"Direct Bank Loans to Municipalities: What Are the Implications Under the Federal Securities Laws?" by Paul Devlin

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June 8, 2012

Over the last nine months, the Municipal Securities Rulemaking Board (“MSRB”) has issued a series of notices that addresses the regulatory uncertainty caused by the increasing popularity of bank loan financing over traditional public municipal bond offerings. The MSRB has warned market participants that municipal financings structured as loans may in certain circumstances be recharacterized as securities, with significant adverse effects for the parties to such transactions.

In this memorandum, Richards Kibbe & Orbe LLP attorney Paul J. Devlin, along with Rebecca S. Lawrence of Piper Jaffray & Co., discuss these issues and suggest that the large secondary market for commercial loans – which are not considered securities – provides a model for the emergence of a robust municipal loan market outside of the framework of the federal securities laws.  

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