The Municipal Bond Financing Team: Who Does What

A municipal bond financing team is the group of firms an issuer assembles to bring a bond issue to market and to put the proceeds to work: bond counsel, a municipal advisor if the issuer engages one, an underwriter, a trustee where the issue has an indenture, and, on the investment side, a verification agent, a rebate analyst and a Bidding Agent.

The roles meet in one place, the proceeds: the investment-side roles work under the bond contract's permitted investments, the instruments bond proceeds may be invested in under that contract, and the federal arbitrage rules, which investing bond proceeds introduces.

Bond counsel

Bond counsel is the attorney or firm, typically retained by the issuer, that delivers the opinion the MSRB glossary describes: that the bonds have been validly issued and, if tax exemption is intended, that they are tax-exempt bonds.

Every arbitrage and tax conclusion the investment team works from, from the bond yield to the spending exceptions an issue may use, belongs to bond counsel and tax counsel rather than to the advisor or the Bidding Agent.

On the fee side, the MSRB glossary lists bond counsel fees among costs of issuance, alongside underwriter's discount, financial advisory, other counsel and rating agency fees, and a costs of issuance account holds those funds pending payment.

The SLGS rule even names the role: 31 CFR 344.3(d) lists underwriters, financial advisors and bond counsel among potential users of SLGSafe, the Treasury system through which SLGS transactions generally must go.

Municipal advisor

A municipal advisor is a person, other than the municipal entity or its employee, who either advises a municipal entity or obligated person on municipal financial products or the issuance of municipal securities, or solicits a municipal entity, under Exchange Act Section 15B(e)(4).

Dodd-Frank Act §975 added that definition in 2010, and the SEC restated it in its registration rule at 17 CFR 240.15Ba1-1(d)(1)(i).

The statute then names the forms the role takes: municipal advisors include, without limitation, financial advisors, guaranteed investment contract brokers, third-party marketers, placement agents, solicitors, finders and swap advisors, to the extent they otherwise meet the definition.

The registration timeline runs through three dates: the registration requirement took effect October 1, 2010, the SEC adopted the permanent rules on September 20, 2013 in Release No. 34-70462, and those rules became effective July 1, 2014 after a temporary stay.

Federal law deems a municipal advisor and its associated persons to have a fiduciary duty to any municipal entity for which it acts as a municipal advisor, under 15 U.S.C. 78o-4(c)(1), and the MSRB's standards of conduct rule for advisors details the duty as loyalty and care owed to municipal entity clients, with a duty of care owed to obligated person clients; the rule took effect June 23, 2016.

Not everyone who touches the deal is a municipal advisor: the exclusions in 17 CFR 240.15Ba1-1(d)(2) cover a registered investment adviser giving investment advice and an attorney giving traditional legal advice, among others, and the exemptions in (d)(3) cover written or oral responses to RFPs and RFQs, so long as the responder receives no separate direct or indirect compensation for the advice in the response.

A broker-dealer can also advise without registering when the issuer is represented by an independent registered municipal advisor on the same aspects of the transaction, gives a written representation that it relies on the IRMA, and receives written disclosures, which is the IRMA exemption.

On selection, GFOA recommends that issuers choose municipal advisors on merit through a competitive RFP or RFQ process and review the relationships periodically, and it notes that brokers giving advice on bond-proceeds investments may be treated as municipal advisors under the SEC's Municipal Advisor Rule.

SEC staff described an RFP that would generally fit the exemption: run by the issuer or its registered municipal advisor, aimed at a stated objective, open for a reasonable finite period, and competitive, for instance by going to at least three reasonably competitive participants or by public posting, a description staff called only an illustrative example.

Underwriter

An underwriter is a municipal securities dealer that purchases a new issue of municipal securities from the issuer for resale in a primary offering, whether through negotiation or a competitive bid, as the MSRB glossary defines the role.

The offering is documented in the official statement, which the MSRB glossary describes as a document prepared by or on behalf of the issuer for a primary offering that discloses material information such as the issue's purposes, how the securities will be repaid, and the obligor's financial and economic characteristics.

The registration rules tie the exclusion to the underwriting itself: 17 CFR 240.15Ba1-1(d)(2)(i) excludes a broker, dealer or municipal securities dealer serving as an underwriter only to the extent that it engages in activities within the scope of an underwriting.

