“Let Me Advise You on How Much to Pay Me”: Subverting Fiduciary Duties and Rules

Tamar Frankel

Municipal Finance Journal, 2007, vol. 28, issue 1, 53 - 64

Abstract: Some broker-dealers and underwriters advise municipal bond issuers and later resign to act as dealers and underwriters for the same issue and issuer. This poses conflicts of interest—gaining the issuers’ trust and recommending underwriter and dealer rates, which they might later charge. Although Municipal Securities Rulemaking Board Rule G-23 prohibits anyone from serving as adviser and dealer at the same time, it allows dealers to serve both as advisers and dealers sequentially with respect to the same transaction. This permissible and serious conflict of interest should be changed by amending the rules or by public exposure.

Date: 2007
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