Appendix: The Dodd-Frank Act and the Municipal Marketa
As a result of the financial crisis that began in 2007, recent legislation signed into law may forever change the municipal bond market, with both positive and negative consequences for high yield municipal bond investors. The Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law No. 111-203 (the Dodd-Frank Act, or Dodd-Frank, briefly known as FinReg) was signed into law by President Barack Obama on July 21, 2010.
Among other things, Dodd-Frank promotes greater transparency in the bond market, provides new protections for bond issuers, and adds accountability to the market participants. Municipal bonds and corporate bonds will be impacted differently by Dodd-Frank, because corporate bonds are registered securities, while municipal bonds are not. Both the Securities Act of 1933 and the Securities Exchange Act of 1934 were enacted with broad exemptions for municipal securities. Consequently, the Securities and Exchange Commission (SEC) never focused on the municipal securities market, but suddenly the SEC is now authorized to play the key role in regulating that market.
There are three provisions in Dodd-Frank specifically affecting the municipal securities market, which are outlined in Subtitle H, Municipal Securities; Section 975, Regulation of Municipal Securities and Changes to the Board of the MSRB; as well as Section 979, Commission Office of Municipal Securities. These ...