If listed only as a “Municipal Advisor,” that firm has a fiduciary duty under federal law to always put their clients’ interests first!
“Municipal Advisor/Broker Dealer”
If listed as a “Municipal Advisor/Broker Dealer,” the firm has potential conflicts of interests that could be detrimental to bond issuers.
The link above points to a list of Municipal Advisor Registrants maintained by the MSRB (Municipal Securities Rulemaking Board).
Recent incidents in Kansas due to “conflicted advisors” (using a broker-dealer or underwriter)
No bids are taken on bond issues
We are still seeing bonds sold without taking bids – likely resulting in the far higher interest rates than necessary.
"Advisors" buying bonds
A city recently received advice from a “financial advisor” that then proceeded to purchase the bonds as an “underwriter” rather than taking bids. (Fines were levied recently against that firm and the individual advisors in March 2016.)
Bonds issued when not prudent to do so
We are seeing many “advanced” refundings that are urged by bond underwriters (“conflicted” advisors) which provide fees to underwriters, even though it may not be in the best interests of the municipality.
No advisor used at all
Some bonds have been issued with no Financial Advisor to protect the local government’s interest.
Reduced number of bond bidders
When a broker-dealer/underwriter acts as “financial advisor,” that firm is legally barred from bidding on bonds. This “blacklisting” limits the competitiveness of the bonds – which can result in higher interest rates for the local government. Municipal advisors are to always put their clients’ interest before their own!