Many third-party placement agents were caught by surprise by the Oct. 1 deadline to register with the Securities and Exchange Commission.
Some also were unclear whether they had to register, period.
“There's a lot of confusion,” said Edward Pittman, a securities attorney with the law firm of Dechert LLP, Washington. “I don't think the SEC was prepared for the impact that this would have, and there's no clear message that's been communicated to the industry.”
“All of the people who should be registered may not be registered by Oct. 1 because some of them are unaware of the requirement,” added Peg Henry, deputy general counsel of the Municipal Securities Rulemaking Board. The MSRB is an Alexandria, Va.-based self-regulatory organization that will be writing SEC-enforced rules for about 1,000 placement agents and other state and local government consultants that are estimated by the board and the SEC to have to register at the SEC under the new regulation.
Said Stacy Havener, president of the Third Party Marketers Association, Princeton Junction, N.J.: “We were a little bit caught by surprise. I don't think many of us realized that Congress was dealing with third-party marketers in this Dodd-Frank bill.”
Securities attorneys in the private sector said the SEC bypassed its usual public “notice and comment” procedures in order to meet the Oct. 1 deadline that was set by the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Barack Obama July 21.
In addition, the attorneys said it's not clear if unaffiliated placement agents who lobby local and state government pension funds on behalf of money manager clients are among the “municipal advisers” the law said had to register.
Under the new law, unregistered placement agents and others defined as “municipal advisers” will be required to fill out SEC registration forms that explain their lines of business. In addition, the disclosure forms, which will be publicly available through the agency's website, are supposed to detail a registrant's securities-related infractions and criminal histories.
“We didn't think the law's definition of municipal entity would include public pension plans,” Mr. Pittman said. “I've compared it to a computer virus that is hidden in an e-mail attachment. You just didn't know it was there.”
Mr. Pittman said yet another reason the requirement escaped notice is that the SEC in June had just adopted its own rules on money manager use of placement agents for public plans, appearing to have resolved the issue.