The SEC gave that scope a time frame in Release No. 34-70462: it generally begins when the issuer engages the underwriter for the particular issue and ends at the end of the underwriting period, and advice outside the scope of the underwriting falls outside the exclusion.

Whether an issuer relies on the underwriter's comments or engages an independent advisor is the trade-off a separate guide takes up.

Trustee

A trustee is a financial institution with trust powers, designated by the issuer or borrower, that acts pursuant to the bond contract in a fiduciary capacity for the benefit of the bondholders, as the MSRB glossary describes it.

The same institution often also serves as custodian, paying agent, registrar or transfer agent, and the bond funds guide describes what sits in each fund.

Where the issue uses an indenture, the trustee's job description comes from it: the indenture is the contract between the issuer and the trustee for the bondholders' benefit that sets out the parties' rights, duties and remedies and the exact nature of the security for the bonds, which a separate guide reads for what it says about investing proceeds.

Many governmental issues, especially general obligation bonds, may not use an indenture at all, the MSRB glossary notes, so the indenture is one form the bond contract takes rather than a fixture of every issue.

The registration rules note the trustee's bank as well: the SEC exempts banks advising on deposits, extensions of credit, sweep accounts or investments made as indenture trustee, and the indenture-trustee piece is a narrow one under 17 CFR 240.15Ba1-1(d)(3)(iii).

Verification agent

A verification agent, typically a CPA firm, confirms in a refunding that the escrow is sufficient to pay the refunded bonds and, where yield is limited, that the escrow yield does not exceed the permitted yield, as GFOA describes the role.

Its work product is the verification report, which the MSRB glossary describes as one prepared by a CPA or other independent third party that verifies the escrow investments' yield and shows their cash flow is enough to pay principal and interest on the refunded bonds.

The escrow itself sits with a different player, because GFOA describes the escrow agent, typically a commercial bank, as the institution that holds the escrow investments, and what a verification agent checks line by line is its own topic.

This is also where several of these roles touch Treasury's SLGS system: SLGS transactions generally must go through SLGSafe, which accepts subscriptions and redemption requests on business days from 10:00 to 22:00 Eastern time under 31 CFR 344.3(b) and (g), and the same rule names underwriters, financial advisors and bond counsel among potential SLGSafe users.

Rebate analyst

A rebate analyst is the specialist who prepares the arbitrage rebate computations for an issue: under Treasury Regulation §1.148-3, the rebate amount is the excess of the future value of all receipts on nonpurpose investments over the future value of all payments on them, with future values compounded at the bond yield.

The schedule the analyst works to comes from Treasury Regulation §1.148-3: the first rebate installment covers a computation date no later than 5 years after the issue date, each later one no later than 5 years after the previous installment, each installment must bring cumulative payments to at least 90% of the rebate amount at future value, and every payment is due within 60 days after its computation date.

Those payments go to the United States on Form 8038-T, one form per issue, which the IRS instructions also use for yield reduction payments and penalties.

GFOA's post-issuance compliance guidance notes that governments may outsource tasks such as arbitrage rebate but keep ultimate responsibility for ensuring the procedures are met, and it recommends a written policy that lists the key documents, such as the tax certificate and the indenture, at closing.

Which rebate exception applies to a particular issue is a legal determination for tax counsel, and the rebate requirement guide covers the rules themselves.

Bidding Agent

A Bidding Agent is the role that solicits and compares provider bids when an issuer buys its investments competitively, and, for refundings, GFOA says funding an escrow with open market securities may require an escrow bidding agent that solicits bids for the securities used in the escrow.

GFOA adds that a municipal advisor, if the issuer has engaged one, may be able to act as the escrow bidding agent.

On proceeds deals beyond escrows, the registration question follows the advisor rules rather than the label: the statute lists guaranteed investment contract brokers among those who are municipal advisors to the extent they meet the definition, and GFOA notes that brokers giving advice on bond-proceeds investments may be treated as municipal advisors.

What the role does bid by bid, and why independence from the provider matters, is the subject of the Bidding Agent guide.

mGIC, the publisher of this guide, works as an independent municipal advisor and Bidding Agent: it sells no investment product, does not act as principal in the investments it evaluates, and its fee is paid by the winning provider rather than the issuer.

Issuers who want an independent read on their own team's investment work can ask mGIC for a no-obligation reinvestment review.

Which roles a particular issue needs, and who signs which conclusion, comes out of the bond documents and the tax and securities rules, and the legal and tax calls rest with bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.