Securities regulators in the US are looking to make the standards governing the conduct of advisers to state and local governments concerning their municipal bonds stricter, Bloomberg reported. The move stemmed from the Dodd-Frank Act which was approved by Congress in 2010.

The Municipal Securities Rulemaking Board released the draft rules today. Under the said regulations, companies would be barred from dividing fees with banks, getting too much compensation or promoting deals that would be at odds with the interests of their clients.

The rules are geared to firms that provide advice to public officials who look to raise funds in the $3.7 trillion municipal bond market, the report said. The industry got the attention of the regulators after the 2008 credit crisis when state and local governments were hit with unexpected costs resulting from the bond deals. A federal investigation also found that advisers got fees secretly from lenders to fix prices on the bidding on investment deals, the report said.

The rules are part of a broader move to keep state and local governments protected. Since the Wall Street crisis, other regulations have also been adopted which restricted banks from proposing complex financial deals to public officials.  

According to the report, the rules unveiled today bear a semblance to those that the board based in Alexandria, Virginia initially proposed in 2011. The board put those rules on hold as they waited for the US Securities and Exchange Commission to give a legal definition that would specify the firms that would be covered. The regulator gave that definition in September, the report said.

Citing registrations filed with the rulemaking body, over 900 companies that give financial advice to public officials would have to follow the added regulations. These include unpopular regional firms to big names like Goldman Sachs Group and JPMorgan Chase & Co, Bloomberg reported.