's business activities, disciplinary history, and information on the individuals responsible for the oversight of the municipal advisor.

Form MA-I

Form MA-I must be completed and submitted by a municipal advisory firm for each individual involved in municipal advisory activities on behalf of the firm, including employees and independent contractors deemed as employees for these purposes.

The form asks questions about the background of these individuals, including their residential history, education, professional experience, employment history, and any other businesses they may be engaged in.

The form also asks for additional information regarding any events or proceedings that the individuals were involved in, including criminal actions, regulatory actions, investigations, and terminations.

Form MA-NR

Form MA-NR is used to provide information about the appointment of a representative to receive legal documents on behalf of a non-resident municipal advisor.

This includes registered municipal advisors to appoint a representative for their non-resident general partners, managing agents, or non-resident individuals associated with the advisor.

Form MA-NR filing is an attachment to the initial registration application and Form MA-I.

Form MA-W

Form MA-W must be filled out and submitted by a business entity previously registered as a municipal advisor. However, it no longer needs to maintain its registration.

If a natural person associated with and engaged in municipal advisory activities on behalf of the firm is no longer working with the firm, an updated version of Form MA-I must reflect this change.

Municipal Advisor Filing Requirements

The filing requirements for municipal advisors vary according to the firm structure and advisor’s association.

Municipal Advisory Firms. A company or organization that engages in municipal advisory activities must be registered with the SEC by submitting Form MA. The registered municipal advisory firm must file annual updates and amend the form in case of significant changes.

Non-resident Municipal Advisory Firms. They must promptly update Form MA with an updated opinion of counsel if changes in the legal or regulatory framework or physical facilities affect the firm's ability to provide access to its books and records or be inspected by the SEC.

Natural Person. Each natural person associated with the municipal advisory firm and engaged in municipal advisory activities must file Form MA-I and promptly amend it if any information is inaccurate.

Natural Person Acting as Sole Proprietor. Such an advisor must also complete and file Form MA-I and Form MA. Update Form MA-1 as necessary.

Non-resident Municipal Advisory Firm. They must file Form MA-NR and a separate Form MA-NR for each non-resident general partner, managing agent, or natural person associated with the firm.

Any business entity registered as a municipal advisor, but no longer required to be registered, must file Form MA-W to withdraw its registration.

To remain registered, municipal advisors must comply with Rule 15Ba1-8's books and records regulations. These requirements ensure municipal advisors comply with the registration process and protect investors from fraud or abuse in the marketplace.

Municipal Advisor Examinations

The SEC mandates that individuals working in municipal advisory services be qualified to perform their duties. To meet this requirement, several examination series have been created:

Series 50 – Municipal Advisor Representative Qualification Examination

The exam authorizes individuals to offer advisory services in the field of municipal financial products to municipalities or on their behalf from issuance of securities and offering investment advice for the funds generated from these securities.

Series 51 – Municipal Fund Securities Limited Principal Qualification Examination

The exam qualifies professionals to manage the activities of a broker, dealer, or municipal securities dealer related to municipal fund securities. This includes supervising individuals involved in the underwriting, sales, and consulting for issuers of municipal fund securities.

Series 52 – Municipal Securities Representative Qualification Examination

The exam enables individuals to pursue a career in various areas of municipal securities, including sales, underwriting, trading, advice-giving, research, and communicating with public investors.

Series 53 – Municipal Securities Principal Qualification Examination

The exam enables individuals to supervise the operations of a securities firm or bank dealer related to municipal securities. It involves overseeing individuals involved in underwriting, consulting with issuers, research, investment advising, and communicating with public investors.

Series 54 – Municipal Advisor Principal Qualification Examination

The exam provides certification for individuals looking to lead, manage, and oversee municipal advisory operations. Such activities encompass offering municipalities advice on issuing securities – determining the structure, timing, and terms of issuance.

Series 6 – Investment Company and Variable Contracts Products Representative Qualification Examination

Passing the Series 6 exam grants the authorization to sell select investment offerings such as mutual funds, life insurance, and municipal fund securities.

Series 7 – General Securities Representative Qualification Examination

The FINRA Series 7 license enables individuals to engage in the solicitation, purchase, and sale of all types of securities products, including corporate securities, municipal fund securities, options, investment company products, direct participation programs, and variable contracts.

Series 9/10 – General Securities Sales Supervisor Qualification Examination

These licenses enable the branch manager to supervise sales of corporate securities, investment firm products and variable contracts, municipal securities, options, government securities, and direct participation programs.

Securities Industry Essentials (SIE) Examination

Upon successfully completing the SIE exam and obtaining employment with a broker-dealer, an individual can take a representative-level exam and become a licensed representative in the securities industry.

Municipal Advisor Examinations

Who Are Excluded and Exempted from the Municipal Advisor Registration?

Some individuals do not have to register as municipal advisors as long as they participate in the activities stated in Rule 15Ba1-1(d)(2).

Excluded Individuals

According to the regulation, there are several categories of individuals who are excluded from the definition of municipal advisor. These include:

  • Broker, dealer, or municipal securities dealer serving as an underwriter for a specific issuance of municipal securities

  • Investment advisors registered under the Investment Advisers Act of 1940, or their associates

  • Commodity trading advisors registered under the Commodity Exchange Act, or their associates

  • Attorneys

  • Engineers

Exempted Individuals

The Commission has also listed certain categories of individuals who are exempt from the definition of municipal advisor, provided they engage in the specific activities described in Rule 15Ba1-1(d)(3). These include:

  • Accountants

  • Officials and employees of a municipal entity or obligated person

  • Banks

  • Individuals answering to a request for proposals or qualifications from a municipal entity or obligated person in relation to a municipal financial product or issuance of municipal securities

  • Swap dealers registered under the Commodity Exchange Act, or their associates

  • Individuals participating in municipal advisory activities where a municipal entity or obligated person is representative of a registered municipal advisor

  • Individuals giving advice on investments that are not related to the investment of money from municipal securities or advising and helping with the buying and selling of municipal investments

  • People asking a municipality or obligated entity to invest in financial products that are not related to the investment of proceeds from municipal securities or the recommendation and sale of municipal escrow investments

  • Natural person municipal advisors who are associated with a SEC-registered municipal advisor and engage in municipal advisory activities exclusively on behalf of the registered advisor.

Final Thoughts

A municipal advisor is a professional who advises state and local governments on matters related to their investments, debt offerings, and other financial decisions.

They offer guidance to their clients on financial products related to municipal securities and their issuance.

To complete their registration, municipal advisors must complete several forms, including Form MA, Form MA-I, Form MA-NR, and Form MA-W.

These forms provide information about the municipal advisor's business activities, disciplinary history, and other relevant information.

Individuals working in municipal advisory services must be qualified to perform their duties and pass several examination series. Understanding these regulations can help municipal advisors properly and ethically fulfill their duties.

Municipal Advisor FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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