service of process from each natural person who is a person associated
with the municipal advisor and engages in municipal advisory activities
solely on behalf of such registered municipal advisor.\1865\ In light
of these changes, the Commission now estimates that the average annual
burden for a municipal advisory firm to comply with the recordkeeping
requirements will be approximately 182 hours.
---------------------------------------------------------------------------

    \1864\ See supra notes 1359-1360 and accompanying text.
    \1865\ See supra Section VII.D.7.
---------------------------------------------------------------------------

    One commenter argued that the information technology and storage
facilities required for all email or similar electronic communications
is expensive. The commenter believed that, regardless of whether a firm
were to develop a technology solution in-house or hire an IT
professional, the cost would be significant to firms, especially those
with limited revenue.\1866\ This commenter, however, did not provide
specific figures by which to recalculate the Commission's estimate,
making it difficult to evaluate these assertions.
---------------------------------------------------------------------------

    \1866\ See NAIPFA Letter.
---------------------------------------------------------------------------

    As stated above, the books and records estimate, as proposed, was
meant to include storage costs and any needed technology refinements or
upgrades. The Commission staff understands based on discussions with
market participants that, although larger financial institutions may
generally need to invest in more expensive technology solutions to
manage their recordkeeping, smaller municipal advisory firms with
smaller clienteles may not require significant expenditures on storage
and technology to the extent they retain most of their records in their
existing email systems.\1867\ Furthermore, the Commission staff
understands that many of the smallest municipal advisory firms and sole
proprietors may use third-party electronic mail systems that offer free
and effectively unlimited cloud storage and would be less likely to
incur significant storage costs. For these reasons, the Commission
believes that the variety of technology and storage solutions, and
their resulting costs, are properly accounted for in the cost
estimates.
---------------------------------------------------------------------------

    \1867\ Larger firms that already have technology solutions in
place would likely incur lower costs than those that need to develop
new technology solutions.
---------------------------------------------------------------------------

    Another commenter asserted that the Commission used an hourly rate
for the books and records cost that was too low for small entity
municipal advisors. The commenter argued, ``[t]he figure [of 181 hours]
was based on record keeping by `General Clerks' at $50 per hour. If
similar rules are imposed on Small Entity Municipal Advisors (many of
whom are solo practitioners) that do not typically have `General
Clerks,' the correct hourly rate should be $170 per hour (a figure
frequently used by the Commission in the Release), which would equate
to $30,770 per advisor.'' \1868\
---------------------------------------------------------------------------

    \1868\ See Joy Howard WM Financial Strategies Letter.
---------------------------------------------------------------------------

    While the Commission acknowledges that small municipal advisors do
not typically employ General Clerks and that, in many cases, the
municipal advisory professional himself may be responsible for
maintaining the books and records of the firm, the Commission does not
believe that it should use a higher hourly rate to estimate the
recordkeeping burden for small municipal advisors for several reasons.
The 182-hour estimate is an average annual hourly burden across all
firms regardless of their size, and is based on the Commission's
experience with other regulatory regimes. The Commission anticipates
that larger municipal advisory firms that offer a variety of services
to municipal entities and have significantly greater volumes of books
and records will incur an annual burden greater than 182 hours, while
smaller municipal advisory firms that have significantly lower volumes
of books and records will incur an annual burden lower than 182 hours.
Similarly, the $53 figure is an average hourly rate across all firms
regardless of their size and is inclusive of the variability of costs
across municipal advisors. The Commission does not have the information
necessary to provide reasonable estimates of the differences in hourly
burden among firms of various sizes, a separate average hourly burden
for small entity municipal advisors, or the differences in hourly rates
among firms of various sizes. The Commission is also unaware of any
such data being publicly available. The Commission staff also
understands that some small municipal advisors employ part-time staff
to perform certain business and clerical functions and that the costs
of such employees are less likely to reflect the costs for compliance
personnel at larger municipal advisory firms or the hourly rate
suggested by the commenter. The Commission assumes that municipal
advisors will use the most cost-effective approach available, depending
on their size and specific circumstances, to comply with the
recordkeeping requirement. Accordingly, the Commission does not believe
that it should use a higher hourly rate to estimate the

recordkeeping burden for small municipal advisors.
    However, as stated above, the Commission believes that small
municipal advisory firms will likely incur lower annual costs for
maintaining books and records than larger firms. The Commission
recognizes that, although small municipal advisory firms and solo
practitioners may maintain their books and records without a general
clerk or additional staff assistance, such activity would not be
costless. The Commission believes that it is appropriate to assume
that, because small firms will utilize the most cost-effective approach
available, per-hour costs attributable to the books and records
requirements will be, at most, equivalent to the hourly rate for a
General Clerk. Therefore, the Commission uses the hourly rate for a
General Clerk to estimate the average cost across all municipal
advisory firms, regardless of size. The Commission also addresses the
burden for smaller municipal advisory firms in the Final Regulatory
Flexibility Analysis below.\1869\
---------------------------------------------------------------------------

    \1869\ See infra Section IX.
---------------------------------------------------------------------------

    Despite these costs, as discussed above, the recordkeeping
requirements will benefit the municipal securities market by enhancing
the Commission's ability to oversee municipal advisors.\1870\
Recordkeeping requirements are a familiar and important element of the
Commission's approach to investment adviser and broker-dealer
regulation, and are designed to maintain the efficiency and
effectiveness of the Commission's examination program for regulated
entities, which facilitates the Commission's review of their compliance
with statutory mandates and with Commission rules.
---------------------------------------------------------------------------

    \1870\ See supra Section VIII.D.1.a.
---------------------------------------------------------------------------

b. Alternatives
    As an alternative to the recordkeeping requirement adopted today,
the Commission considered creating a unique recordkeeping requirement
for municipal advisors different from the standard recordkeeping
practices under federal securities law. The Commission has determined
not to create a unique recordkeeping requirement because it expects
that many entities already registered with the Commission in another
capacity, such as investment advisers and broker-dealers, would likely
incur higher, and in many ways redundant, costs to comply with this
type of regime. As discussed above, the Commission estimates that the
average hourly burden for municipal advisory firms to comply with the
books and records requirement will be approximately 182 hours per
year.\1871\ The Commission anticipates that the average hourly burden
estimate would be higher to the extent the alternative recordkeeping
requirement did not allow entities to maintain books and records in a
manner consistent with other regulations under the securities laws. As
discussed above, with respect to the recordkeeping requirement adopted
today, the Commission believes costs may be reduced for firms that are
currently registered with the Commission with respect to their other
activities (because the final rule allows some records to be maintained
in compliance with those other regulations) and for firms that have
voluntarily adopted similar recordkeeping practices.\1872\ If the
Commission established a unique recordkeeping requirement for municipal
advisors, the Commission believes that many municipal advisors would
incur higher costs due to the inability to leverage experience,
systems, and practices developed to comply with the similar
recordkeeping practices under federal securities law.
---------------------------------------------------------------------------

    \1871\ See supra Section VII.D.8.
    \1872\ See supra note 1862-1863 and accompanying text.
---------------------------------------------------------------------------

5. Exclusions From the Definition of Municipal Advisor
a. Programmatic, Registration, and Recordkeeping Costs and Benefits
    As discussed above,\1873\ the Dodd-Frank Act included a number of
statutory exclusions from the definition of municipal advisor.\1874\
The Commission is adopting interpretations of these statutory
exclusions that are consistent with the Commission's understanding of
Congress's intent not to provide blanket exclusions from the municipal
advisor regulatory regime for underwriters, registered investment
advisers, commodity trading advisors, attorneys, and engineers,
regardless of the activities in which they are engaged. In adopting
these interpretations, the Commission has considered the programmatic,
registration, and recordkeeping costs that these persons would incur
absent an exclusion from the definition of municipal advisor.
---------------------------------------------------------------------------

    \1873\ See supra Section III.A.1.c.
    \1874\ Section 15B(e)(4)(C) of the Exchange Act provides that
the term municipal advisor does not include (1) a broker, dealer, or
municipal securities dealer serving as an underwriter (as defined in
Section 2(a)(11) of the Securities Act); (2) any investment adviser
registered under the Investment Advisers Act, or persons associated
with such investment advisers who are providing investment advice;
(3) any commodity trading advisor registered under the CEA or
persons associated with a commodity trading advisor who are
providing advice related to swaps; (4) attorneys offering legal
advice or providing services that are of a traditional legal nature;
or (5) engineers providing engineering advice. See 15 U.S.C. 78o-
4(e)(4)(C).
---------------------------------------------------------------------------

    Given the limitations on the Commission's ability to conduct a
quantitative assessment of the programmatic costs and benefits
associated with interpreting the statutory exclusions,\1875\ the
Commission has considered the programmatic costs and benefits primarily
in qualitative terms. In addition, the Commission has quantified many
of the registration and recordkeeping costs that result from the final
rules and forms. Relying primarily on the programmatic, registration,
and recordkeeping costs and benefits, the Commission believes it is
possible to identify those persons that, because of the activities in
which they engage, appear to be the types of persons for which the
other statutory requirements of Section 975 of the Dodd-Frank Act were
not intended.
---------------------------------------------------------------------------

    \1875\ See supra note 1742.
---------------------------------------------------------------------------

    As discussed above, persons subject to the municipal advisor
regulatory regime are subject to programmatic, registration, and
recordkeeping costs. As indicated throughout this release, and as
discussed further below, the Commission is mindful of these costs and
has interpreted the statutory exclusions in a manner that is consistent
with the purposes of Section 15B of the Exchange Act to regulate
persons that engage in municipal advisory activities and that is
intended to help minimize compliance burdens. The Commission's
interpretations of the statutory exclusions are designed to reduce
redundant regulation of entities engaged in activities related to
municipal entities that are appropriately regulated under another
regime. Accordingly, the Commission is adopting an interpretation of
the statutory exclusion for underwriters that applies only to those
underwriters that engage in municipal advisory activities that are
within the scope of an underwriting.\1876\ The Commission is also
adopting an interpretation of the statutory investment adviser
exclusion that would permit a registered investment adviser to provide
advice concerning the investment of proceeds of municipal securities,
but not advice concerning whether and how to issue municipal
securities, advice concerning the structure, timing, and terms of an
issuance of municipal securities and

other similar matters, advice concerning municipal derivatives, or a
solicitation of a municipal entity or obligated person, without
registering as a municipal advisor.\1877\ Similarly, the Commission is
adopting an interpretation of the statutory commodity trading advisor
exclusion that is limited to registered commodity trading advisors and
associated persons thereof providing advice related to swaps in the
capacity as a registered commodity trading advisor that is subject to
the Commodity Exchange Act.\1878\ The interpretations of the statutory
attorney exclusion and the statutory engineering exclusion the
Commission is adopting today are designed to permit attorneys to offer
legal advice or provide services that are of a traditional legal nature
\1879\ and engineers to provide engineering advice \1880\ without
having to register with the Commission as a municipal advisor. The
Commission does not believe that imposing an additional layer of
regulation, including the fiduciary duty imposed upon municipal
advisors when advising municipal entities, on the persons described
above would provide benefits that would justify the burden (i.e., the
programmatic, registration, and recordkeeping costs discussed
throughout the economic analysis) of municipal advisor regulation.
---------------------------------------------------------------------------

    \1876\ See Rule 15Ba1-1(d)(2)(i). In response to comments, the
Commission is also providing lists of activities that the Commission
would consider to be within or outside the scope of an underwriting.
See supra Section III.A.1.c.iv.
    \1877\ See Rule 15Ba1-1(d)(2)(ii).
    \1878\ See Rule 15Ba1-1(d)(2)(iii). Under this exclusion, a
registered commodity trading advisor could provide advice relating
to swaps without registering as a municipal advisor.
    \1879\ See Rule 15Ba1-1(d)(2)(iv).
    \1880\ See Rule 15Ba1-1(d)(2)(v).
---------------------------------------------------------------------------

