Why is This Topic Important to Wealth Managers? This blogticle discusses the municipal bond market. The discussion focuses on regulation regarding wealth managers who recommend the use of muni bonds to clients.
This past week served as the one year anniversary of when President Obama signed into law the Dodd-Frank Act. 
The Dodd-Frank Act was enacted, among other things, to promote the financial stability of the United States by improving accountability and transparency in the financial system.
With Section 975 of Title IX of the Dodd-Frank Act, Congress amended Section 15B of the Exchange Act  to, among other things, make it unlawful for municipal advisors to provide certain advice to, or solicit, municipal entities or certain other persons without registering with the Commission.
Since then the SEC has taken several actions regarding municipal securities. In December, it voted to propose a rule creating a new process by which municipal advisors must register with the SEC.  In May 2010, the Commission voted to approve rule changes improving the quality and timeliness of municipal securities disclosure. 
Both measures were intended to strengthen existing requirements for the scope of securities covered, the nature of the events that issuers must disclose, and the time period in which disclosure must be made.
Until the passage of the Dodd-Frank Act, the activities of municipal advisors were largely unregulated and municipal advisors were generally not required to register with the Commission or any other federal, state or self-regulatory entity with respect to their municipal advisory activities.
Some entities that are now subject to registration as municipal advisors pursuant to Section 15B of the Exchange Act, and rules or regulations promulgated thereunder, currently are subject to regulation by various federal and state regulators in other capacities. These entities include brokers, dealers, municipal securities dealers, investment advisers, and banks. Such regulations, however, generally do not apply to their activities as municipal advisors.
Municipal advisors engage in municipal advisory activities in a variety of contexts. For example, municipal advisors participate in the majority of issuances of municipal securities.
According to the Municipal Securities Rulemaking Board (“MSRB” or “Board”), approximately $315 billion (70%)  of the municipal debt issued in 2008 was issued with the participation of municipal advisors commonly referred to as “financial advisors.”
A study that looked at historical involvement by “financial advisors” identified participation rates of approximately 50% in a nearly twenty-year period ending in 2002. 
The municipal securities market consists of over 51,000 issuers, a diverse group that includes states, their political subdivisions such as cities, towns and counties, and their instrumentalities such as school districts or port authorities. These public bodies are governed by state and local laws, including state constitutions, statutes, city charters, and municipal codes.
Municipal securities are issued by government entities to pay for a variety of public projects, for cash flow and other governmental needs, and to fund non-governmental private projects by acting as a conduit on behalf of private organizations that wish to obtain tax-exempt interest rates.
As of March 31, 2010, municipal issuers had an outstanding principal amount of securities in excess of $2.8 trillion. 
Tomorrow’s blogticle will continue discussion on regulation.
 The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010).
 See Pub. L. No. 111-203 Preamble.
 15 U.S.C. 78o-4. All references in this Release to the Exchange Act refer to the Exchange Act as amended by the Dodd-Frank Act.
 See Section 975(a)(1)(B) of the Dodd-Frank Act; 15 U.S.C. 78o-4(a)(1)(B)
 See 17 CFR Parts 240 and 249.
 See 17 CFR Parts 240 and 241.
 See Municipal Securities Rulemaking Board, “Unregulated Municipal Market Participants:
A Case for Reform” (Apr. 2009), available at http://www.msrb.org/News-and-Events/PressReleases/Press-Releases/~/media/Files/SpecialPublications/MSRBReportonUnregulatedMarketParticipants_April09.ashx (“MSRB
 See Arthur Allen and Donna Dudney, May 2010, Does the Quality of Financial Advice
Affect Prices? The Financial Review 45: 389 (“Allen and Dudney”) (analyzing data from
1984 to 2002).
 See Report on Transactions in Municipal Securities, Office of Economic Analysis and
Office of Municipal Securities, the Division of Trading and Markets, U.S. Securities and
Exchange Commission, (July 1, 2004).
 See Federal Reserve Board, Flow of Funds Accounts, Flows and Outstandings, First Quarter