Report 2011-118/2011-613 Recommendation 8 Responses

Report 2011-118/2011-613: Conduit Bond Issuers: Issuers Complied With Key Bond Requirements, but Two Joint Powers Authorities' Compensation Models Raise Conflict-of-Interest Concerns (Release Date: August 2012)

Recommendation #8 To: Statewide Communities Development Authority, California

Once the Securities and Exchange Commission (SEC) finalizes its definition of
municipal advisor, California Communities should have its legal counsel review whether HB Capital should register with the Municipal Securities Rulemaking Board.

Annual Follow-Up Agency Response From August 2014

After extensive review of the newly proposed definition of a Municipal Advisor by the U.S. Securities and Exchange Commission (SEC), HB Capital Resources, Ltd. has made the determination to register a Municipal Advisor subsidiary with the SEC and MSRB effective June 2014. The Commission approved the assignment of a portion of the CSCDA Program Manager Services contract to GPM Municipal Advisors, LLC, a wholly owned subsidiary of HB Capital Resources, Ltd., at its meeting on June 26, 2014, per the attached meeting minutes. GPM Municipal Advisors, LLC will serve as a Municipal Advisor to California Communities.

Completion Date: July 2014

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2013

Please refer to our one-year response.

Estimated Completion Date: October 2013

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

The SEC finalized the definition of municipal advisors on September 19, 2013. California Communities Legal Counsel is currently conducting an independent review.

Estimated Completion Date: October, 2013
Response Date: September 2013

California State Auditor's Assessment of 1-Year Status: Pending

The Securities and Exchange Commission (SEC) finalized its definition of municipal advisor on September 20, 2013. In its one-year response to the audit, California Communities indicated that its legal counsel is currently conducting an independent review to evaluate whether HB Capital will register with the Municipal Securities Rulemaking Board.

6-Month Agency Response

The SEC still has not finalized the definition of municipal advisors, and has extended the temporary definition until September 30, 2013. California Communities' Legal Counsel will continue to monitor SEC communications for when the definition is finalized and conduct an independent review.

Response Date: February 2013

California State Auditor's Assessment of 6-Month Status: Pending

California Communities noted that the SEC has not finalized the definition of municipal advisors, and has extended the temporary definition until September 2013. California Communities stated that its legal counsel will continue to monitor SEC communications for when the definition is finalized and conduct an independent review. (See 2013-406, p. 34)