    Because the Commission's interpretations of the statutory
exclusions are consistent with Section 15B(e) of the Exchange Act, the
Commission believes that those persons that do not currently qualify
for a statutory exclusion should already be registered with the
Commission and the MSRB under the temporary registration regime.
Accordingly, because the Commission has interpreted the statutory
exclusions consistent with the statute, the number of persons for which
a statutory exclusion is available should not change significantly and
any differences from the baseline with regard to the number of
municipal advisors required to register with the Commission and the
MSRB should be minimal. The Commission also believes that any
differences from the baseline with regard to the programmatic costs and
benefits related to the statutory requirements and MSRB rules that are
currently operative should be minimal because they would have already
been incurred under the temporary registration regime. In addition,
there should be no significant impact on efficiency, competition, and
capital formation relative to the baseline because those market
participants for which an exclusion is not available should have
already registered with the Commission and the MSRB under the temporary
registration regime and be complying with the requirements of Section
15B of the Exchange Act and MSRB rules.
    Those persons who provide municipal advisory services and are not
excluded from the definition of municipal advisor as described above,
however, will incur the programmatic, registration, and recordkeeping
costs of the municipal advisor regulatory regime. Accordingly,
underwriters that engage in municipal advisory activities outside the
scope of underwriting an issuance of municipal securities; investment
advisers that provide advice concerning whether and how to issue
municipal securities, advice concerning the structure, timing, and
terms of issuances of municipal securities and other similar matters,
advice concerning municipal derivatives, or a solicitation; commodity
trading advisors that are not a registered commodity trading advisor or
that provide advice with respect to an issuance of municipal securities
or any municipal financial product other than a swap; attorneys that
represent themselves as financial advisors or financial experts in
connection with the issuance of municipal securities or municipal
financial products and engage in municipal advisory activities; and
engineers that provide municipal advisory activities beyond engineering
advice, will incur the programmatic, registration, and recordkeeping
costs discussed throughout this release.
    The Commission believes such persons should continue to be subject
to the municipal advisor regulatory regime, including a fiduciary duty
to municipal entity clients and the standards of conduct, training, and
testing as may be required by the Commission or the MSRB, and other
requirements as may be imposed by the MSRB.\1881\ As discussed above,
the Commission believes that the municipal advisor regulatory regime
could incentivize municipal advisors not to engage in misconduct
relative to the baseline because of the enhanced disclosure
requirements of the permanent registration regime.\1882\ Municipal
advisors will continue to be subject to Commission oversight, including
periodic examinations, and may be subject to disciplinary action for
misconduct.\1883\ In addition, certain municipal advisors will now be
subject to periodic examinations by FINRA to evaluate compliance with
the Exchange Act, the rules and regulations thereunder, and MSRB
rules.\1884\
---------------------------------------------------------------------------

    \1881\ While the underwriting activities of brokers, dealers,
and municipal securities dealers in connection with an issuance of
municipal securities are currently subject to MSRB rules, those
rules generally do not apply to municipal advisory activities that
are outside the scope of an underwriting.
    \1882\ See supra Section VIII.D.1.a.
    \1883\ See supra note 1680 and accompanying text.
    \1884\ See 15 U.S.C. 78o-4(b)(2)(E); 15 U.S.C. 78o-
4(c)(7)(A)(iii).
---------------------------------------------------------------------------

b. Alternatives
    One alternative to the rules adopted today would be for the
Commission not to engage in additional rulemaking, and thus, not to
further clarify the statutory exclusions from the definition of
municipal advisor. As discussed above,\1885\ the Commission believes
that the assessment costs associated with determining whether a person
would be required to register as a municipal advisor would be greater
in the absence of the rules the Commission is adopting today. Without
these rules, market participants would still need to analyze whether
their activities fall within a statutory exclusion and would likely
need to seek no-action relief and other guidance from the Commission or
Commission staff, or risk failing to register with the Commission as
required.\1886\ The Commission believes that the final rules provide
extensive guidance to market participants that should reduce the number
of requests for no-action relief and other guidance from the Commission
or Commission staff, which, in turn, should lead to lower assessment
costs for many firms.\1887\
---------------------------------------------------------------------------

    \1885\ See supra Section VIII.D.1.c.
    \1886\ In addition, without this guidance, a greater number of
market participants would likely decide to register as municipal
advisors unnecessarily and thereby incur the programmatic,
registration, and recordkeeping costs of the municipal advisor
regulatory regime.
    \1887\ See supra Section VIII.D.1.c.
---------------------------------------------------------------------------

    The Commission also considered whether to interpret the statutory
exclusions using a status-based approach, as suggested by commenters,
rather than an activity-based approach. For example, some commenters
called for an exclusion for broker-dealers that would exclude broker-
dealers based on their status as a regulated entity.\1888\ Similarly,
some commenters argued that the statute excludes any registered

investment adviser, without limitation.\1889\
---------------------------------------------------------------------------

    \1888\ See supra note 580 and accompanying text.
    \1889\ See, e.g., Vanguard Letter; IAA Letter; ICI Letter.
---------------------------------------------------------------------------

    Although persons excluded under a status-based approach would not
incur the programmatic, registration, and recordkeeping costs of the
regulatory regime, the Commission has determined that to provide
status-based exclusions would be inconsistent with the purposes of the
Dodd-Frank Act to regulate persons that engage in municipal advisory
activities. The Commission believes that a status-based approach would
permit many persons to provide municipal advisory services without
being subject to the regulatory regime, which could cause municipal
entities and obligated persons to receive municipal advice without the
protections of the regime and limit the Commission's ability to oversee
the municipal advisory activities of those excluded persons. The
Commission believes these other regimes are not designed to address
directly municipal advisory activities and may not provide similar
protections to municipal entities and obligated persons. In addition,
persons excluded under a status-based approach would not be required to
register with the Commission, which would reduce any benefits of the
permanent registration regime to the municipal advisor selection
process.\1890\ The Commission is also concerned that interpreting the
exclusions using a status-based approach could create inappropriate
competitive advantages for covered categories of market participants.
---------------------------------------------------------------------------

    \1890\ See supra Section VIII.D.3.b.
---------------------------------------------------------------------------

    Another alternative the Commission considered was to interpret some
of the statutory exclusions in a manner that would allow otherwise
regulated persons to engage in municipal advisory activities that are
solely incidental to their regulated activities. Some commenters stated
that the Commission should exclude from registration broker-dealers
that provide advice that is solely incidental to a transaction, similar
to the broker-dealer exclusion under Section 202(a)(11)(C) of the
Investment Advisers Act.\1891\ Another commenter expressed concern that
commodity trading advisers that provide ancillary services in
connection with advice related to swaps would need to register as
municipal advisors if the ancillary services fall within the scope of
municipal advisory activities and are not deemed to be the type of
advice described in the commodity trading advisor exclusion.\1892\
---------------------------------------------------------------------------

    \1891\ See supra note 580 and accompanying text.
    \1892\ See MFA Letter.
---------------------------------------------------------------------------

    The Commission does not believe it is necessary to interpret the
statutory exclusions in a manner that would permit municipal advisory
activities that are solely incidental to other regulated activities,
and believes that the result would be substantially similar to a
status-based approach.\1893\ Interpreting the statutory exclusions in
this manner could result in a difficult facts-and-circumstances
analysis to determine whether the exclusions apply, which is unlikely
to result in any assessment savings. In addition, the Commission has
provided additional exemptions that would limit the circumstances under
which a person could be considered a municipal advisor and the range of
municipal financial products to which duplicative regulation could
apply.\1894\
---------------------------------------------------------------------------

    \1893\ See supra notes 1888-1890 and accompanying text.
    \1894\ For example, the Commission is providing an exemption for
any person engaging in municipal advisory activities in a
circumstance in which a municipal entity or obligated person is
otherwise represented by an independent registered municipal
advisor. See Rule 15Ba1-1(d)(3)(vi). In addition, the Commission is
exempting from the definition of municipal advisor persons that
provide advice with respect to investment strategies that are not
plans or programs for the investment of the proceeds of municipal
securities or the recommendation of and brokerage of municipal
escrow investments. See Rule 15Ba1-1(d)(3)(vii).
---------------------------------------------------------------------------

6. Exemptions From the Definition of Municipal Advisor
a. Programmatic, Registration, and Recordkeeping Costs and Benefits
    As discussed above,\1895\ the Dodd-Frank Act granted the Commission
authority to conditionally or unconditionally exempt, by rule or order,
upon its own motion or upon application, any municipal advisor or class
of municipal advisors from any provision of Section 15B of the Exchange
Act or the rules or regulations thereunder, if the Commission finds
that such exemption is consistent with the public interest, the
protection of investors, and the purposes of Section 15B.\1896\ The
final rules provide exemptions from the definition of municipal
advisor, subject to specified conditions, for (1) public officials and
employees of municipal entities and obligated persons; (2) banks; (3)
swap dealers; (4) accountants; (5) persons engaging in municipal
advisory activities with a municipal entity or obligated person that is
represented by an independent registered municipal advisor; and (6)
persons responding to RFPs or RFQs. As discussed below, the Commission
believes that these exemptions are consistent with the public interest,
the protection of investors, and the purposes of Section 15B. In
providing these exemptions, the Commission has considered the
programmatic, registration, and recordkeeping costs, which are
discussed throughout the economic analysis, that these persons would
incur absent an exemption from the definition of municipal advisor. The
Commission has designed these exemptions to provide that municipal
entities and obligated persons receive municipal advisory services with
the protections of the municipal advisor regulatory regime.
---------------------------------------------------------------------------

    \1895\ See supra Section III.A.1.c.
    \1896\ See 15 U.S.C. 78o-4(a)(4).
---------------------------------------------------------------------------

    Given the limitations on the Commission's ability to conduct a
quantitative assessment of the programmatic costs and benefits
associated with providing these exemptions,\1897\ the Commission has
considered these costs and benefits primarily in qualitative terms. In
addition, the Commission has quantified many of the registration and
recordkeeping costs that result from the final rules and forms. Relying
primarily on the programmatic, registration, and recordkeeping costs
and benefits, the Commission believes it is possible to identify those
persons that, because of the activities in which they engage, appear to
be the types of persons for which the other statutory requirements of
Section 975 of the Dodd-Frank Act were not intended.
---------------------------------------------------------------------------

    \1897\ See supra note 1742.
---------------------------------------------------------------------------

    The Commission is exempting from the definition of municipal
advisor: (1) Any person serving as a member of a governing body, an
advisory board, or a committee of, or acting in a similar official
capacity with respect to, or as an official of, a municipal entity or
obligated person to the extent that such person is acting within the
scope of such person's official capacity; and (2) any employee of a
municipal entity or obligated person to the extent that such person is
acting within the scope of such person's employment.\1898\ The
Commission believes that this exemption will significantly reduce the
number of individuals who would otherwise have needed to register as
municipal advisors. Some commenters

asserted that, as proposed, thousands of board members would be
required to register as municipal advisors.\1899\
---------------------------------------------------------------------------

    \1898\ See Rule 15Ba1-1(d)(3)(ii). See also supra note 507 and
accompanying text (discussing the Commission's interpretation of the
statutory exclusion from the definition of ``municipal advisor'' for
employees of municipal entities by exempting such employees ``to the
extent that such person is acting within the scope of such person's
employment'').
    \1899\ See, e.g., Bachus Letter; Marchant Letter.
---------------------------------------------------------------------------

    The Commission believes the programmatic, registration, and
recordkeeping costs such board members would incur would not justify
the benefits of registration for a number of reasons. The Commission
believes that individuals who engage in deliberative and decision-
making functions with respect to municipal financial products or the
issuance of municipal securities as part of their duties as members of
a governing body should not have to register as municipal advisors
because they are agents of the municipal entity that is the intended
recipient of the protections of the municipal advisor regulatory
regime. Board members and other officials (appointed and elected alike,
as well as their duly appointed designees) may be subject to state and
local law, including fiduciary duties and ethics laws, and the
statutory qualifications for such members' board position may be
significant to the mission of the municipal entity. In addition, as
noted by commenters, there would be costs to municipal entities as the
requirement to register as a municipal advisor could reduce the number
of persons willing to volunteer for boards or could limit what
volunteers would say. The Commission believes this exemption
appropriately balances consideration of the need to protect municipal
entities with the preservation of volunteer services by not requiring
board members to register as municipal advisors.
    The Commission is also providing exemptions from the definition of
municipal advisor for certain market participants: banks, accountants,
and swap dealers. As discussed above, persons subject to the municipal
advisory regulatory regime are subject to a series of programmatic,
registration, and recordkeeping costs. The Commission is exempting from
the definition of municipal advisor banks engaging in certain municipal
activities,\1900\ certain swap dealers, and certain accountants.\1901\
These exemptions are designed to reduce redundant regulation of
entities engaged in activities related to municipal entities that are
appropriately regulated under another regime. The Commission does not
have the information necessary to provide a reasonable estimate of the
number of persons who will rely on these exemptions because Form MA-T
does not collect data on banks, swap dealers, or accountants. To the
extent these entities are not required to register as municipal
advisors because of an exemption, they will not incur the programmatic,
registration, and recordkeeping costs discussed throughout the economic
analysis, and thus, will realize cost savings.
---------------------------------------------------------------------------

