Bond Accountability Commission 2 Recommendations Page 12
The potential for an appearance of impropriety should be avoided. •
Second, the fee schedule pays the Advisors additional compensation if the transactions are larger. Again, that is unfair to all parties. The Advisors should be paid according to their respective time and effort, not by the size of a transaction. Although we have seen no evidence of biased advice, the Advisors are exposed to the potential criticism that specific transactions should not have occurred or that transactions may be larger than necessary for CMSD’s purposes.
It is unfair to CMSD and all members of its Finance Team to place the Team members in a position of losing months of diligent professional work if a transaction, even if through no fault of the Financial Advisors, were to become marginal or inadvisable near its end. That set of facts is an extreme illustration of the conflicts created by contingent fee structures.
Competitive Bids vs. Negotiated Sales Municipal securities are sold typically through two methods of sale.8 One, competitive bids, offers the securities for sale after the securities are structured by the 8
Another method of sale, not relevant to this review of CMSD’s practices, involves direct private placements with sophisticated investors.
Published on May 14, 2014