BCRUA_R-16-07-20-7C RESOLUTION NO. R-16-07-20-7C
WHEREAS, the Brushy Creek Regional Utility Authority, Inc. (BCRUA) desires to retain
professional municipal advisory services related to the issuance of City of Leander Contract Revenue
Bonds; and
WHEREAS, FirstSouthwest has submitted an engagement letter to provide said services; and
WHEREAS, the BCRUA wishes to enter into an engagement letter with FirstSouthwest, Now
Therefore
BE IT RESOLVED BY THE BRUSHY CREEK REGIONAL UTILITY AUTHORITY,
That the Board President is hereby authorized and directed to execute on behalf of the BCRUA
an engagement letter with FirstSouthwest, a copy of same being attached hereto as Exhibit "A" and
incorporated herein for all purposes.
The Board hereby finds and declares that written notice of the date, hour, place and subject of
the meeting at which this Resolution was adopted was posted and that such meeting was open to the
public as required by law at all times during which this Resolution and the subject matter hereof were
discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551,
Texas Government Code, as amended.
RESOLVED this 20th day of July, 2016.
JON LUy�, Pr(sident
Brushy Cree/k Regional Utility Authority
ATT ST:
Ro Abruzzese, Se retar
C:\Users\madams\AppData\Local\Microso(t\NVindows\Temporary Internet Files\Content.Outlook\VWEYNNPO\Res.BCRUA-Engagement letter w-FirstSouthwest(00360912xA08178).doc
FirstSouthwest
A Division of Hilltop securities_
Chris W. Allen
Managing Director
July 14,2016
Mr. Steve Sheets
Sheets&Crossfield, P.C.
309 East Main Street
Round Rock,Texas 78664
Re: Municipal Advisory Services, Brushy Creek Regional Utility Authority, Inc.
Dear Mr. Sheets:
On behalf of FirstSouthwest, a Division of Hilltop Securities Inc. ("FirstSouthwest"), we
appreciate the opportunity to provide municipal advisory services to Brushy Creek Regional Utility
Authority,Inc.(`BCRUA"or the"Issuer")related to the issuance of City of Leander Contract Revenue
Bonds and/or other similar instruments by the Issuer (the "Municipal Advisory Services"). The
following outlines the terms of the engagement:
Scope of Services:
FirstSouthwest will provide its professional services as a municipal advisor to advise the Issuer
regarding the issuance of municipal securities and any municipal financial products, all as more fully
described in the Scope of Municipal Advisory Services attached hereto as Appendix A.
Duration:
This engagement shall begin upon the written acceptance by an authorized representative of
the Issuer below and shall remain in effect until terminated by either party upon giving of at least thirty
(30) days prior written notice to the other party of its intention to terminate, specifying in such notice
the effective date of such termination. In the event of such termination,it is understood and agreed that
only the amounts due FirstSouthwest for services provided and expenses incurred to the date of
termination will be due and payable.
Compensation and Expenses:
In consideration for providing the Municipal Advisory Services as set forth in Appendix A, it
is understood and agreed that the fee due to FirstSouthwest for each issuance will be 0.225%of the par
amount of municipal securities sold relating to Phase I Improvements and 0.175% of the par amount
of municipal securities sold thereafter (with a $25,000 minimum fee due on any single issuance of
municipal securities). Payment of fees related to the issuance of municipal securities shall be
contingent upon and payable upon the delivery of the municipal securities. The above charges shall be
multiplied by 1.25 times for the issuance of refunding bonds,reflecting the additional services required.
/ direct 512.481.2000
Hilltop Securities Inc. ®C In9 9 mobile 512.750.1492
300 West 6th Street � �, / fax 512.481.2010
Suite 1940 ?�
Chris.Allen@hilltopsecurities.com
Austin,Texas 78701 HilltopSecurities.com
The Issuer shall be responsible for transaction related expenses including but not limited to
bond counsel, bond printing, rating agency fees, CPA fees for refundings, Official Statement
preparation and printing, paying agent fees,escrow agent fees,verification agent fees,travel expenses,
and miscellaneous costs associated with the issuance of municipal securities. The Issuer agrees to
reimburse FirstSouthwest for all such expenses advanced by FirstSouthwest. The payment of
reimbursable expenses that FirstSouthwest assumes on behalf of the Issuer is not contingent upon the
delivery of the municipal securities and shall be due and payable upon receipt of an invoice submitted
by FirstSouthwest therefor.