    \1900\ See Rule 15Ba1-1(d)(3)(iii). Because the Commission is
exempting from the definition of municipal advisor persons that
provide advice with respect to ``investment strategies that are not
plans or programs for the investment of the proceeds of municipal
securities or the recommendation of and brokerage of municipal
escrow investments'' (see Rule 15a1-1(d)(2)(vii)), the Commission
believes that the performance of many of the bank activities and
services about which commenters were concerned will not require
banks to register as municipal advisors.
    \1901\ The Commission is exempting from the definition of
municipal advisor any accountant to the extent that the accountant
is providing audit or other attest services, preparing financial
statements, or issuing letters for underwriters for, or on behalf
of, a municipal entity or obligated person. See Rule 15Ba1-
1(d)(3)(i).
---------------------------------------------------------------------------

    The Commission does not believe that imposing an additional layer
of regulation, including the fiduciary duty imposed upon municipal
advisors when advising municipal entities, on these persons would
provide benefits that would justify the burden (i.e., the programmatic,
registration, and recordkeeping costs discussed throughout the economic
analysis) of municipal advisor regulation.\1902\ Those persons that
provide municipal advisory services beyond the activities described
above, and thus, that do not qualify for one of the exemptions,
however, will incur the programmatic, registration, and recordkeeping
costs of the municipal advisor regulatory regime. The Commission
believes that the exemption for banks will help ensure that parties
engaging in key municipal advisory activities are registered, while
permitting banks to continue to provide banking services to municipal
entities and obligated persons for which they are currently subject to
regulation.\1903\ Similarly, the final rule provides exemptions for
registered swap dealers that are consistent with the exemptions
promulgated under Title VII of the Dodd-Frank Act.\1904\ The Commission
believes it is appropriate to provide an accountant exemption that
includes accountants providing audit or other attest services since
both audit and other attest services are generally subject to
regulation and professional standards (including independence
requirements) \1905\--requirements that could potentially conflict with
a municipal advisor's fiduciary duty to its municipal entity
clients.\1906\
---------------------------------------------------------------------------

    \1902\ The Commission received a number of comments about the
costs that would be imposed on banks under the Proposal. See, e.g.,
Old Point Bank Letter; Union Bank Letter; Texas Bankers Association
Letter; American Bankers Association Letter II. These comment
letters are discussed extensively earlier in this release.
    \1903\ To the extent a bank provides advice with respect to a
municipal derivative or engages in any other non-exempted municipal
advisory activity through a SID, Rule 15Ba1-1(d)(4) will permit the
SID to register as a municipal advisor rather than the bank itself.
The Commission believes that permitting SIDs to register instead is
in the public interest in that it will ensure that municipal
entities and obligated persons receive the regulatory protection
intended by the statute while not imposing the burdens of the
municipal advisor regulatory regime (i.e., the programmatic,
registration, and recordkeeping costs discussed throughout the
economic analysis) on the bank as a whole.
    \1904\ The final rule exempts any registered swap dealer to the
extent that such dealer recommends a municipal derivative or a
trading strategy that involves a municipal derivative for sale by
such dealer or an affiliated registered swap to a municipal entity
or obligated person, provided that the dealer meets any applicable
safe harbor requirements for parties to such transactions under the
CFTC's regulatory regime. See supra Section III.A.1.c.vi. The
Commission notes that swap dealers will incur costs to qualify for
the exemption under the applicable regulatory regime, and that these
costs will likely be lower than the programmatic, registration, and
recordkeeping costs of the municipal advisor regulatory regime.
    \1905\ See AICPA Code of Professional Conduct ET 201.01, 202.01.
See also AICPA Attestation Standards AT Sec.  101.06 (providing that
``[a]ny professional service resulting in the expression of
assurance must be performed under AICPA professional standards that
provide for the expression of such assurance'').
    \1906\ See AICPA Attestation Standards AT Sec.  101.35, 101.36.
Accountants providing attest services are also required to meet
general standards related to adequate technical training and
proficiency; adequate knowledge of subject matter; suitability and
availability of criteria; and the exercise of due professional care.
See AICPA Attestation Standards AT Sec.  101.19 to 101.41.
---------------------------------------------------------------------------

    The Commission is also exempting from the definition of municipal
advisor any persons engaging in municipal advisory activities in a
circumstance in which a municipal entity or obligated person is
otherwise represented by an independent registered municipal advisor
\1907\ with respect to the same aspects of a municipal financial
product or an issuance of municipal securities, subject to certain
requirements.\1908\ As long as a municipal entity is represented by an
independent registered municipal advisor, the Commission believes it is
desirable to allow municipal entities to receive as much advice and
information as possible from a variety of sources, even if the
providers of such advice are not subject to a fiduciary duty, because
such advice could lead to better

decision making where the municipal entity or obligated person also
receives the advice of an independent registered municipal
advisor.\1909\ The Commission, therefore, does not believe at this time
that imposing an additional layer of regulation, including the
fiduciary duty imposed upon municipal advisors when advising municipal
entities, on persons providing advice to a municipal entity that is
otherwise represented by an independent municipal advisor would provide
benefits that justify the burden (i.e., the programmatic, registration,
and recordkeeping costs discussed throughout the economic analysis) of
registration.
---------------------------------------------------------------------------

    \1907\ The term ``independent registered municipal advisor''
means a municipal advisor registered pursuant to Section 15B of the
Exchange Act (15 U.S.C. 78o-4) and the rules and regulations
thereunder, and that is not, and within the past two years was not,
associated with the person seeking to rely on Rule 15Ba1-
1(d)(3)(vi). See Rule 15Ba1-1(d)(3)(vi)(A).
    \1908\ See Rule 15Ba1-1(d)(3)(vi). See also supra notes 564-572
and accompanying text (discussing the requirements for the
exemption).
    \1909\ The Commission staff understands based on discussions
with market participants that market participants and others,
including underwriters, often are aware of important facts and are
in a position to offer valuable advice and information to municipal
entities and obligated persons. The Commission does not want to
curtail the receipt of such advice and information so long as the
municipal entities and obligated persons are represented by
independent registered municipal advisors who are subject to a
fiduciary and other duties and who can help the municipal entities
and obligated persons evaluate the advice and identify potential
conflicts of interest.
---------------------------------------------------------------------------

    As discussed above, the Commission believes that underwriters in
negotiated deals are the persons most likely to rely on this
exemption.\1910\ The Commission estimates the total initial PRA burden
to rely on this exemption in the first year will be $297,339.\1911\ The
Commission estimates that the ongoing PRA burden to rely on this
exemption in each year after the first will be $138,159.\1912\ In
comparison to the registration and recordkeeping costs, estimated
above, the Commission believes that these costs will be minimal, and
that persons relying on this exemption will realize cost savings by not
being subject to the municipal advisor regulatory regime.
---------------------------------------------------------------------------

    \1910\ See supra Section VII.D.9.
    \1911\ ((210 hours (estimated burden to draft the written
representation) + 210 hours (estimated burden to draft the required
disclosure) x $379 (hourly rate for an in-house attorney)) + (2,193
hours (estimated burden to obtain the written representation) x $63
(hourly rate for a Compliance Clerk)) = $297,339. See supra note
1611 and accompanying text; supra note 1779 (calculating the hourly
rates for an in-house attorney and for a Compliance Clerk).
    \1912\ 2,193 hours (estimated initial burden to rely on
exemption) x $63 (hourly rate for a Compliance Clerk) = $138,159.
See supra note 1612 and accompanying text; supra note 1779
(calculating the hourly rate for a Compliance Clerk).
---------------------------------------------------------------------------

    The Commission is also exempting from the definition of municipal
advisor any person providing a response in writing or orally to an RFP
or RFQ from a municipal entity or obligated person for services in
connection with a municipal financial product or the issuance of
municipal securities, provided that such person does not receive
separate direct or indirect compensation for advice provided as part of
such a response.\1913\ The Commission believes that responses to RFPs
and RFQs by themselves do not constitute municipal advisory activities,
and thus, that imposing an additional layer of regulation, including
the fiduciary duty imposed upon municipal advisors when advising
municipal entities, on persons responding to RFPs and RFQs would
provide benefits that justify the burden (i.e., the programmatic,
registration, and recordkeeping costs discussed throughout the economic
analysis) of registration. The Commission does not have the information
necessary to provide a reasonable estimate of the number of persons who
may rely on this exemption because the Commission does not have data
regarding the number of persons who respond to RFPs and RFQs, and is
unaware of such data being publicly available. The Commission staff
understands based on discussions with market participants, however,
that a significant number of persons respond to RFPs and RFQs, some of
which would be registered municipal advisors; others may be already-
regulated entities, such as Commission-registered investment advisers
and broker-dealers, whose responses may be subject to fair dealing,
suitability, fiduciary, or other standards.
---------------------------------------------------------------------------

    \1913\ See Rule 15Ba1-1(d)(3)(iv).
---------------------------------------------------------------------------

    The exemptions adopted today could allow for more-efficient use of
resources by persons that are no longer required to register with the
Commission as a municipal advisor pursuant to one of the exemptions in
the final rules because such persons will now be able to put to use the
resources that would otherwise have been spent registering. However, to
the extent that such persons were registered under the temporary
registration regime, the absence of current information about such
persons on Form MA and increased difficulty in finding information
about such persons could reduce informational efficiency relative to
the baseline. The exemptions could also improve competition relative to
the baseline among exempted persons engaging in those activities that
are consistent with the relevant exemption to the extent they remain in
their respective industry as a result of an exemption.\1914\
---------------------------------------------------------------------------

    \1914\ For example, if swap dealers were required to register as
municipal advisors, some might determine to no longer sell swaps to
municipal entities and obligated persons. The exemption may
incentivize such swap dealers to stay in the market and compete with
each other.
---------------------------------------------------------------------------

b. Alternatives
    One alternative to the rules adopted today would be for the
Commission not to engage in additional rulemaking, and thus, not to
provide any exemptions from the definition of municipal advisor. As
discussed above, the Commission does not believe that the benefits that
would accrue if the Commission did not provide the exemptions would
justify the costs that would accrue from subjecting certain market
participants to potentially conflicting and redundant obligations under
the municipal advisor regulatory regime. In addition, the Commission
believes the exemptions provide greater clarity to market participants
by delineating the types of activities that are not subject to the
municipal advisor regulatory regime. To the extent that a person can
determine that registration as a municipal advisor is not required
based solely on the availability of an exemption, the Commission
believes the exemptions adopted today should lead to lower assessment
costs for many firms. For example, board members should be able to
determine relatively easily whether registration as a municipal advisor
is required. Absent these rules, it is likely that market participants
would need to seek no-action relief and other guidance from the
Commission or Commission staff, or risk failing to register with the
Commission, if required. The Commission believes the final rules
provide greater clarity to market participants that should allow them
to make determinations without requesting interpretations from the
Commission or Commission staff, which, in turn, should lead to lower
assessment costs for many firms.
    The Commission also considered whether to provide exemptions using
a status-based approach rather than an activity-based approach. For
example, some commenters called for a blanket exemption for swap
dealers, arguing that registration as a municipal advisor would be
duplicative.\1915\ Similarly, some commenters recommended that
municipal advisor regulation should not apply to banks since they are
already regulated.\1916\
---------------------------------------------------------------------------

    \1915\ See supra note 748 and accompanying text. Commenters also
requested an exemption for security-based swap dealers. The
Commission is not adopting an exemption for security-based swap
dealers at this time. See supra notes 763-765 and accompanying text.
    \1916\ See supra notes 875-878 and accompanying text. Although
the Commission is providing exemptions for certain banking
activities, it has determined not to exempt banks entirely solely
because of their status as otherwise regulated entities.

