6.1 Federal Securities Laws

Section 3(a)(2) of the 1933 Act exempts from the registration requirements of the 1933 Act “Any security issued or guaranteed by… any State of the United States, or by any political subdivision of a State…or by any public instrumentality of one or more States.” Separate exemptions are generally available for instruments securing municipal securities. A letter of credit issued by a bank, for example, is exempt under Section 3(a)(2), and a bond insurance policy is exempt under Section 3(a)(8). Further, the loan payment obligation of a conduit borrower is not generally a “separate security” requiring its own obligation.

The registration exemption, however, does not exempt the issuers of municipal securities from federal “anti fraud” rules and the corresponding obligation to provide accurate and complete information to potential investors or, at times, to securities markets generally. Thus, the primary securities law focus in the municipal securities context is on disclosure; in the working group for a particular municipal securities offering the focus is on the OS.