FirstSouthwest will provide any additional services to those outlined herein upon mutual
agreement of the parties as to both the services to be performed and the payment of additional
compensation.
Conflict of Interest Disclosures:
FirstSouthwest is providing its Disclosure Statement of Municipal Advisor (the "Disclosure
Statement"), attached hereto as Appendix B, current as of the date of this agreement, setting forth
disclosures by FirstSouthwest of material conflicts of interest, if any, and of any legal or disciplinary
events required to be disclosed pursuant to MSRB Rule G-42. The Disclosure Statement also describes
how FirstSouthwest addresses or intends to manage or mitigate any disclosed conflicts of interest, as
well as the specific type of information regarding, and the date of the last material change, if any, to
the legal and disciplinary events required to be disclosed on Forms MA and MA-1 filed by
FirstSouthwest with the SEC.
We look forward to working with BCRUA during this engagement. Please acknowledge
acceptance of these terms with the signature of an authorized representative of the Issuer in the space
provided below and return two copies to me.
Sincerely,
aj4L--
Chris W. Allen
Managing Director
Agreed and Accepted:
Brushy Creek Regional Utility Authority,Inc.
By: Title:
Name: Date:
2
APPENDIX A
SCOPE OF MUNICIPAL ADVISORY SERVICES
This Appendix A sets out the scope of the Municipal Advisory Services to be performed by
FirstSouthwest.
New Issuances of Municipal Securities. At the direction of or upon the request of the Issuer,
FirstSouthwest shall provide advice to the Issuer on any new issuances, including reofferings of
outstanding issuances that are treated for purposes of the federal securities laws and/or federal tax laws
as new issuances, throughout the tern of this Agreement. The activities to be performed by
FirstSouthwest may include, depending on the specific circumstances of an issuance and any request
or direction of the Issuer, one or more of the following:
Planning for New Issuance
1. Survey and Analysis. Surveying the financial resources of the Issuer in connection with its
capacity to authorize, issue and service the contemplated issuance. This survey would be expected to
include an analysis of any existing debt structure as compared with the existing and projected sources
of revenues which may be pledged to secure payment of debt service and, where appropriate, would
include a study of the trend of the assessed valuation, taxing power and present and future taxing
requirements of the Issuer.In the event revenues of existing or projected facilities operated by the Issuer
are to be pledged to repayment of the contemplated issuance,the survey would be expected to take into
account any outstanding indebtedness payable from such revenues,additional revenues to be available
from any proposed rate increases, and additional revenues resulting from improvements to be financed
by the contemplated issuance, as projected by consulting engineers engaged by the Issuer.
2. Future Financings. In connection with the contemplated issuance, considering and
analyzing future financing needs as projected by the Issuer's staff and consulting engineers or other
experts, if any, engaged by the Issuer.
3. Recommendations. Making recommendations to the Issuer on the contemplated issuance,
including such elements as the date of issue, interest payment dates, schedule of principal maturities,
options for prepayment, security provisions, and such other provisions as may be appropriate.
4. Market Information. Advising the Issuer of FirstSouthwest's view of current bond market
conditions, other related forthcoming bond issues and general information (including applicable
economic data) which might normally be expected to influence interest rates or bidding conditions
relevant to setting an appropriate date and time for the sale of the issuance.
5. Elections. In the event it is necessary to hold an election to authorize the contemplated
issuance, assisting in coordinating the assembly of such data as may be required for the preparation of
necessary petitions, orders, resolutions, ordinances, notices and certificates in connection with the
election, including assistance in the transmission of such data to the Issuer's bond counsel.
Debt Management and Financial Implementation for New Issuance
6. Method of Sale.Evaluating the particular financing being contemplated,giving consideration to
the complexity,market acceptance,rating, size and structure in order to make a recommendation as to
an appropriate method of sale, and:
a. If the issuance is to be sold by a competitive sale:
3
(1) Supervising the sale of the municipal securities;
(2)Disseminating information to prospective bidders,organizing such informational meetings
as may be necessary, and facilitating prospective bidders' efforts in making timely submission
of proper bids;
(3) Assisting the staff of the Issuer in coordinating the receipt of bids,the safekeeping of good
faith checks and the tabulation and comparison of submitted bids;
(4) Advising the Issuer regarding the best bid and provide advice regarding acceptance or
rejection of the bids; and
(5) Obtaining CUSIP numbers on behalf of the Issuer.
