Universities Ask for Pass on Municipal Adviser Registration Rule

April 19, 2011 (PLANSPONSOR.com) - Penn State and other institutions across the state and country are asking the U.S. Securities and Exchange Commission to reconsider new rules they say would discourage qualified people from serving on their boards.

A provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires “municipal advisers” who provide advice on municipal securities to register with the SEC. The State College (PA) Centre Daily Times reports that a letter from Penn State and the other state-related universities said that because they are instrumentalities of the state and governmental issuers of municipal securities, the regulations would apply to many members of their boards of trustees. 

“[W]ith the exception of those few ex-officio members that are employees of the (u)niversities, all of our remaining board members and most likely a vast number of committee members, including community and student representatives, would also have to register with the SEC as municipal advis(e)rs,” the letter said.  

According to the news report, the universities contend that the “registration requirements, including the related expense and potential federal securities law liability, would undoubtedly cause current board members to consider resigning, and would certainly have a ‘chilling effect’ on the recruitment of private citizens to serve as board members.”   

They warned that the change would, in particular, deter people with finance and investing backgrounds from serving on the boards.  

Industry groups have also expressed concern over how the application of proposed new rules by the Securities and Exchange Commission will impact retirement plan professionals who work with government-sponsored retirement plans (see ASPPA Asks for Retirement Plan Exemption from Adviser Rules).