A Registered Municipal Advisor (RMA) is a professional who advises state and local governments on financial decisions involving public funds. RMAs play a significant role in the public finance sector by providing guidance to municipal entities regarding the issuance of municipal securities and other complex financial products. This advisory function helps governments make informed decisions about raising capital and managing their financial obligations. Their presence is intended to bring a higher level of expertise and conduct to the market where public money is at stake.
Understanding the Municipal Advisor Role
The legal definition of a Municipal Advisor broadly covers any person or entity that provides advice to a municipal entity or obligated person concerning municipal financial products or the issuance of municipal securities. This definition was established as part of a significant regulatory overhaul following the 2008 financial crisis. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandated the registration and oversight of this new class of financial professionals. RMAs advise entities such as state and local governments, public utilities, school districts, and special districts that issue debt to fund public projects.
Core Duties and Fiduciary Responsibility
The most distinguishing requirement for a Registered Municipal Advisor is the imposition of a fiduciary duty when advising a municipal entity. This duty elevates the standard of conduct, requiring the advisor to always act in the client’s best interest, placing the municipality’s financial welfare above their own. The fiduciary obligation comprises both a duty of loyalty and a duty of care, meaning the advisor must provide competent advice and act in good faith, without regard to their own financial gain. Typical activities include advising on the structuring and timing of a bond issuance, managing existing debt portfolios, and structuring complex financial products like municipal derivatives. RMAs also assist in developing the overall plan of finance and coordinate the transaction timetable for capital improvement projects.
The Regulatory Framework and Oversight
Two primary bodies govern the conduct of Registered Municipal Advisors within the United States. The Securities and Exchange Commission (SEC) is responsible for the formal registration of firms and individuals, in addition to enforcing federal securities laws within the municipal market. The Municipal Securities Rulemaking Board (MSRB) functions as the self-regulatory organization, establishing professional conduct and disclosure rules. MSRB Rule G-42 establishes the core standards of conduct for non-solicitor municipal advisors. This rule mandates specific disclosures of any material conflicts of interest and requires the advisor to have a reasonable basis for all recommendations made to the client.
Steps to Becoming a Registered Municipal Advisor
Individuals seeking to become associated with an RMA firm must meet specific professional qualification requirements. The primary step involves passing the MSRB Series 50 exam, the Municipal Advisor Representative Qualification Examination, which tests knowledge of municipal finance and regulatory standards. Once qualified, the individual is listed on the firm’s registration filed with the SEC, which includes detailed information about the person on Form MA-I. Individuals must also adhere to continuing education requirements to maintain their professional competence and stay current with regulatory changes. This structured qualification process ensures a basic level of preparedness and ethical understanding among professionals.
Where Municipal Advisors Work
Registered Municipal Advisors are employed across a variety of organizations that serve the public finance sector. Many RMAs operate within independent financial advisory firms that focus exclusively on providing advice to municipal clients. Others are associated with larger investment banks, where they offer advisory services distinct from the firm’s underwriting activities. Some professionals also work for law firms or directly within large government entities, such as state treasuries or major city finance departments. Their client base is diverse, including not only cities and states but also special districts, like water and sewer authorities, and non-profit organizations that issue tax-exempt debt.