b. If the issuance is to be sold by negotiated sale:
(1) Recommending for the Issuer's final approval and acceptance one or more investment
banking firms,as sole underwriter or as managers of an underwriting syndicate,for the purpose
of negotiating the purchase of the municipal securities;
(2) Cooperating with and assisting any selected sole or managing underwriter and its counsel,
as well as any disclosure counsel retained by the Issuer, in connection with the preparation of
any preliminary or final official statement or offering memorandum. FirstSouthwest will
cooperate with and assist the underwriters in the preparation of a bond purchase contract, an
underwriters' agreement and other related documents;
(3) Assisting the staff of the Issuer in the safekeeping of any good faith checks and providing
a cost comparison to the then-current market of expenses, interest rates and prices which are
proposed by the underwriters;
(4) Advising the Issuer on the fairness of the price offered by the underwriters;
(5) Advising the Issuer in connection with any terms and conditions it may wish to establish
with respect to order priorities and other similar matters relating to the underwriting of the new
issuance;
(6) If the new issuance will have a retail order period, advising the Issuer on retail eligibility
criteria and other features of the retail order period and reviewing information provided by the
underwriters to the Issuer in connection with retail orders received; and
(7) At the request of the Issuer, reviewing required disclosures by underwriters to the Issuer
relating to their role as underwriter, conflicts of interests, material terms and risks of the
issuance, and any other matters, and providing any appropriate advice to the Issuer in
connection with such disclosures.
7. Offering Documents for Competitive Offerings. Coordinating the preparation of the notice of
sale and bidding instructions, preliminary official statement(including cooperating with and assisting
any disclosure counsel retained by the Issuer), official bid form and such other documents as may be
required and submitting all such documents to the Issuer for examination, approval and certification.
After such examination, approval and certification, FirstSouthwest shall provide the Issuer with a
supply of all such documents sufficient to its needs and distribute sets of the same to prospective bidders
for the municipal securities. FirstSouthwest also shall provide copies of the final official statement to
4
the winning bidder purchasing the municipal securities in the MSRB-designated electronic format and
in accordance with the notice of sale and bidding instructions promptly after the Issuer approves the
final official statement for distribution.
8. Credit Ratings. Making recommendations to the Issuer on the advisability of obtaining one or
more credit ratings for the issuance and, when directed by the Issuer, coordinating the preparation of
such information as may be appropriate for submission to any rating agency. In those cases where the
advisability of personal presentation of information to a rating agency may be indicated,FirstSouthwest
will arrange for such personal presentations, utilizing such composition of representatives from the
Issuer as may be approved or directed by the Issuer.
9. Trustee, Paying Agent, Registrar, Professionals and Other Transaction Participants. Upon
request,providing advice to the Issuer in the selection of a trustee and/or paying agent/registrar, legal,
accounting or other professionals, and other transaction participants relating to any issuance, and
assisting in the negotiation of agreements pertinent to these services and the fees incident thereto.
10. Financial Publications. When appropriate, advising financial publications of the forthcoming
sale of the municipal securities and providing them with all pertinent information.
11. Consultants. After consulting with and receiving directions from the Issuer, arranging for such
reports and opinions of recognized independent consultants as may be appropriate for the successful
marketing of the issuance.
12. Auditors. In the event formal verification by an independent auditor of any calculations incident
to the issuance is required,making arrangements for such services.
13. Issuer Meetings.Attending meetings of the governing body of the Issuer,its staff,representatives
or committees as requested when FirstSouthwest may be of assistance or service and matters within the
scope of this engagement are to be discussed.
14. Printing.To the extent authorized by the Issuer,coordinating all work incident to printing or final
production,physical or electronic,of the offering documents.
15. Bond Counsel. Maintaining liaison with bond counsel in the preparation of all legal documents
pertaining to the authorization,sale and issuance of the municipal securities.
16. Changes in Laws. Providing to the Issuer copies of proposed or enacted changes in federal and
state laws,rules and regulations having,or expected to have,a significant effect on the municipal bond
market of which FirstSouthwest becomes aware in the ordinary course of its business, it being
understood that FirstSouthwest does not and may not act as an attorney for, or provide legal advice or
services to,the Issuer.
17. Delivery of the Municipal Securities.As soon as a bid for the purchase of a competitive issuance
is accepted by the Issuer or the bond purchase contract for a negotiated issuance is signed by the Issuer,
coordinating the efforts of all concerned to the end that the municipal securities may be delivered and
paid for as expeditiously as possible and assisting the Issuer in the preparation or verification of final
closing figures incident to the delivery of the municipal securities.
