On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"). The complete text of the law is available here.
The Act addresses a broad range of financial regulatory topics in an effort to address the causes of the current economic crisis.
The following are some of the provisions that affect the municipal bond industry:
- Office of Municipal Securities – The Act creates an Office of Municipal Securities within the Securities and Exchange Commission ("SEC") to administer the rules related to municipal securities brokers, dealers, issuers, and advisors.
- Municipal Securities Rulemaking Board – The Act broadens the authority of the Municipal Securities Rulemaking Board so it can better assist the SEC and the Financial Industry Regulatory Authority with regulation and enforcement.
- Credit Rating Agencies – The Act creates an Office of Credit Ratings within the SEC and imposes several new rules affecting rating agencies, including rules regarding independent representation on boards, conflicts of interest, disclosure of credit ratings, and filing requirements designed to minimize false, misleading, or insufficient information.
- Swaps and Derivatives – Although the exemptions contained in the Commodity Exchange Act for state and local obligations should continue to apply to state and local municipal swaps, the Act includes new reporting requirements for derivatives and swap transactions that will also apply to municipal swaps.
- Exemptions for Municipal Securities – The Act exempts municipal securities from the prohibitions on bank propriety trading (by insured institutions) and exempts municipal securities dealers (and any other entity required to be registered under the Securities Exchange Act of 1934) from the jurisdiction of the newly created Bureau of Consumer Financial Protection.
The Dodd-Frank Act does not, however, address the extension of certain programs enacted pursuant to the American Recovery and Reinvestment Act of 2009 ("ARRA"). Absent additional legislation in 2010, the following public finance programs and provisions, originally provided for in ARRA and related legislation, will expire on December 31, 2010:
- The Build American Bonds program. (As of this writing, both the House and Senate are considering bills to extend the Build America Bond program.)
- The Recovery Zone Bonds program.
- The exemption from the alternative minimum tax ("AMT") for interest earned on certain private activity bonds.
- The liberalization of the "bank-qualified" bonds rules that increased the annual bank qualified limit to $30 million, permitted treatment of each 501(c)(3) borrower as an issuer for Section 265 purposes, and provided a 2% de minimis exception.
- The extension of the program permitting Federal Home Loan Bank guarantees for tax-exemption for non-housing bonds.
- The provisions that would permanently exclude Water and Sewer Exempt Facility Bonds from state volume caps.
Goodwin Procter LLP is one of the nation's leading law firms, with a team of 700 attorneys and offices in Boston, Los Angeles, New York, San Diego, San Francisco and Washington, D.C. The firm combines in-depth legal knowledge with practical business experience to deliver innovative solutions to complex legal problems. We provide litigation, corporate law and real estate services to clients ranging from start-up companies to Fortune 500 multinationals, with a focus on matters involving private equity, technology companies, real estate capital markets, financial services, intellectual property and products liability.
This article, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP or its attorneys. © 2010 Goodwin Procter LLP. All rights reserved.