Financial advisors provide expertise and evaluate decisions throughout the municipal bond issuance process. They are generally recommended for competitive financings but can also be used in negotiated transactions.
Financial advisors have a fiduciary duty to the issuer per the Dodd-Frank Wall Street Reform and Consumer Protection Act. They must be registered with the Securities and Exchange Commission and hold a Municipal Securities Rulemaking Board (MSRB) Series 50 license.
Financial advisors have a commitment to act in the best interests of the issuer. Their work includes:
Issuers can also use financial advisors for other financial transactions beyond bond issuances, such as investment analysis.
Example:
An issuer decides to sell a bond issue to finance a project through the competitive market. Even though the issuer has issued bonds before, it does not have the staff to do the work necessary to sell a bond in the capital markets or the market expertise to know what the bond should be yielding. The issuer will hire a financial advisor to assist in bringing the bonds to market and ensure the bonds are sold at a fair yield.
Financial advisors help with all aspects of debt issuances, including working with the issuer on the bond rating process and determining the terms of the transaction. Financial advisors are especially helpful when the issuer sells bonds through a competitive bid, as they play a key role in putting together the financing options and orchestrating the sale process.
Financial advisors may also help with the selection of other team members, such as the underwriter. They assist in the preparation of marketing and offering documents and assess bond market conditions. However, unlike other members of the bond issuance team, financial advisors have a fiduciary duty to act in the best interests of the issuer.