How Should an Issuer Choose a Reinvestment Advisor or Bidding Agent?

Choosing a reinvestment advisor or Bidding Agent for bond proceeds comes down to five checks: registration and independence, transaction experience, fee transparency, compliance deliverables and the questions, several of which the rules already require firms to answer in writing.

The broader role is covered on the municipal advisor page.

Registration and independence

The first screen is registration: the firm and its advising professionals should be registered municipal advisors, verifiable in public filings.

Exchange Act Section 15B(e)(4)(A), added by Section 975 of the Dodd-Frank Act in July 2010, defines a municipal advisor as a person, other than the municipal entity or its employee, who advises a municipal entity or obligated person on municipal financial products or the issuance of municipal securities, or who solicits a municipal entity.

The statute's investment strategies definition includes plans or programs for investing proceeds of municipal securities and the recommendation and brokerage of municipal escrow investments, so reinvestment advice sits inside the definition (15 U.S.C. 78o-4(e)(3)).

The SEC's rule names guaranteed investment contract brokers, financial advisors, third-party marketers, placement agents, solicitors, finders and swap advisors among the covered types, to the extent those persons otherwise meet the definition (17 CFR 240.15Ba1-1(d)(1)(iii)); Bidding Agent itself is market usage rather than a statutory term.

Advice on strategies outside proceeds and escrows is exempt, which leaves bond-proceeds reinvestment advice squarely in the regulated category (17 CFR 240.15Ba1-1(d)(3)(vii)).

For registration purposes, SEC staff read "advice" generally as a recommendation particularized to a specific municipal entity's or obligated person's needs, objectives or circumstances.

The MSRB cautions that performing municipal advisory activities without the required filings could make a firm an unregistered municipal advisor in violation of MSRB rules and federal securities laws; Section 15B(a)(1)(B) makes it unlawful to advise or solicit unless registered.

The permanent registration rules, adopted September 20, 2013 in Release No. 34-70462, took effect July 1, 2014 after a temporary stay.

The MSRB urges market participants to review that list closely when evaluating an advisor, and notes that firms without a Series 50 qualified person do not appear on it.

The Exchange Act deems a municipal advisor and its associated persons to have a fiduciary duty to any municipal entity it advises (15 U.S.C. 78o-4(c)(1)).

The MSRB's standards of conduct rule, effective June 23, 2016, frames that duty as loyalty plus care for municipal entity clients and care for obligated persons, and how the rule works has its own page.

Loyalty requires acting in the client's best interests without regard to the firm's own, and declining the engagement if conflicts cannot be managed; care requires the knowledge and expertise for informed advice, reasonable inquiry and a reasonable basis for advice and for representations in signed certificates.

The fair dealing rule requires dealers and municipal advisors alike to deal fairly and avoid deceptive, dishonest or unfair practices, and underwriters in negotiated deals must disclose that their role is arm's length and that, unlike a municipal advisor, they hold no federal fiduciary duty to the issuer; that contrast has its own page.

Firms differ on the economics: mGIC is an independent, SEC-registered municipal advisor that sells no proprietary investment product and does not act as principal in the alternatives it evaluates.

The arbitrage rules add a structural safeguard: to use the bidding safe harbor in Treas. Reg. 1.148-5(d)(6)(iii), an agent that conducts the bidding must not have bid to provide the investment (Treas. Reg. 1.148-5(d)(6)(iii)(B)(3)).

Transaction experience

Registration is the entry condition, so the second screen is whether the firm has structured, bid and closed investments of the type the issuer's fund needs.

The MSRB's qualification rule requires municipal advisor representatives to pass the Series 50 examination before engaging in municipal advisory activities, in place for all such professionals since September 12, 2017; principals must add the Series 54, each firm must have at least one principal and a new principal has 120 days to pass.

The MSRB itself notes the Series 50 does not confer the degree of knowledge and expertise needed for informed advice under the conduct rule, so examinations are a floor, not evidence of reinvestment experience.

At the firm level, the supervision rule requires written supervisory procedures, a designated supervising principal, a chief compliance officer and at least an annual compliance review.

The practical questions are how many transactions the firm has bid in the relevant instruments and fund types, and how it handled draw schedules and closings.

Experience as a Bidding Agent covers bid specifications, soliciting qualified providers, managing questions, receiving bids and comparing bids on rate and non-rate terms.

For scale, mGIC has invested more than $60 billion in bond proceeds and executed swap notional, a combined figure, across more than 1,000 transactions for issuers in more than 40 states, with a reinvestment focus since 2002.

Robert H. Rasmussen has served as Managing Director since mGIC's 2002 inception, with primary responsibility for its Bidding Agent and reinvestment advisory work, in a public finance career that began in the early 1980s and included mortgage revenue bond programs and a place on the pioneering team behind the variable rate demand bond.

More on the firm is on the about mGIC page.

Fee transparency

The third screen is compensation: what the firm is paid, by whom, and what it must put in writing.