---------------------------------------------------------------------------

    Although persons exempt under a status-based approach would not
incur the programmatic, registration, and recordkeeping costs of the
regulatory regime, the Commission believes that to provide status-based
exemptions would be inconsistent with Congress's intent to regulate
persons that engage in municipal advisory activities. The Commission
believes that since the exclusions for regulated entities in Section
975 of the Dodd-Frank Act are limited in scope to certain regulated
activity, any exemptions the Commission provides should be similarly
limited. For example, the Commission believes that a bank that provides
advice with respect to municipal derivatives or the issuance of
municipal securities should not be exempt unless the bank qualifies for
another exclusion or exemption. Similarly, the Commission believes that
a registered swap dealer should be exempt only if it meets the
requirements of Rule 15Ba1-1(d)(3)(v). The Commission believes that a
status-based approach would permit many persons to provide municipal
advisory services without being subject to the regulatory regime, which
could cause municipal entities and obligated persons to receive
municipal advice without the investor protections of the regime. The
Commission also believes such an approach could limit the Commission's
ability to oversee the municipal advisory activities of those exempt
persons. The Commission believes these other regimes are not designed
to address directly municipal advisory activities and may not provide
similar protections to municipal entities and obligated persons. In
addition, persons exempt under a status-based approach would not be
required to register with the Commission, which would reduce any
benefits of the regime to the municipal advisor selection
process.\1917\ The Commission is also concerned that providing status-
based exemptions could create inappropriate competitive advantages for
covered categories of market participants.
---------------------------------------------------------------------------

    \1917\ See supra notes 1823-1832 and accompanying text.
---------------------------------------------------------------------------

IX. Final Regulatory Flexibility Analysis

    The Commission has prepared the following Final Regulatory
Flexibility Analysis (``FRFA'') in accordance with Section 4(a) of the
Regulatory Flexibility Act (``RFA'').\1918\ This FRFA relates to Rules
240.15Ba1-1 through 240.15Ba1-8 under the Exchange Act, which set forth
the requirements for municipal advisors to register with the Commission
and the books and records that registered municipal advisory firms must
make and keep. The Commission prepared an Initial Regulatory
Flexibility Analysis (``IFRA'') in conjunction with the Proposal.\1919\
---------------------------------------------------------------------------

    \1918\ 5 U.S.C. 604(a).
    \1919\ See Proposal, 76 FR 878-81.
---------------------------------------------------------------------------

A. Need for and Objectives of the Rules

    The final rules and forms establish a permanent registration regime
for municipal advisors in accordance with Section 975 of the Dodd-Frank
Act. Section 15B of the Exchange Act, as amended by the Dodd-Frank Act,
is intended generally to strengthen oversight of the municipal
securities markets and to broaden current municipal securities market
protections to cover, among other things, previously unregulated market
activity. The rules and forms are designed to meet this mandate by
requiring each municipal advisor to provide basic identifying
information, a description of its activities, and facts regarding
disciplinary history and conflicts of interest, if any.
    The Commission believes that the information provided pursuant to
these rules and forms will aid municipal entities, obligated persons,
and others in choosing municipal advisors or engaging in transactions
with municipal advisors, including participating in transactions of
municipal securities offerings in which a municipal advisor provided
municipal advisory services. In addition, the information disclosed
pursuant to the rules and forms will provide significant value to the
Commission in its oversight of municipal advisors and their activities
in the municipal securities markets.

B. Significant Issues Raised by Public Comment

    In the Proposal, the Commission solicited comment on the IRFA. In
particular, the Commission sought comment on the number of small
entities that would be subject to the proposed rules and forms;
compliance burdens and how they would affect small entities; and
whether the proposed rules and forms would have any effects that have
not been discussed.\1920\ In addition, the Commission requested that
commenters describe the nature of any effects on small entities subject
to the rule and provide empirical data to support the nature and extent
of such effects.\1921\
---------------------------------------------------------------------------

    \1920\ See id. at 881.
    \1921\ See id.
---------------------------------------------------------------------------

    The Commission received approximately ten comment letters that
provided specific evaluative comments about the IRFA and the potential
effect of the rules on small businesses. Most of the commenters were
concerned that the requirements of the permanent registration regime
would be too costly and burdensome for small entity municipal
advisors.\1922\ Several commenters emphasized in particular that the
Small Business Act (``SBA'') threshold of $7 million in revenues that
the Commission estimated for small businesses was too high.\1923\
---------------------------------------------------------------------------

    \1922\ See, e.g., Fieldman Rolapp Letter; MSRB Letter; NAIPFA
Letter; Public FA Letter; Ranson Financial Consultants Letter;
Tamalpais Advisors Letter.
    \1923\ See, e.g., Chancellor Financial Associates Letter;
Fieldman Rolapp Letter; NAIPFA Letter; Public FA Letter; Ranson
Financial Consultants Letter; Tamalpais Advisors Letter; Joy Howard
WM Financial Strategies Letter (``[B]y establishing a threshold of
$7 million in annual receipts, the Commission is likely to determine
that there are few, if any, rules that would `impose a regulatory
burden on small entities.' Such a conclusion would likely be true
for firms that have millions of dollars in annual receipts; however,
most independent financial advisor firms have significantly lower
revenues.'').
---------------------------------------------------------------------------

    Many commenters recommended that the Commission create exemptions
for small independent advisors.\1924\ Two commenters suggested
exempting from registration municipal advisors involved in transactions
below a debt financing limit.\1925\ One commenter suggested the
Commission allow small municipal advisors to convert their temporary
registration to permanent status by agreeing to observe a fiduciary
duty to clients and filing Form ADV (Part 1) with FINRA.\1926\ Another
commenter recommended small firms be allowed to pay lower registration
fees to the MSRB.\1927\ The Commission addresses these comments
below.\1928\
---------------------------------------------------------------------------

    \1924\ See, e.g., Bradley Payne Letter; Chancellor Financial
Associates Letter; Ranson Financial Associates Letter; Specialized
Public Finance Letter; Sullivan Letter; Tamalpais Advisors Letter.
    \1925\ See Chancellor Financial Associates Letter (suggesting
``a limit predicated on the Internal Revenue Code's $10 million
limit (during a calendar year) in order for an issuer's bonds to be
bank-qualified''); Ranson Financial Associates Letter (suggesting
``that if a debt financing does not exceed a certain size or is of a
certain nature, that a firm would not have to register'').
    \1926\ See Specialized Public Finance Letter.
    \1927\ See Sullivan Letter.
    \1928\ See infra Section IX.C.3.
---------------------------------------------------------------------------

    The Commission recognizes that small municipal advisors are
concerned with the potential burdens that the permanent registration
regime may impose. The Commission recognizes that some municipal
advisory firms, including some smaller municipal advisory firms and
sole proprietors, may exit the market for various reasons, including
the costs related to the registration and recordkeeping

requirements in the final rules and forms. The requirements under the
final rules and forms were designed to impose only those burdens
necessary to accomplish the objectives of the Dodd-Frank Act. The
Commission continues to believe that the costs associated with
municipal advisor registration generally will not be overly burdensome
for small firms, and notes that small municipal advisory firms and sole
proprietors may exit the market for a number of reasons, including
business reasons separate from the costs incurred with respect to the
permanent registration regime.

C. Small Entities Subject to the Rule

    In developing the final rules and forms, the Commission has
considered their potential impact on small entities to which they will
apply. The final rules and forms will affect municipal advisors
required to register with the Commission, including small municipal
advisors. Under Section 601(3) of the RFA, the term ``small business''
is defined as having ``the same meaning as the term `small business
concern' under section 3 of the Small Business Act, unless an agency,
after consultation with the Office of Advocacy of the Small Business
Administration and after opportunity for public comment, establishes
one or more definitions of such term which are appropriate to the
activities of the agency and publishes such definition(s) in the
Federal Register.'' \1929\ The Commission's rules do not define ``small
business'' or ``small organization'' for purposes of municipal
advisors. The SBA defines ``small business,'' for purposes of entities
that provide financial investments and related activities, as a
business that had annual receipts of less than $7 million during the
preceding fiscal year and is not affiliated with any person that is not
a small business or small organization.\1930\
---------------------------------------------------------------------------

    \1929\ 5 U.S.C. 601(3).
    \1930\ See 13 CFR 121.201.
---------------------------------------------------------------------------

    As stated above, several commenters emphasized in particular that
the SBA threshold of $7 million in revenues that the Commission used
for purposes of estimating the number of small businesses was too
high.\1931\ For example, one commenter countered that the median annual
revenue of a four-person financial advisory firm was closer to
$800,000, and thus, that the majority of such small advisory firms
would earn annual revenue far below the $7 million threshold.\1932\
This commenter and two others recommended a $1 million threshold for
annual revenue as a more realistic number for small municipal
advisors.\1933\ Another commenter argued that, as a sole
proprietorship, his firm has never generated more than $1 million in
total revenue in any given year, and that for the past two years, his
firm's gross revenue has never been over $350,000.\1934\ This commenter
suggested that, as an alternative to using the SBA threshold of $7
million, municipal advisors involved in transactions below a debt
financing limit should be exempt from municipal advisor
regulation.\1935\
---------------------------------------------------------------------------

    \1931\ See supra note 1923.
    \1932\ See NAIPFA Letter.
    \1933\ See id.; Tamalpais Advisors Letter; Fieldman Rolapp
Letter.
    \1934\ See Chancellor Financial Associates Letter.
    \1935\ See supra note 1925.
---------------------------------------------------------------------------

    The Commission has considered all public comments relating to the
IRFA included in the Proposal. After considering these comments, the
Commission has determined to continue to use the SBA threshold of $7
million in revenues to denote small businesses. The Commission did not
have sufficient data regarding municipal advisors to propose a
definition of ``small business'' or ``small entity'' for purposes of
the municipal advisor regulatory regime. The Commission believes that
it will benefit from analyzing data submitted on Form MA over time, as
well as data others may collect once the permanent registration regime
is in place, before deciding whether to establish a separate definition
of ``small business'' or ``small organization'' in Rule 0-10 under the
Exchange Act \1936\ for purposes of municipal advisors.\1937\ As the
Commission obtains additional information about municipal advisory
firms after the commencement of the permanent registration regime, the
Commission may reevaluate the appropriateness of the annual receipt
threshold. The Commission may then determine, if appropriate, to
promulgate a definition of ``small business'' or ``small entity'' for
purposes of municipal advisors, as it has done in other contexts.\1938\
---------------------------------------------------------------------------

    \1936\ 17 CFR 240.0-10.
    \1937\ Form MA, Item 10, will ask municipal advisors to indicate
whether they meet the definition of ``small business'' or ``small
organization.'' In addition, the Commission will leverage data
collected by others (e.g., the MSRB) to determine whether it should
re-assess its determination of who is a small municipal advisor. As
a result, in the future the Commission will have information it can
use to reevaluate estimates of the number of small municipal
advisors subject to its rules.
    \1938\ See 17 CFR 240.0-10.
---------------------------------------------------------------------------

    In the Proposal, the Commission estimated that approximately 1,000
municipal advisory firms, including sole proprietors, would be required
to complete Form MA.\1939\ For purposes of the IRFA, the Commission
believed that the proportion of small municipal advisory firms subject
to the proposed rules compared to all Form MA applicants would be
similar to the proportion of small registered broker-dealers compared
to all registered broker-dealers.\1940\ The Commission had previously
estimated that approximately 17% of all broker-dealers are ``small''
for the purposes of the RFA.\1941\ Thus, the Commission estimated that
approximately 170 municipal advisory firms that would be required to
register with the Commission would be small entities subject to the
rules.\1942\
---------------------------------------------------------------------------

    \1939\ See Proposal, 76 FR 864-65.
    \1940\ See id. at 879.
    \1941\ See Securities Exchange Act Release No. 61908 (April 14,
2010), 75 FR 21456, 21483 (April 23, 2010). See also Proposal, 76 FR
879.
    \1942\ 1,000 (estimated number of municipal advisors subject to
the Rule) x 0.17 (Proposal's estimated percentage of municipal
advisors that are small entities) = 170 small entity municipal
advisors. See Proposal, 76 FR 879.
---------------------------------------------------------------------------

    In connection with the Proposal, commenters did not provide
estimates of how many municipal advisory firms would be small
businesses or small organizations. One commenter asserted that ``the
large majority of [independent public finance advisory firms] would
fall within the definition of `small business' that the SEC has
proposed it adopt; indeed, a high percentage of [independent public
finance advisory] firms likely generate revenue in amounts
substantially less than $7 million per year.'' \1943\ Other commenters,
as noted above, also argued that most independent financial advisory
firms earn annual revenues far less than $7 million.\1944\
---------------------------------------------------------------------------

    \1943\ See NAIPFA Letter I.
    \1944\ See supra notes 1931-1934 and accompanying text.
---------------------------------------------------------------------------

