Underwriter Exclusion
Once a municipality has engaged the services of an underwriter on a specific transaction, the underwriter may give advice to the municipality or obligated person. This is called the underwriter exclusion. Engagement must occur through a contractual agreement and the agreement must include the required underwriter disclosures listed in MSRB Rule G-17. The engagement may occur through either of the following:
- • Traditional engagement agreement
- • Non-binding letter of intent (LOI) agreement—this kind of agreement does not obligate the issuer to issue any debt or use the underwriter
The engagement agreement should contain the following:
- • Written approval by the governing body or a responsible official of the municipal entity
- • Information relating to the underwriting services
- • The role of the broker-dealer in the transaction
- • Information relating to a particular issuance of municipal securities that the municipal entity or obligated person anticipates issuing (should not be a general engagement for underwriting services that does not relate to any particular transaction)
- • All disclosures that are required by underwriters by the time of the engagement listed in G-17 (e.g., underwriter’s compensation, conflicts of interest)
A broker-dealer that acts as a municipal advisor to a municipality may not switch