6.2.2 Attorneys

The attorneys involved in the disclosure process for a municipal securities offering include, in addition to the issuer’s counsel, bond counsel, and underwriters’ counsel (in a negotiated sale). The issuer may also engage a separate disclosure counsel. All attorneys are subject to the professional responsibility standards of the legal profession, including a requirement to pursue the best interests of their client (e.g., the public agency) within the limits of the law and to disclose conflicts of interest that would prevent them from doing so.

Bond counsel plays a unique role in a municipal securities offering. Although bond counsel is generally engaged by and has an attorney client relationship with the issuer, a key to a successful offering is the opinion delivered by bond counsel stating the following:

That the bonds have been validly issued pursuant to state law
That the bonds and the indenture or trust agreement with which the bonds are issued constitute valid and binding obligations of the issuer
If applicable, that interest on the bonds is excluded from gross income for federal income tax purposes

This “bond counsel opinion” is addressed to the issuer but is intended to be relied upon by the holders of the bonds. A bond counsel opinion represents (and must represent if the bonds are to be marketed successfully) an objective judgment on the matters addressed rather than the partisan position of an advocate.

Bond counsel and disclosure counsel represent the issuer and assist the issuer in the preparation of the OS. Disclosure counsel, and sometimes bond counsel, may deliver a SEC Rule 10b-5 letter to the underwriters to assist the underwriters in their diligence efforts. See Section 6.2.1, Municipal Advisors and Underwriters. Disclosure counsel is at times asked to address a SEC Rule 10b-5 letter to its client, the issuer. Because no “due diligence” defense is available to securities issuers, however, a SEC Rule 10b-5 letter is of less value to an issuer than the assistance provided by the counsel in the preparation of disclosure.

In the past, it was common for underwriters’ counsel to assist the issuer in the preparation of the OS. It is more often the case now that the issuer will engage the firm serving as bond counsel or a different firm to act as the issuer’s disclosure counsel. Underwriters’ counsel does not, however, have an attorney client relationship with the issuer and California Government Code Section 53593 in fact prohibits attorneys from serving as both bond counsel and underwriters’ counsel for a given local agency municipal securities offering.