    With respect to municipal advisors registered with the Commission
as investment advisers and/or broker-dealers, commenters did not
provide, and the Commission is not aware of, any alternative reliable
estimates for the percentage of small entities. The Commission
continues to believe that the percentage of ``small'' broker-dealers
(i.e., 17%) is a reasonable estimate of the number of small entity
municipal advisors that are registered with the Commission as
investment advisers and/or broker-dealers. As discussed above, the
Commission estimates that approximately 273 Form MA registrants will be
municipal advisors registered with the Commission as investment
advisers and/or broker-dealers.\1945\ Thus, the Commission estimates
that approximately 46 municipal advisors registered with the Commission
as

investment advisers and/or broker-dealers will be small entities.\1946\
---------------------------------------------------------------------------

    \1945\ See supra note 1456 and accompanying text.
    \1946\ 273 (estimated number of municipal advisors registered
with the Commission as investment advisers and/or broker-dealers) x
0.17 (estimated percentage of municipal advisors registered with the
Commission as investment advisers and/or broker-dealers that are
small entities) = 46.41 small entity municipal advisors registered
with the Commission as investment advisers and/or broker-dealers.
---------------------------------------------------------------------------

    The Commission recognizes, however, as suggested by commenters,
that a significant majority of municipal advisors not otherwise
registered with the Commission and solicitors that will be required to
register with the Commission may be small entities subject to the final
rules and forms. Therefore, the Commission is revising its estimate to
reflect its belief that approximately 90% of municipal advisors not
otherwise registered with the Commission and solicitors earn annual
revenue less than $7 million.\1947\
---------------------------------------------------------------------------

    \1947\ See, e.g., NAIPFA Letter I (indicating that smaller
financial advisory firms' average revenue of approximately $200,000
per natural person municipal advisor). As discussed above, the
Commission estimates that firms not otherwise registered with the
Commission and solicitors will have, respectively, an average of ten
and five natural person employees who engage in municipal advisory
activities on the firm's behalf. See supra text accompanying notes
1458 and 1461. Assuming average revenues of $200,000 per natural
person municipal advisor, such entities would likely have revenues
far below $7 million. However, the Commission believes a small
number of such firms are likely to have revenues in excess of $7
million. For these reasons, the Commission estimates that
approximately 90% of municipal advisors not otherwise registered
with the Commission and solicitors earn annual revenue less than $7
million.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that approximately 491
Form MA registrants will be municipal advisors not otherwise registered
with the Commission \1948\ and 146 will be solicitors.\1949\ Thus, the
Commission estimates that 573 municipal advisors not otherwise
registered with the Commission and solicitors will be small
entities.\1950\ In total, the Commission estimates that approximately
619 municipal advisory firms will be small entities.\1951\
---------------------------------------------------------------------------

    \1948\ See supra note 1459 and accompanying text.
    \1949\ See supra note 1463 and accompanying text.
    \1950\ 637 (estimated number of municipal advisors not otherwise
registered with the Commission and solicitors) x 0.90 (estimated
percentage of municipal advisors not otherwise registered with the
Commission and solicitors that are small entities) = 573.3 small
entity municipal advisors not otherwise registered with the
Commission and small entity solicitors.
    \1951\ 573 small entity municipal advisors not otherwise
registered with the Commission and small entity solicitors + 46
small entity municipal advisors registered with the Commission as
investment advisers and/or broker-dealers = 619 small entity
municipal advisory firms.
---------------------------------------------------------------------------

    In the Proposal, the Commission also estimated that, with respect
to Form MA-I, only those that are sole proprietors and meet the annual
receipts threshold would be considered small entities subject to the
proposed rules.\1952\ The Commission stated in the Proposal that,
because all sole proprietors would be required to complete Form MA in
addition to Form MA-I, sole proprietors that would be small entities
subject to the proposed rules (i.e., that are under the ``small
entities'' annual receipts threshold) were already counted among the
original estimate of 170 small entities calculated in the
Proposal.\1953\
---------------------------------------------------------------------------

    \1952\ In the proposal, the Commission noted that individuals
who are not sole proprietors (i.e., employees of municipal advisors)
and must register on Form MA-I do not fall within the definitions of
``small business'' or ``small organization'' because only those
businesses and organizations that are ``independently owned'' may
qualify as small entities pursuant to the definitions contained in
the RFA. See 5 U.S.C. 601(4) and 15 U.S.C. 632(a)(1). See also
Proposal, 76 FR 879. As discussed in this release, such individuals
will no longer be required to register as a municipal advisor.
    \1953\ See Proposal, 76 FR 879.
---------------------------------------------------------------------------

    Although, as discussed above, the Commission is revising its
estimate of the total number of municipal advisory firms that will be
considered to be small entities, the Commission did not receive comment
regarding, and is not revising its approach regarding, the estimate of
the number of small entities with respect to Form MA-I. The Commission
continues to believe that, because all sole proprietors must complete
both Form MA and Form MA-I, those sole proprietors that will be
considered small entities are already counted among the new estimate of
619 small entities. Thus, the Commission maintains that it will not be
necessary to further estimate the number of small entities with respect
to Form MA-I.

D. Reporting, Recordkeeping, and Other Compliance Requirements

    The final rules and forms establish a permanent registration regime
for municipal advisors, including small municipal advisors, which
consists of Form MA, Form MA-I, Form MA-W, and Form MA-NR. The final
rules also establish recordkeeping requirements for registered
municipal advisors, including small municipal advisors.\1954\ These
requirements and the burdens on small municipal advisors are discussed
below. The Commission received several comment letters that addressed
the Commission's burden estimates.\1955\
---------------------------------------------------------------------------

    \1954\ See Rule 15Ba1-8.
    \1955\ See, e.g., Ranson Financial Consultants Letter; Joy
Howard WM Financial Strategies Letter; NAIPFA Letter I; Specialized
Public Finance Letter.
---------------------------------------------------------------------------

    Rule 15Ba1-2 imposes costs on all municipal advisors, including
small municipal advisors, by requiring each person applying for
registration with the Commission as a municipal advisor to complete
Form MA and file the form electronically with the Commission. In
addition, a person applying for registration as a municipal advisor
must complete Form MA-I with respect to each natural person who is a
person associated with the municipal advisor and engages in municipal
advisory activities on its behalf and file each Form MA-I
electronically with the Commission.\1956\ Each Form MA will be
considered filed with the Commission upon acceptance of Form MA,
together with all additional required documents, including all required
Form MA-Is, by the Commission's EDGAR system.\1957\
---------------------------------------------------------------------------

    \1956\ See Rule 15Ba1-2(b)(1).
    \1957\ See Rule 15Ba1-2(c).
---------------------------------------------------------------------------

    In the Proposal, the Commission estimated that the average initial
cost per applicant to complete Form MA and the initial self-
certification would be approximately $1,110,\1958\ and the average
initial cost per applicant to complete Form MA-I and the initial self-
certification would be approximately $510.\1959\ The Commission
received comment letters that addressed the Commission's burden
estimates for Form MA \1960\ and Form MA-I.\1961\ The Commission now
estimates that the average initial PRA cost per applicant to complete
Form MA will be approximately $581.\1962\ The Commission also estimates
that the average initial PRA cost for a municipal advisory firm to
complete Form MA-I with respect to each natural person who is a person
associated with the municipal advisor and engages in municipal advisory
activities on its behalf will be approximately $498.\1963\ The total
initial cost incurred by a municipal advisor to register with the
Commission as a municipal advisor will depend on a number of factors,

including the size of the municipal advisory firm; the complexity of
its business activities; the amount and type of information to be
included on Form MA and Form MA-I; and the number of natural persons
municipal advisors for whom the municipal advisory firm will need to
submit Form MA-I. The Commission estimates that the average initial
registration burden across all firms will be approximately $7,595 per
applicant.\1964\
---------------------------------------------------------------------------

    \1958\ See Proposal, 76 FR 880 n. 426 and accompanying text.
    \1959\ See id. at 880 n. 427 and accompanying text.
    \1960\ See supra notes 1483-1485 and accompanying text.
    \1961\ See supra notes 1496-1498 and accompanying text.
    \1962\ 3.5 hours (estimated hourly burden for one municipal
advisor to complete a Form MA) x $166 (combined hourly rate for a
Compliance Manager and Compliance Clerk) = $581. This estimate is
lower than the estimate in the Proposal due to the Commission's
decision not to adopt a self-certification requirement and a
reduction in the combined hourly rate for a Compliance Manager and
Compliance Clerk from $170 to $166. See supra note 1812 (calculating
the combined hourly rate).
    \1963\ 3.0 hours (estimated time required to complete Form MA-I)
x $166 (combined hourly rate for a Compliance Manager and Compliance
Clerk) = $498. This estimate is lower than the estimate in the
Proposal due to a reduction in the combined hourly rate for a
Compliance Manager and Compliance Clerk from $170 to $166. See supra
note 1812 (calculating the combined hourly rate).
    \1964\ See supra note 1813.
---------------------------------------------------------------------------

    The Commission notes that the estimated $166 hourly rate for
compliance personnel that the Commission uses to estimate calculations
with respect to certain figures \1965\ will be less likely to apply to
small entities and solo practitioners because they will be less likely
than larger firms to employ highly compensated compliance
professionals. In the case of such entities, the Commission's per-
applicant cost estimates represent the upper range of potential
registration costs, and the Commission expects that the actual
registration costs for small entities will be significantly lower.
---------------------------------------------------------------------------

    \1965\ See supra note 1812 (calculating the combined hourly
rate).
---------------------------------------------------------------------------

    In addition, municipal advisors will use Form MA and Form MA-I to
amend information previously reported to the Commission.\1966\ Under
Rule 15Ba1-5 and the General Instructions, a registered municipal
advisor must amend Form MA at least annually and whenever a material
event has occurred that changes the information provided in the
form.\1967\ As a result of certain changes to the final rule, a
registered municipal advisor must also promptly amend the information
contained in Form MA-I by filing an amended Form MA-I whenever the
information contained in the form becomes inaccurate for any
reason.\1968\ Municipal advisors will also need to submit an amendment
to Form MA-I to indicate that an individual is no longer an associated
person of the municipal advisory firm filing the form or no longer
engaged in municipal advisory activities on its behalf.\1969\
---------------------------------------------------------------------------

    \1966\ See Rule 15Ba1-5.
    \1967\ Municipal advisors will also report successions of
registration on Form MA. See Rule 15Ba1-6.
    \1968\ See Rule 15Ba1-5(b).
    \1969\ See Instructions to Form MA-I.
---------------------------------------------------------------------------

    In the Proposal, the Commission estimated that the average ongoing
annual cost per applicant to amend Form MA and complete a self-
certification would be approximately $510,\1970\ and the average
ongoing annual cost per applicant to amend Form MA-I and complete a
self-certification would be approximately $160.\1971\ The Commission
received one comment letter that addressed the Commission's burden
estimates for amendments to Form MA and Form MA-I.\1972\ The Commission
now estimates that the average annual PRA cost per registered municipal
advisor to amend Form MA will be approximately $332.\1973\ The
Commission also now estimates that the average annual PRA cost per
registered municipal advisor to prepare updating amendments to Form MA-
I for each of its natural person municipal advisors will be
approximately $141,\1974\ and that the average PRA cost per registered
municipal advisor to amend Form MA-I to indicate that an individual is
no longer an associated person of the municipal advisory firm filing
the form or no longer engaged in municipal advisory activities on its
behalf will be approximately $83.\1975\
---------------------------------------------------------------------------

    \1970\ See Proposal, 76 FR 880 n. 428 and accompanying text.
    \1971\ See id. at 880 n. 429 and accompanying text.
    \1972\ See supra notes 1523-1524 and accompanying text.
    \1973\ ((1.5 hours (average estimated time to prepare an annual
amendment to Form MA) x 1.0 hours (number of annual amendments per
year)) + (0.5 hours (average estimated time to prepare an interim
updating amendment to Form MA) x 1.0 (number of interim updating
amendments per year))) x $166 (combined hourly rate for a Compliance
Manager and Compliance Clerk) = $332. This estimate is lower than
the estimate in the Proposal due to the Commission's decision not to
adopt a self-certification requirement and a reduction in the
combined hourly rate for a Compliance Manager and Compliance Clerk
from $170 to $166. See supra note 1812 (calculating the combined
hourly rate).
    \1974\ (0.5 hours (average estimated time to prepare an updating
amendment to Form MA-I) x 1.7 hours (average number of amendments
per year)) x $166 (combined hourly rate for a Compliance Manager and
Compliance Clerk) = $141.10. This estimate is lower than the
estimate in the Proposal because natural person municipal advisors
are not required to complete a self-certification under the final
rules and the combined hourly rate for a Compliance Manager and
Compliance Clerk has been reduced from $170 to $166. See supra note
1812 (calculating the combined hourly rate).
    \1975\ 0.5 hours (average estimated time to prepare an updating
amendment to Form MA-I) x $166 (combined hourly rate for a
Compliance Manager and Compliance Clerk) = $83. See supra note 1812
(calculating the combined hourly rate).
---------------------------------------------------------------------------

