Final federal rules that now require municipal financial consultants to register with the U.S. Securities and Exchange Commission include exemptions for engineering advice such as feasibility studies, project revenue projections and cash-flow modeling, but there may still be gray areas in capital program finance advice, Washington, D.C.-based securities attorney Amy N. Kroll told ENR on July 8.

The rules, part of the Dodd-Frank financial services reform law, took effect July 1 in response to past municipal finance abuses.

The final rules, whose effective date was extended since they were enacted last year, succeed temporary registration rules in place since October 2010 that were tougher for engineers.

While the final rules don’t require registration for consultants who provide municipalities with certain market and revenue projections on securities-backed projects, engineers’ advice on the "structure, timing or terms" of municipal securities or "financial product" would be outside the exemption, says the SEC.


"If the engineer provides advice on the engineering aspects and consideration of a project to be financed by the proceeds of the state revolving loan funds, the staff believes such advice would be within the scope of the engineering exclusion," says the SEC in a May guidance document. "If the engineer’s advice includes advice with respect to structure, timing, terms or other similar matters concerning a related municipal financial product or issuance of municipal securities, it would constitute municipal advisory activity outside the scope of the engineering exclusion."

"To the extent that your advice veers into area of financing a potential project, you always want to think about the limits of the municipal advisory rule," says Kroll, a partner at Bingham McCutchen LLP.

She says that while the SEC rule includes other possible exemptions, engineering consultants may want to form a separate corporate entity to provide advice in new areas of project finance because of possible client fiduciary liability.

Kroll will host an American Council of Engineering Companies webinar on July 17 to discuss impacts of the municipal advisor rules on engineering firms.