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Why Use a Municipal Securities Financial Advisor?
American Governmental Financial Services Company (AGFS) is a private independent financial advisory firm bringing to its municipal securities issuer clients an important independent business and financial perspective. As a professional independent municipal securities financial advisor, AGFS does not seek to displace investment bankers or placement agents in the issuer’s financing activities. Unlike an underwriter, an independent financial advisor represents the interests of its issuer clients, acting as a business agent in the analysis, negotiation and structuring of financial transactions and in long-term capital planning and budgeting. Independent financial advisors function best as extensions of their issuer-clients’ staffs. Investment bankers, in contrast, as underwriters, purchase the issuer’s obligations, dealing with the issuers at arm’s-length in the role of principals in buyer-seller transactions. The bankers mediate between the issuer and the needs of investors, which often differ from the interests of issuers. In other words, underwriters cannot represent issuers independently both because they are acting for their own account and because they must also represent the interests of investors. The California court quoted above effectively rejected the issuers’ arguments that underwriters are bound by expansive representations and undertakings to issuers at the time of the RFP process when the underwriters are employed. In contrast, another California court, by refusing to dismiss an issuer’s complaint, recognized that a financial advisor could be considered to be a fiduciary, with a duty of disclosure to its issuer client, a duty to exercise care for its client, and a duty not to represent conflicting interests in a bond financing.
The following excerpt illustrates critical differences between underwriters, as described in the excerpt above, and independent financial advisors in terms of the independence of the advice rendered to the issuer-clients--
Financial advisors and underwriters, of course, must work together to achieve issuer’s objectives. A professional financial advisor develops sound working relationships with the investment banking community. A professional financial advisor does not, however, function as a competitor to investment bankers or placement agents, but rather as a helpful and independent financial and business advisor to the issuers. The underwriters then are better able to devote attention to their banking activities, informing issuers of the interests of investors. For example, much of the structuring of a financing for an issuer is best undertaken by a party working directly as an inside independent advisor to the issuer for a noncontingent fee, analyzing first whether the transaction should be undertaken at all, or if undertaken, with what approach. That way, the issuer’s interests and its needs are more fully represented. The independent financial advisor is not a third party principal acting at arms’-length and benefiting primarily, or perhaps solely, if the transaction proceeds to closing or in a preferred form. Indeed, a financial advisor, serving in an independent role with a noncontingent fee, is able to advise the issuer-client not to proceed with a transaction proposed by underwriters, developers or others when the transaction is not in the issuer-client's best interests. Such an independent financial advisor does not have conflicts of interest resulting from compensation concerns. Stemming from this independence, the professional independent financial advisor does not automatically lead the issuer into either competitive bids or negotiated sales, but rather evaluates the circumstances on their merits. There are many conditions in which one or another sales approach may be preferable. In structuring negotiated sales, the investment banker’s point of view is an important element. The independent financial advisor works with the banker, just as with counsel, to prepare the issue and achieve a successful marketing. When a competitive bid is the issuer’s choice, the independent financial advisor assists the issuer in taking the issue to market for the issuer, providing support in the bidding process and aggressively utilizing the advisor’s contacts with the investment banking community. In competitive sales, as a part of the process of educating the underwriting community about the issue, the professional independent financial advisor seeks comments from potential bidders about the issue and their views of market conditions bearing upon the structure. In negotiated sales, the independent financial advisor assists the issuer-client in employing a qualified municipal securities team; works with the issuer, bond counsel and underwriters in structuring a sound municipal bond or other municipal securities transaction that meets the issuer's goals; and then monitors the underwriters' pricing of the securities sale. The following highlights some of the reasons why issuers need independent municipal securities financial advisors at their side:
In summary, the independent financial advisor offers issuers the important benefits of analyzing transactions, and representing and negotiating the issuers’ interests at the municipal bond or other municipal securities financing table, from the earliest planning stages to transactional closings. The issuers gain important advantages from the municipal securities financial advisor’s independence and experience.
Please feel free to contact Robert Doty & American Governmental Financial Services
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Robert W. Doty, President American Governmental Financial Services (AGFS) 1721 Eastern Avenue, Suite 4 Sacramento, CA 95864-1745 |
Phone: (916) 483-7378 Fax: (916) 483-7565 E-mail: http://www.agfs.com |
Copyright © 2008
AGFS - American Governmental Financial Services Company, Sacramento, CA. All rights reserved.
A private company - Not a government agency
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Robert Doty - American Governmental Financial Services Company (AGFS) is a private firm providing services as a municipal securities independent financial advisor to state and local governments for their public finance problems and project funding, and providing municipal bond expert witness and legal consulting services to the legal profession. Robert W Doty and AGFS provide municipal bond financial consultant services to municipal securities issuers, and municipal finance expert witness services, municipal securities expert witness services, municipal disclosure expert witness services, and other legal consulting to lawyers with respect to municipal bonds funding, municipal securities law, municipal bond law, and municipal bond disclosure.