    Municipal advisors will also file a notice of withdrawal from
registration as a municipal advisor on Form MA-W.\1976\ In the
Proposal, the Commission estimated that the average cost per registrant
to complete Form MA-W would be approximately $85.\1977\ The Commission
now estimates that the average PRA cost per registered municipal
advisor to complete Form MA-W will be approximately $83.\1978\
---------------------------------------------------------------------------

    \1976\ See Rule 15Ba1-4.
    \1977\ See Proposal, 76 FR 880 n. 430 and accompanying text.
    \1978\ 0.5 hours (average estimated time to complete Form MA-W)
x $166 (combined hourly rate for a Compliance Manager and Compliance
Clerk) = $83. This estimate is lower than the estimate in the
Proposal due to a reduction in the combined hourly rate for a
Compliance Manager and Compliance Clerk from $170 to $166. See supra
note 1812 (calculating the combined hourly rate).
---------------------------------------------------------------------------

    Non-resident municipal advisors will incur costs to complete Form
MA-NR and provide an opinion of counsel. In the Proposal, the
Commission estimated that the average cost per filer to complete Form
MA-NR would be approximately $255 \1979\ and that the average cost per
non-resident municipal advisory firm to obtain an opinion of counsel,
including the cost to hire outside counsel, would be approximately
$1,960.\1980\ The Commission now estimates the average PRA cost to
complete a single Form MA-NR will be approximately $249.\1981\ The
Commission also estimates that the average PRA cost per non-resident
municipal advisor to obtain an opinion of counsel, including the cost
to hire outside counsel, will be approximately $2,037.\1982\
---------------------------------------------------------------------------

    \1979\ See Proposal, 76 FR 880 n. 431 and accompanying text.
    \1980\ See id. at 880 n. 432 and accompanying text.
    \1981\ 1.5 hours (average estimated time to complete Form MA-NR)
x $166 (combined hourly rate for a Compliance Manager and Compliance
Clerk) = $249. This estimate is lower than the estimate in the
Proposal due to a reduction in the combined hourly rate for a
Compliance Manager and Compliance Clerk from $170 to $166. See supra
note 1812 (calculating the combined hourly rate).
    \1982\ 3.0 hours (average estimated time to obtain an opinion of
counsel) x $379 (hourly rate for an internal attorney) = $1,137. See
supra note 1779 (calculating the hourly rate for an in-house
attorney). $900 = average estimated cost to hire outside counsel to
provide opinion of counsel. $1,137 + $900 = $2,037. This estimate is
higher than the estimate in the Proposal due to an increase in the
hourly rate for an internal attorney from $354 to $379. See supra
note 1538 (explaining the outside counsel cost estimate).
---------------------------------------------------------------------------

    The Commission also believes that some municipal advisory firms
will incur costs associated with hiring outside counsel to help them
comply with the requirements of the final rules and to complete Form
MA. In the Proposal, the Commission estimated that the average cost per
municipal advisory firm to hire outside counsel would be approximately
$400.\1983\ The Commission continues to estimate that the average cost
per municipal advisory firm to hire outside counsel will be
approximately $400.\1984\
---------------------------------------------------------------------------

    \1983\ See Proposal, 76 FR 880 n. 433 and accompanying text.
    \1984\ 1.0 hour (average estimated time spent by outside counsel
to help a municipal advisory firm comply with the rule) x $400
(hourly rate for an outside attorney) = $400. See supra note 1538
(explaining the outside counsel cost estimate).

---------------------------------------------------------------------------

    Rule 15Ba1-8 will require all registered municipal advisors to
maintain true, accurate, and current books and records relating to
their municipal advisory activities. Generally, Rule 15Ba1-8 will
require such books and records to be maintained and preserved for a
period of not less than five years, the first two years in an easily
accessible place. In the Proposal, the Commission estimated that the
average cost per municipal advisory firm to comply with the proposed
recordkeeping requirement would be approximately $9,050.\1985\
---------------------------------------------------------------------------

    \1985\ See Proposal, 76 FR 88 n. 434 and accompanying text.
---------------------------------------------------------------------------

    The Commission estimates that, on average, the annual hourly burden
for each municipal advisory firm to comply with the recordkeeping
requirements will be 182 hours.\1986\ Thus, the Commission estimates
that the average PRA cost per municipal advisory firm to comply with
the recordkeeping requirements will be approximately $9,646 each
year.\1987\ In addition, the Commission continues to believe that it is
appropriate to assume that, for small firms, the per-hour costs
attributable to the recordkeeping requirements will be, at most,
equivalent to the hourly rate for a General Clerk.\1988\ Thus, the
Commission estimates that the average PRA cost per small entity
municipal advisory firm to comply with the recordkeeping requirements
will be approximately $9,646 each year.\1989\ The Commission believes
that for many small entity municipal advisory firms the actual cost
will likely be lower for a number of reasons, including differences in
the variety of services offered to municipal entities and the number of
municipal entity clients, but is using a conservative estimate of such
costs.
---------------------------------------------------------------------------

    \1986\ See supra Section VII.D.8.
    \1987\ 182 hours (estimated time spent by municipal advisors to
ensure annual compliance with the books and records requirement) x
$53 (hourly rate for a General Clerk) = $9,646. See supra note 1861
(calculating the hourly rate for a General Clerk). This estimate is
higher than in the Proposal because of an increase in the hourly
rate for a General Clerk from $50 per hour to $53 per hour.
    \1988\ See supra note 1861 (calculating the hourly rate for a
General Clerk).
    \1989\ See supra note 1987 and accompanying text.
---------------------------------------------------------------------------

    As discussed above, one commenter asserted that the Commission used
an hourly rate for the books and records estimate that was too low for
small entity municipal advisors since they often do not employ General
Clerks.\1990\ While the Commission acknowledges that small municipal
advisors do not typically employ General Clerks and that, in many
cases, the municipal advisory professional himself may be responsible
for maintaining the books and records of the firm, the Commission does
not agree that it should use a higher hourly rate to estimate the
recordkeeping burden for small municipal advisors for several reasons.
The 182-hour estimate is an average annual hourly burden across all
firms regardless of their size, and is based on the Commission's
experience with other regulatory regimes. The Commission anticipates
that larger municipal advisory firms that offer a variety of services
to municipal entities and have significantly greater volumes of books
and records will incur an annual burden greater than 182 hours, while
smaller municipal advisory firms that have significantly lower volumes
of books and records will incur an annual burden lower than 182 hours.
Similarly, the $53 figure is an average hourly rate across all firms
regardless of their size and is inclusive of the variability of costs
across municipal advisors. The Commission does not have the information
necessary to provide reasonable estimates of the differences in hourly
burden among firms of various sizes, a separate average hourly burden
for small entity municipal advisors, or the differences in hourly rates
among firms of various sizes. The Commission is also unaware of any
such data being publicly available. The Commission staff also
understands that some small municipal advisors employ part-time staff
to perform certain business and clerical functions and that the costs
of such employees are less likely to reflect the costs for compliance
personnel at larger municipal advisory firms or the hourly rate
suggested by the commenter. The Commission assumes that municipal
advisors will use the most cost-effective approach available, depending
on their size and specific circumstances, to comply with the
recordkeeping requirement. Accordingly, the Commission does not believe
that it should use a higher hourly rate to estimate the recordkeeping
burden for small municipal advisors.
---------------------------------------------------------------------------

    \1990\ See Joy Howard WM Financial Strategies Letter. See also
supra text accompanying note 1867.
---------------------------------------------------------------------------

    Further, as stated above, the Commission believes that small
municipal advisory firms will likely incur lower annual costs for
maintaining books and records than larger firms. The Commission
recognizes that, although small municipal advisory firms and solo
practitioners may maintain their books and records without a general
clerk or additional staff assistance, such activity would not be
costless. The Commission believes that it is appropriate to assume
that, because small firms will utilize the most cost-effective approach
available, per-hour costs attributable to the books and records
requirements will be, at most, equivalent to the hourly rate for a
General Clerk. Therefore, the Commission uses the hourly rate for a
General Clerk to estimate the average cost across all municipal
advisory firms, regardless of size.
    The Commission recognizes that such compliance burdens and expenses
may cause some smaller municipal advisory firms and sole proprietors to
exit the market or consolidate with other municipal advisory firms. The
Commission estimates that, at the upper range of annual costs, a small
entity municipal advisory firm will incur approximately $17,241 in PRA
costs during the first year \1991\ and $11,721 each subsequent year to
maintain its registration and books and records.\1992\ The Commission
estimates that sole proprietors will incur a lower PRA cost of
approximately $11,125 during the first year \1993\ and $10,119 each
subsequent year.\1994\
---------------------------------------------------------------------------

    \1991\ $7,595 (estimated average initial registration burden for
a single municipal advisory firm) + $9,646 (estimated cost to
maintain books and records) = $17,241. See supra note 1813
(calculating the estimated average initial registration burden for a
single municipal advisory firm).
    \1992\ $332 (estimated annual cost for one municipal advisor to
amend Form MA) + ((11,250 (estimated number of individuals for whom
municipal advisory firms will need to complete a Form MA-I) / 910
(estimated number of municipal advisors registered on Form MA)) x
$141 (estimated annual cost to complete updating amendments to Form
MA-I for each natural person municipal advisor)) + $9,646 (estimated
cost to maintain books and records) = $11,721.13.
    \1993\ $581 (estimated initial cost for one municipal advisor to
complete a Form MA) + (1.0 (sole proprietor required to complete a
Form MA-I) x $498 (estimated initial cost to complete a Form MA-I))
+ $400 (estimated cost to hire outside counsel) + $9,646 (estimated
cost to maintain books and records) = $11,125.
    \1994\ $332 (estimated annual cost for one municipal advisor to
amend Form MA) + (1.0 (sole proprietor required to complete a Form
MA-I) x $141 (estimated annual cost to complete updating amendments
to Form MA-I for each natural person municipal advisor)) + $9,646
(estimated cost to maintain books and records) = $10,119.
---------------------------------------------------------------------------

    One sole proprietor has asserted that his annual revenue during the
past two years has not exceeded $350,000,\1995\ while another commenter
estimated that the median annual revenue for a four-person municipal
advisory firm was $800,000.\1996\ Such comments indicate that
registration costs could comprise approximately 2% of a sole
proprietor's \1997\ or a four-person

municipal advisory firm's \1998\ annual revenue. Nevertheless, the
Commission acknowledges that some small firms and sole proprietors will
not consider the annual cost to be trivial and may discontinue
providing municipal advisory services or consolidate with other
municipal advisory firms as a result. The requirements under the final
rules and forms were designed to impose only those burdens necessary to
accomplish the objectives of the Dodd-Frank Act.
---------------------------------------------------------------------------

    \1995\ See supra note 1934 and accompanying text.
    \1996\ See supra note 1932 and accompanying text.
    \1997\ $6,877 (estimated registration cost for a sole proprietor
during the first year) / $350,000 (estimated annual revenue for a
sole proprietor) = 1.96%.
    \1998\ $16,598 (estimated registration cost for a municipal
advisor registered with the Commission as an investment adviser and/
or broker-dealer during the first year) / $800,000 (estimated annual
revenue for a four-person municipal advisory firm) = 2.07%.
---------------------------------------------------------------------------

E. Agency Action to Minimize Effects on Small Entities

    The RFA directs the Commission to consider significant alternatives
that would accomplish the stated objective, while minimizing any
significant adverse impact on small advisors.\1999\ In considering
whether to adopt the final rules and forms, the Commission considered
the following alternatives: (i) The establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small municipal advisors; (ii) the
clarification, consolidation, or simplification of compliance and
reporting requirements under the rules for such small advisors; (iii)
the use of performance rather than design standards; \2000\ and (iv) an
exemption from coverage of the rules, or any part thereof, for such
small advisors.
---------------------------------------------------------------------------

    \1999\ See 5 U.S.C. 603(c).
    \2000\ The Commission does not consider using performance rather
than design standards to be consistent with the Commission's
understanding of Congress's intent to have the Commission register
municipal advisors and oversee their activities or with other
registration regimes under Commission rules.
---------------------------------------------------------------------------

