WASHINGTON —  Four more members of Congress have sent letters to the SEC expressing concerns or raising questions about provisions in its proposed muni adviser registration rules that would treat state and local appointed board members as muni advisers who would be subject to registration and regulation.

The letters were sent by Sens. Jack Reed, D-R.I., and Michael Bennet, D-Colo., both members of the Senate Banking Committee, as well as Orrin Hatch, R-Utah, and Rep. Steve Stivers, R-Ohio, the latter a member of the House Financial Services Committee.

They were publicly released after House Financial Services Committee chairman Spencer Bachus, R-Ala., sent the SEC a letter warning he does not support the proposed adviser rules because they are too broad and do not reflect congressional intent.

Reed asked the SEC for information about the proposal after sending it a letter he had received from Robert Donovan, executive director of the Rhode Island Health and Educational Building Corp. Donovan warned the proposal would hurt the RIHEBC, whose members are appointed by the governor, as well as many other state and local boards.

The SEC proposal “is a direct intrusion into the way a state carries out its responsibilities” and “will shut down the functions of numerous boards who provide vital services, Donovan warned.

Hatch said the SEC’s proposal “would very likely create an extreme chilling effect on the ability of the Utah State Board of Regents to attract qualified people.” The 19-member board consists of 15 individuals who are appointed by the governor with the consent of the state Senate.

“I request that you provide me, as soon as possible, with compelling reasons this proposed rule is necessary, and how any of its potential benefits would outweigh the significant problems it is likely to create for entities like the Utah State Board of Regents,” Hatch told the SEC.

Bennet urged the commission to exclude appointed members as muni advisers.

“As a former superintendent of the Denver Public School system and a former employee in city government, I have seen firsthand the important role that volunteers play in municipal governments,” he said. “I am concerned that a registration requirement may dissuade some of our best and brightest citizens from stepping forward to assist their local communities.” 

Stivers said many of his constituents have raised concerns about the burdens the SEC’s proposal will create for appointed board members. “As you move forward I urge you to give consideration to the unintended consequences that may result from the commission’s interpretation of this rule,” he said.

But some sources said it’s ironic the lawmakers are complaining about the SEC because they failed to exempt appointed board members from the definition of muni advisers in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the commission to register muni advisers.

Dodd-Frank exempts municipal entities as muni advisers. The SEC goes one step further in its proposed rules for a permanent registration system for advisers, and says elected officials also would be exempt. The agency did not exempt appointed officials, saying in its proposed registration rules that they “are not directly accountable for their performance to the citizens of the municipal entity.”

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