The conduct rule requires each municipal advisory relationship to be documented in a dated writing delivered before, upon or promptly after the relationship begins, stating the form and basis of compensation, the required conflict and disciplinary disclosures, the scope and limits of the engagement and the withdrawal terms; it must be amended promptly for material changes.

Before activities begin, the firm must give full and fair written disclosure of all material conflicts and any material legal or disciplinary events, or state in writing that there are none.

Listed conflicts include fee splitting with providers of investments or services, compensation contingent on the size or closing of a transaction, payments from third parties to enlist recommendations and payments to obtain engagements, each with an explanation of how it is managed.

The rule also prohibits excessive compensation, materially inaccurate invoices, misleading statements about capacity in RFP responses, fee splitting with underwriters, undisclosed fee splitting with providers and most payments to obtain engagements; for municipal entity clients, principal transactions on the same or a directly related issue are prohibited.

The arbitrage regulations add a benchmark: a broker's commission on a GIC or yield restricted defeasance escrow falls within a safe harbor where the amount treated as a qualified administrative cost does not exceed the lesser of $30,000 or 0.2 percent of the computational base, or $3,000 if greater, with no more than $85,000 per issue across all such investments (Treas. Reg. 1.148-5(e)(2)(iii)(B)(1)).

Those are the 2003 base amounts adopted by T.D. 9097, applicable to bonds sold on or after February 9, 2004, and the regulation indexes them upward.

The safe harbor is not a cap: a fee above it may still be reasonable under the general standard, but the safe harbor is unavailable for the excess; the fair market value safe harbor and Bidding Agent fees pages go further.

Fee models differ: mGIC's fee is paid by the winning provider rather than the issuer, is set at or below the safe harbor maximum in the arbitrage regulations and is disclosed under those regulations' disclosure requirement.

Compliance deliverables

The fourth screen is the paper the firm will produce, the record an auditor, bond counsel or the IRS may ask for later.

Treas. Reg. 1.148-5(d)(6)(iii) pairs its safe harbor bidding conditions with a provider certification of administrative costs and record retention, and the certifications page lists what is delivered at closing.

A closing that ends in a compliance file keeps that record in one place.

On the advisory side, a firm that recommends a transaction or product needs a reasonable basis to believe it is suitable and must explain its evaluation of material risks and benefits, the basis for suitability and whether it considered other reasonably feasible alternatives; the same applies when reviewing another party's recommendation within the engagement's scope.

Enforcement history explains the emphasis: in a December 7, 2010 settlement, the SEC found that Banc of America Securities won 88 affected reinvestment instruments, including GICs, repurchase agreements and forward purchase agreements, through practices described as "last looks" and "set-ups", and that bidding agents received undisclosed gratuitous payments and kickbacks.

BAS agreed to pay more than $36 million to the SEC and another $101 million to other federal and state authorities, without admitting or denying the findings.

The SEC's rulemaking cites the same vulnerability, describing municipal escrow investments as particularly vulnerable to pricing abuse and citing a joint SEC, IRS and SDNY U.S. Attorney initiative on artificially high Treasury prices in escrows (Release No. 34-70462).

Questions to ask

Most of the selection can be run as questions, several of which the firm is already required to answer in writing.

• Where are your Form MA and Form MA-I filings on EDGAR, and what disclosure answers do they carry?
• What is the form and basis of your compensation, and what conflicts will you disclose in writing?
• Will you or an affiliate bid to provide the investment, or act as principal in it?
• Who is your designated supervising principal, and who reviews compliance?
• What will we receive at closing: bid specifications, the bid record, certifications and the compliance file?

The GFOA recommends selecting municipal advisors on merit through a competitive RFP or RFQ process and reviewing the relationships periodically.

SEC staff described an illustrative RFP that generally fits the exemption: run by the issuer or its registered municipal advisor, stating a particular objective, open a reasonable and finite period and competitive, with at least three reasonably competitive participants or public posting as examples; that illustration belongs to the SEC exemption alone and is separate from the Treasury bid conditions under Treas. Reg. 1.148-5.

The exemption carries a condition worth confirming: the responder must not receive separate direct or indirect compensation for the advice in the response.

The GFOA also notes that brokers advising on bond proceeds may be treated as municipal advisors, with broker-dealer advice available through an RFP or where an independent registered municipal advisor is retained.

Marketing is regulated too: since July 3, 2023, the MSRB's advertising rule has allowed a statement of a person's or entity's experience concerning the advisor only where the person has the knowledge and experience to comment and the advertisement clearly and prominently discloses whether the person is a current client, that the statement may not be representative, that it is no guarantee of future performance or success and, if more than $100 was paid, that it is paid along with any material conflicts.

Compensation for such a statement may not exceed $1,000 in total value in the preceding 12 months, the disclosures must be at least as prominent as the statement itself and placed close to it, and no advertisement may state or imply that the MSRB or any regulator endorses, indemnifies or guarantees the advisor or any product, so registration language stays factual.

Where a question turns on the tax law or the bond documents, the determination belongs to bond counsel and tax counsel.

For an independent look at an existing investment or a bid in progress, mGIC offers a free, no-obligation reinvestment review; you can work with an SEC-registered advisor through the contact page.

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.