    The Commission received several comments recommending that the
Commission create exemptions for small independent advisors.\2001\ Two
commenters suggested exempting from registration municipal advisors
involved in transactions below a debt financing limit.\2002\
---------------------------------------------------------------------------

    \2001\ See, e.g., Bradley Payne Letter; Chancellor Financial
Associates Letter; Ranson Financial Associates Letter; Specialized
Public Finance Letter; Sullivan Letter; Tamalpais Advisors Letter.
    \2002\ See Chancellor Financial Associates Letter (suggesting
``a limit predicated on the Internal Revenue Code's $10 million
limit (during a calendar year) in order for an issuer's bonds to be
bank-qualified''); Ranson Financial Associates Letter (suggesting
``that if a debt financing does not exceed a certain size or is of a
certain nature, that a firm would not have to register'').
---------------------------------------------------------------------------

    The Commission does not believe differing compliance or reporting
requirements or an exemption from coverage of the final rules and
forms, or any part thereof, for small municipal advisors (i.e., the
first and fourth alternatives) would be appropriate or consistent with
investor protection or with the Commission's understanding of
Congress's intent to have the Commission register municipal advisors
and oversee their activities. Because the Commission believes the
protections of Section 15B of the Exchange Act, as amended by Section
975 of the Dodd-Frank Act, are intended to apply equally to clients of
both large and small municipal advisory firms, the Commission believes
it would be inconsistent with the purposes of the Exchange Act to
specify different requirements for small municipal advisors under the
final rules and forms. In addition, the requirements under the final
rules and forms are designed to impose only those burdens necessary to
accomplish the objectives of the Dodd-Frank Act.
    As discussed above, the Commission believes that the requirement
that municipal advisors register with the Commission on Form MA and
update the information provided at least annually (or more often as
required by the rules) will provide a number of benefits.\2003\ For
example, the final rules and forms should allow municipal entities and
obligated persons to become better informed about municipal advisors at
a lower cost, which could increase the use of municipal advisors. In
addition, the permanent registration regime and recordkeeping
requirements should enhance the ability of Commission and other
securities regulators to oversee municipal advisors and monitor
compliance with the requirements of the Exchange Act and MSRB rules.
The Commission believes that requiring less information about small
municipal advisors would be insufficient for these purposes.
---------------------------------------------------------------------------

    \2003\ See supra Section VIII.D.3.b.
---------------------------------------------------------------------------

    Regarding the second alternative, the Commission does not believe
it is necessary to clarify, consolidate, or simplify the registration
or recordkeeping requirements for small municipal advisors. In
developing the rules and forms, the Commission considered requiring
additional information from municipal advisors and using different
submission mechanisms. The Commission decided that the information in
the forms and the submission requirements are simple and
straightforward, and that they take into account the resources
available to all municipal advisors, including small municipal
advisors. The Commission believes that small advisors will incur less
cost to complete Form MA than larger municipal advisory firms with more
complex businesses because certain disclosures, for example disclosures
related to Item 6 and the number of DRPs required, will be less
complicated and require less time to complete.
    One commenter suggested the Commission allow small municipal
advisors to convert their temporary registration to permanent status by
agreeing to observe a fiduciary duty to clients and filing Form ADV
(Part 1) with FINRA.\2004\ The Commission acknowledges that this
approach would expedite the registration process for those municipal
advisors that currently file Form ADV, but also notes that this
approach would result in a registration process with multiple formats
that may become difficult to track over time. In addition, the
information required to be disclosed on Form ADV would not provide
comparable information about municipal advisory activities. The
Commission continues to believe that the collection of information in a
uniform, standardized format from all municipal advisors will
facilitate consistent public disclosure of municipal advisor
registration information to municipal advisors, municipal entities,
obligated persons, the Commission, and other interested persons.
---------------------------------------------------------------------------

    \2004\ See Specialized Public Finance Letter.
---------------------------------------------------------------------------

    Another commenter recommended small firms be allowed to pay lower
registration fees to the MSRB.\2005\ As discussed above,\2006\ the
Commission does not charge municipal advisors a fee to register with
the Commission. Although the Dodd-Frank Act permits the MSRB to require
municipal advisors to pay such reasonable fees and charges as may be
necessary or appropriate to defray the costs and expenses of operating
and administering the MSRB,\2007\ the Commission does not set or
approve fees charged by the MSRB. Instead, the Exchange Act provides
that certain designated SRO rules, including fees charged by the MSRB,
take effect upon filing with the Commission \2008\ and may thereafter
be enforced by the SRO to the extent not inconsistent with the Exchange
Act, the rules and regulations thereunder, and applicable

Federal and State law.\2009\ The Commission notes, however, that the
MSRB is required to consider the effects of its rules on small
municipal advisors.\2010\
---------------------------------------------------------------------------

    \2005\ See Sullivan Letter.
    \2006\ See supra note 1808.
    \2007\ See 15 U.S.C. 78o-4(b)(2)(J).
    \2008\ See 15 U.S.C. 78s(b)(3)(A).
    \2009\ See 15 U.S.C. 78s(b)(3)(C). The Commission has sixty days
from the date of filing, however, during which it ``summarily may
temporarily suspend'' the fees ``if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of'' the Exchange Act. See id. If the Commission takes such
action, the Commission shall institute proceedings to determine
whether the proposed rule should be approved or disapproved. See id.
In addition, Section 19(c) of the Exchange Act authorizes the
Commission, by rule, to abrogate, add to, and delete from the rules
of an SRO (other than a registered clearing agency) as the
Commission deems necessary or appropriate to insure the fair
administration of the SRO, to conform its rules to requirements of
the Exchange Act and the rules and regulations thereunder applicable
to such organization, or otherwise in furtherance of the purposes of
the Exchange Act. See 15 U.S.C. 78s(c).
    \2010\ See 15 U.S.C. 78o-4(b)(2)(L)(iv) (providing that an MSRB
rule may ``not impose a regulatory burden on small municipal
advisors that is not necessary or appropriate in the public interest
and for the protection of investors, municipal entities, and
obligated persons, provided that there is robust protection of
investors against fraud'').
---------------------------------------------------------------------------

    One commenter suggested that the Commission could provide
meaningful relief by waiving small firms from the requirement to
provide audited financial reports.\2011\ The Commission notes that the
final rules and forms do not require audited or other financial reports
as part of the recordkeeping requirement. The preparation of audited
financial reports is at the discretion of the municipal advisor, and
the Commission expects that municipal advisors will generally utilize
the most cost-effective solution to comply with the requirements of the
permanent registration regime.
---------------------------------------------------------------------------

    \2011\ See Tamalpais Advisors Letter.
---------------------------------------------------------------------------

X. Statutory Basis and Text of Amendments

    Pursuant to the Exchange Act, and particularly Sections 15B, 17,
and 36 (15 U.S.C. 78o-4, 78q, and 78mm, respectively), the Commission
is adopting Sec.  200.19d, Sec.  200.30-3a, Sec. Sec.  240.15Ba1-1
through 240.15Ba1-8, Sec.  240.15Bc4-1, and Sec. Sec.  249.1300 through
249.1330 (Form MA, Form MA-I, Form MA-W, and Form MA-NR), and the
Commission is amending Sec. Sec.  200.19c and 200.30-18.

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegations
(Government agencies), Organization and functions (Government
agencies).

17 CFR Parts 240 and 249

    Reporting and recordkeeping requirements, Municipal advisors,
Registration requirements.

Text of Rules and Forms

    For the reasons set out above, Title 17, Chapter II of the Code of
Federal Regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND
REQUESTS

Subpart A--Organization and Program Management

0
1. The general authority citation for part 200, subpart A, is revised
to read as follows:

    Authority: 15 U.S.C. 77o, 77s, 77sss, 78d, 78d-1, 78d-2, 78o-4,
78w, 78ll(d), 78mm, 80a-37, 80b-11, 7202, and 7211 et seq., unless
otherwise noted.
* * * * *

0
2. Section 200.19c is revised to read as follows:

Sec.  200.19c  Director of the Office of Compliance Inspections and
Examinations.

    The Director of the Office of Compliance Inspections and
Examinations (``OCIE'') is responsible for the compliance inspections
and examinations relating to the regulation of exchanges, national
securities associations, clearing agencies, securities information
processors, the Municipal Securities Rulemaking Board, brokers and
dealers, municipal securities dealers, municipal advisors, transfer
agents, investment companies, and investment advisers, under Sections
15B, 15C(d)(1) and 17(b) of the Securities Exchange Act of 1934 (15
U.S.C. 78o-4, 78o-5(d)(1) and 78q(b)), Section 31(b) of the Investment
Company Act of 1940 (15 U.S.C. 80a-30(b)), and Section 204 of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-4).

0
3. Section 200.19d is added to read as follows:

Sec.  200.19d  Director of the Office of Municipal Securities.

    The Director of the Office of Municipal Securities is responsible
to the Commission for the administration and execution of the
Commission's programs under the Securities Exchange Act of 1934
relating to the registration and regulation of municipal advisors. The
functions involved in the regulation of such entities include
recommending the adoption and amendment of Commission rules, and
responding to interpretive and no-action requests.

0
4. Section 200.30-3a is added to read as follows:

Sec.  200.30-3a  Delegation of authority to Director of the Office of
Municipal Securities.

    Pursuant to the provisions of Pub. L. 100-181, 101 Stat. 1254, 1255
(15 U.S.C. 78d-1, 78d-2), the Securities and Exchange Commission hereby
delegates, until the Commission orders otherwise, the following
functions to the Director of the Office of Municipal Securities to be
performed by him or under his direction by such person or persons as
may be designated from time to time by the Chairman of the Commission:
    (a) With respect to the Securities Exchange Act of 1934 (15 U.S.C.
78a et seq.):
    (1) Pursuant to section 15B of the Act (15 U.S.C. 78o-4):
    (i) To authorize the issuance of orders granting registration of
municipal advisors within 45 days of the filing of an application for
registration as a municipal advisor (or within such longer period as to
which the applicant consents); and
    (ii) To authorize the issuance of orders canceling the registration
of a municipal advisor, if such municipal advisor is no longer in
existence or has ceased to do business as a municipal advisor.
    (b) Notwithstanding anything in the foregoing, in any case in which
the Director of the Office of Municipal Securities believes it
appropriate, he may submit the matter to the Commission.

0
5. Section 200.30-18 is amended by adding paragraphs (j)(7) and (j)(8)
to read as follows:

Sec.  200.30-18  Delegation of authority to Director of the Office of
Compliance Inspections and Examinations.

* * * * *
    (j) * * *
    (j) * * *
    (7) Under section 15B(a) of the Act (15 U.S.C. 78o-4(a)):
    (i) To authorize the issuance of orders granting registration of
municipal advisors within 45 days of the filing of an application for
registration as a municipal advisor (or within such longer period as to
which the applicant consents); and
    (ii) To grant registration of municipal advisors sooner than 45
days after the filing of an application for registration.
    (8) Under section 15B(c) of the Act (15 U.S.C. 78o-4(c)):
    (i) To authorize the issuance of orders canceling the registration
of a municipal advisor, if such municipal advisor is no longer in
existence or has ceased to do business as a municipal advisor; and

    (ii) To determine whether notices of withdrawal from registration
on Form MA-W shall become effective sooner than the 60-day waiting
period.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
6. The general authority citation for part 240 is revised, and
sectional authorities for Sec. Sec.  240.15Ba1-1 through 240.15Ba1-8
and Sec.  240.15Bc4-1 are added, to read as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78p, 78q,
78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29,
80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq.; 18 U.S.C. 1350; and
12 U.S.C. 5221(e)(3) unless otherwise noted.
* * * * *
    Sections 240.15Ba1-1 through 240.15Ba1-8 are also issued under
sec. 975, Public Law 111-203, 124 Stat. 1376 (2010).
    Section 240.15Bc4-1 is also issued under sec. 975, Public Law
111-203, 124 Stat. 1376 (2010).
* * * * *

0
7. Sections 240.15Ba1-1 through 240.15Ba1-8 are added to read as
follows:
SEC.
* * * * *
Sec.  240.15Ba1-1 Definitions.
Sec.  240.15Ba1-2 Registration of municipal advisors and information
regarding certain natural persons.
Sec.  240.15Ba1-3 Exemption of certain natural persons from
registration under section 15B(a)(1)(B) of the Act.
Sec.  240.15Ba1-4 Withdrawal from municipal advisor registration.
Sec.  240.15Ba1-5 Amendments to Form MA and Form MA-I.
Sec.  240.15Ba1-6 Consent to service of process to be filed by non-
resident municipal advisors; legal opinion to be provided by non-
resident municipal advisors.
Sec.  240.15Ba1-7 Registration of successor to municipal advisor.
Sec.  240.15Ba1-8 Books and records to be made and maintained by
municipal advisors.

