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Most Read Contributor in United States, March 2019
The MSRB published an issue brief outlining the
regulatory framework for swaps that may be commonly used by
municipal securities issuers. Publication of the brief was partly a
response to the Tax Cuts and Jobs Act of 2017, which eliminated
tax-exempt advance refunding bonds as a means to refinance
outstanding municipal bonds and has prompted municipal issuers to
consider swaps as an alternative.
In the brief, the MSRB reviewed Dodd-Frank Title
VII and material CFTC regulations, highlighting the heightened
conduct requirements for swap dealers transacting with
"special entities," including municipalities.
Specifically, the MSRB described the requirements that
establish that a special entity have a "qualified independent
representative" or "QIR" and duties (subject to safe
harbors) to act in the "best interest" of a special
entity when making recommendations. The MSRB detailed regulatory
requirements for municipal advisors which will generally apply to
QIRs, including exemptions for swap dealers.
The MSRB further highlighted Dodd-Frank requirements that
directly or indirectly apply to municipal entities, including
documentation requirements. The MSRB stated that
it considers ISDA documentation guidance as a tool to reduce
the administrative burden of these documentation requirements,
noting that they are voluntary and that a municipal end user can
choose to negotiate alternative bespoke agreements provided that
the resulting terms comply with applicable regulations.
Commentary / Jeff Robins
The MSRB's publication provides a useful orientation for
municipalities that may be looking to use swaps for the first
time.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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