Sec.  240.15Ba1-1  Definitions.

    As used in the rules and regulations prescribed by the Commission
pursuant to section 15B of the Act (15 U.S.C. 78o-4) in Sec. Sec.
240.15Ba1-1 through 240.15Ba1-8 and 240.15Bc4-1:
    (a) Guaranteed investment contract has the same meaning as in
section 15B(e)(2) of the Act (15 U.S.C. 78o-4(e)(2)); provided,
however, that the contract relates to investments of proceeds of
municipal securities or municipal escrow investments.
    (b) Investment strategies has the same meaning as in section
15B(e)(3) of the Act (15 U.S.C. 78o-4(e)(3)), and includes plans or
programs for the investment of proceeds of municipal securities that
are not municipal derivatives or guaranteed investment contracts, and
the recommendation of and brokerage of municipal escrow investments.
    (c) Managing agent means any person, including a trustee, who
directs or manages, or who participates in directing or managing, the
affairs of any unincorporated organization or association other than a
partnership.
    (d)(1) Municipal advisor.
    (i) In general. Except as otherwise provided in paragraphs (d)(2)
and (d)(3) of this section, the term municipal advisor has the same
meaning as in section 15B(e)(4) of the Act (15 U.S.C. 78o-4(e)(4)).
Under section 15B(e)(4)(A) of the Act (15 U.S.C. 78o-4(e)(4)(A)), the
term municipal advisor means a person (who is not a municipal entity or
an employee of a municipal entity) that provides advice to or on behalf
of a municipal entity or obligated person with respect to municipal
financial products or the issuance of municipal securities, including
advice with respect to the structure, timing, terms, and other similar
matters concerning such financial products or issues; or undertakes a
solicitation of a municipal entity or an obligated person. Under
section 15B(e)(4)(C) of the Act (15 U.S.C. 78o-4(e)(4)(C)) and
paragraph (d)(2) of this section, a municipal advisor does not include
a person that engages in specified excluded activities.
    (ii) Advice standard. For purposes of the municipal advisor
definition under paragraph (d)(1)(i) of this section, advice excludes,
among other things, the provision of general information that does not
involve a recommendation regarding municipal financial products or the
issuance of municipal securities (including with respect to the
structure, timing, terms and other similar matters concerning such
financial products or issues).
    (iii) Certain types of municipal advisors. Under section
15B(e)(4)(B) of the Act (15 U.S.C. 78o-4(e)(4)(B)), municipal advisors
include, without limitation, financial advisors, guaranteed investment
contract brokers, third-party marketers, placement agents, solicitors,
finders, and swap advisors, to the extent that such persons otherwise
meet the requirements of the municipal advisor definition in this
paragraph (d)(1).
    (2) Exclusions from municipal advisor definition. Pursuant to
section 15B(e)(4)(C) of the Act (15 U.S.C. 78o-4(e)(4)(C)), the term
municipal advisor excludes the following persons with respect to the
specified excluded activities:
    (i) Serving as an underwriter. A broker, dealer, or municipal
securities dealer serving as an underwriter of a particular issuance of
municipal securities to the extent that the broker, dealer, or
municipal securities dealer engages in activities that are within the
scope of an underwriting of such issuance of municipal securities.
    (ii) Registered investment advisers--In general. Any investment
adviser registered under the Investment Advisers Act of 1940 (15 U.S.C.
80b-1 et seq.) or any person associated with such registered investment
adviser to the extent that such registered investment adviser or such
person is providing investment advice in such capacity. Solely for
purposes of this paragraph (d)(2)(ii), investment advice does not
include advice concerning whether and how to issue municipal
securities, advice concerning the structure, timing, and terms of an
issuance of municipal securities and other similar matters, advice
concerning municipal derivatives, or a solicitation of a municipal
entity or obligated person.
    (iii) Registered commodity trading advisors. Any commodity trading
advisor registered under the Commodity Exchange Act (7 U.S.C. 1 et
seq.), or person associated with a registered commodity trading
advisor, to the extent that such registered commodity trading advisor
or such person is providing advice that is related to swaps (as defined
in Section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)) and
section 3(a)(69) of the Act (15 U.S.C. 78c(a)(69)), and any rules and
regulations thereunder).
    (iv) Attorneys. Any attorney to the extent that the attorney is
offering legal advice or providing services that are of a traditional
legal nature with respect to the issuance of municipal securities or
municipal financial products to a client of such attorney that is a
municipal entity, obligated person, or other participant in the
transaction. To the extent an attorney represents himself or herself as
a financial advisor or financial expert regarding the issuance of
municipal securities or municipal financial products, however, the
attorney is not excluded with respect to such financial activities
under this paragraph (d)(2)(iv).
    (v) Engineers. Any engineer to the extent that the engineer is
providing engineering advice.
    (3) Exemptions from municipal advisor definition. The Commission
exempts the following persons from the definition of municipal advisor
to the

extent they are engaging in the specified activities:
    (i) Accountants. Any accountant to the extent that the accountant
is providing audit or other attest services, preparing financial
statements, or issuing letters for underwriters for, or on behalf of, a
municipal entity or obligated person.
    (ii) Public officials and employees. (A) Any person serving as a
member of a governing body, an advisory board, or a committee of, or
acting in a similar official capacity with respect to, or as an
official of, a municipal entity or obligated person to the extent that
such person is acting within the scope of such person's official
capacity.
    (B) Any employee of a municipal entity or obligated person to the
extent that such person is acting within the scope of such person's
employment.
    (iii) Banks. Any bank, as defined in section 3(a)(6) of the Act (15
U.S.C. 78c(a)(6)), to the extent the bank provides advice with respect
to the following:
    (A) Any investments that are held in a deposit account, savings
account, certificate of deposit, or other deposit instrument issued by
a bank;
    (B) Any extension of credit by a bank to a municipal entity or
obligated person, including the issuance of a letter of credit, the
making of a direct loan, or the purchase of a municipal security by the
bank for its own account;
    (C) Any funds held in a sweep account that meets the requirements
of section 3(a)(4)(B)(v) of the Act (15 U.S.C. 78c(a)(4)(B)(v)); or
    (D) Any investment made by a bank acting in the capacity of an
indenture trustee or similar capacity.
    (iv) Responses to requests for proposals or qualifications. Any
person providing a response in writing or orally to a request for
proposals or qualifications from a municipal entity or obligated person
for services in connection with a municipal financial product or the
issuance of municipal securities; provided, however, that such person
does not receive separate direct or indirect compensation for advice
provided as part of such response.
    (v) Swap dealers.
    (A) A swap dealer (as defined in Section 1a(49) of the Commodity
Exchange Act (7 U.S.C. 1a(49)) and the rules and regulations
thereunder) registered under the Commodity Exchange Act or associated
person of the swap dealer recommending a municipal derivative or a
trading strategy that involves a municipal derivative, so long as the
registered swap dealer or associated person is not acting as an advisor
to the municipal entity or obligated person with respect to the
municipal derivative or trading strategy pursuant to Section 4s(h)(4)
of the Commodity Exchange Act and the rules and regulations thereunder.
    (B) For purposes of determining whether a swap dealer is acting as
an advisor in this paragraph (d)(3)(v), the municipal entity or
obligated person involved in the transaction will be treated as a
special entity under Section 4s(h)(2) of the Commodity Exchange Act and
the rules and regulations thereunder (even if such municipal entity or
obligated person does not satisfy the definition of special entity
under those provisions).
    (vi) Participation by an independent registered municipal advisor.
Any person engaging in municipal advisory activities in a circumstance
in which a municipal entity or obligated person is otherwise
represented by an independent registered municipal advisor with respect
to the same aspects of a municipal financial product or an issuance of
municipal securities, provided that the following requirements are met:
    (A) Independent registered municipal advisor. An independent
registered municipal advisor is providing advice with respect to the
same aspects of the municipal financial product or issuance of
municipal securities. For purposes of this paragraph (d)(3)(vi), the
term independent registered municipal advisor means a municipal advisor
registered pursuant to section 15B of the Act (15 U.S.C. 78o-4) and the
rules and regulations thereunder and that is not, and within at least
the past two years was not, associated (as defined in section 15B(e)(7)
(15 U.S.C. 78o-4(e)(7)) of the Act) with the person seeking to rely on
this paragraph (d)(3)(vi).
    (B) Required representation. A person seeking to rely on this
paragraph (d)(3)(vi) receives from the municipal entity or obligated
person a representation in writing that it is represented by, and will
rely on the advice of, an independent registered municipal advisor,
provided that the person receiving such representation has a reasonable
basis for relying on the representation.
    (C) Required disclosures.
    (1) With respect to a municipal entity, such person discloses in
writing to the municipal entity that, by obtaining such representation
from the municipal entity, such person is not a municipal advisor and
is not subject to the fiduciary duty set forth in section 15B(c)(1) of
the Act (15 U.S.C. 78o-4(c)(1)) with respect to the municipal financial
product or issuance of municipal securities, and provides a copy of
such disclosure to the independent registered municipal advisor.
    (2) With respect to an obligated person, such person discloses in
writing to the obligated person that, by obtaining such representation
from the obligated person, such person is not a municipal advisor with
respect to the municipal financial product or issuance of municipal
securities, and provides a copy of such disclosure to the independent
registered municipal advisor.
    (3) Each such disclosure must be made at a time and in a manner
reasonably designed to allow the municipal entity or obligated person
to assess the material incentives and conflicts of interest that such
person may have in connection with the municipal advisory activities.
    (vii) Persons that provide advice on certain investment strategies.
A person that provides advice with respect to investment strategies
that are not plans or programs for the investment of the proceeds of
municipal securities or the recommendation of and brokerage of
municipal escrow investments.
    (viii) Certain solicitations. A person that undertakes a
solicitation of a municipal entity or obligated person for the purpose
of obtaining or retaining an engagement by a municipal entity or by an
obligated person of a broker, dealer, municipal securities dealer, or
municipal advisor for or in connection with municipal financial
products that are investment strategies to the extent that those
investment strategies are not plans or programs for the investment of
the proceeds of municipal securities or the recommendation of and
brokerage of municipal escrow investments.
    (4) Special rule for separately identifiable departments or
divisions of banks for municipal advisory purposes. If a bank engages
in municipal advisory activities through a separately identifiable
department or division that meets the requirements of this paragraph
(d)(4), the determination of whether those municipal advisory
activities cause any person to be a municipal advisor may be made
separately for such department or division. In such event, that
department or division, rather than the bank itself, shall be deemed to
be the municipal advisor.
    (i) Separately identifiable department or division. For purposes of
this paragraph (d)(4), a separately identifiable department or division
of a bank is that unit of the bank which conducts all of the municipal
advisory activities of the bank, provided that the following
requirements are met:

    (A) Supervision. Such unit is under the direct supervision of an
officer or officers designated by the board of directors of the bank as
responsible for the day-to-day conduct of the bank's municipal advisory
activities, including the supervision of all bank employees engaged in
the performance of such activities.
    (B) Separate records. All of the records relating to the bank's
municipal advisory activities are separately maintained in, or
extractable from, such unit's own facilities or the facilities of the
bank, and such records are so maintained or otherwise accessible as to
permit independent examination thereof and enforcement of applicable
provisions of the Act, the rules and regulations thereunder, and the
rules of the Municipal Securities Rulemaking Board relating to
municipal advisors.
    (ii) [Reserved]
    (e) Municipal advisory activities means the following activities
specified in section 15B(e)(4)(A) of the Act (15 U.S.C. 78o-4(e)(4)(A))
and paragraph (d)(1) of this section that, absent the availability of
an exclusion under paragraph (d)(2) of this section or an exemption
under paragraph (d)(3) of this section, would cause a person to be a
municipal advisor:
    (1) Providing advice to or on behalf of a municipal entity or
obligated person with respect to municipal financial products or the
issuance of municipal securities, including advice with respect to the
structure, timing, terms, and other similar matters concerning such
financial products or issues; or
    (2) Solicitation of a municipal entity or an obligated person.
    (f) Municipal derivatives means any swap (as defined in Section