18. Debt Service Schedule;Authorizing Resolution. After the closing of the sale and delivery of the
issuance, delivering to the Issuer a schedule of annual debt service requirements for the issuance and,
in coordination with bond counsel, assuring that the paying agent/registrar and/or trustee has been
provided with a copy of the authorizing ordinance, order or resolution.
5
APPENDIX B
DISCLOSURE STATEMENT OF MUNICIPAL ADVISOR
This Disclosure Statement is provided by FirstSouthwest,a Division of Hilltop Securities Inc. ("the
Firm") to you (the "Client") in connection with our current municipal advisory agreement, ("the
Agreement"). This Disclosure Statement provides information regarding conflicts of interest and legal
or disciplinary events of The Firm that are required to be disclosed to Client pursuant to MSRB Rule
G-42(b)and(c)(ii).
PART A—Disclosures of Conflicts of Interest
MSRB Rule G-42 requires that municipal advisors provide to their clients disclosures relating to any
actual or potential material conflicts of interest, including certain categories of potential conflicts of
interest identified in Rule G-42, if applicable.
Material Conflicts of Interest—The Firm makes the disclosures set forth below with respect to material
conflicts of interest in connection with the Scope of Services under the Agreement with the Firm,
together with explanations of how the Firm addresses or intends to manage or mitigate each conflict.
General Mitigations—As general mitigations of the Finn's conflicts,with respect to all of the conflicts
disclosed below,the Firm mitigates such conflicts through its adherence to its fiduciary duty to Client,
which includes a duty of loyalty to Client in performing all municipal advisory activities for Client.
This duty of loyalty obligates the Firm to deal honestly and with the utmost good faith with Client and
to act in Client's best interests without regard to the Firm's financial or other interests. In addition,
because the Firm is a broker-dealer with significant capital due to the nature of its overall business,the
success and profitability of the Firm is not dependent on maximizing short-term revenue generated
from individualized recommendations to its clients but instead is dependent on long-term profitably
built on a foundation of integrity, quality of service and strict adherence to its fiduciary duty.
Furthermore, the Firm's municipal advisory supervisory structure, leveraging our long-standing and
comprehensive broker-dealer supervisory processes and practices, provides strong safeguards against
individual representatives of the Firm potentially departing from their regulatory duties due to personal
interests.The disclosures below describe,as applicable,any additional mitigations that may be relevant
with respect to any specific conflict disclosed below.
1. Affiliate Conflict. The Firm,directly and through affiliated companies,provides or may provide
services/advice/products to or on behalf of clients that are related to the Firm's advisory activities
within the Scope of Services outlined in the Agreement. First Southwest Asset Management(FSAM),
a SEC-registered affiliate of the Firm, provides post issuance services including arbitrage rebate and
treasury management. The Firm's arbitrage team verifies rebate and yield restrictions on the
investments of bond proceeds on behalf of clients in order to meet IRS restrictions. The treasury
management division performs portfolio management/advisor services on behalf of public sector
clients. The Firm, through affiliate First Southwest Advisory, provides a multi-employer trust tailor-
made for public entities which allows them to prefund Other Post-Employment Benefit liabilities. The
Firm has a structured products desk that provides advice to help clients mitigate risk though investment
management, debt management and commodity price risk management products. These products
consist of but are not limited to swaps (interest rate, currency, commodity), options, repos, escrow
structuring and other securities. Continuing Disclosure services provided by the Firm work with issuers
to assist them in meeting disclosure requirements set forth in SEC rule 15c2-12. Services include but
are not limited to ongoing maintenance of issuer compliance, automatic tracking of issuer's annual
filings and public notification of material events. The Firm administers two government investment
pools for Texas governments; the Short-Term Asset Reserve Fund (TexSTAR) and the Local
Government Investment Cooperative (LOGIC). These programs offer Texas government entities
6
investment options for their cash management programs based on the entities specific needs. The Firm
and the aforementioned affiliate's business with a client could create an incentive for the Firm to
recommend to a client a course of action designed to increase the level of a client's business activities
with the affiliates or to recommend against a course of action that would reduce or eliminate a client's
business activities with the affiliates. Furthermore,this potential conflict is mitigated by the fact that
the Firm and affiliates are subject to their own comprehensive regulatory regime as a member of
multiple self-regulatory organizations in which compliance is verified by not only internal tests but
annual external examinations.
II. Other Municipal Advisor or Underwriting Relationships. The Firm serves a wide variety of
other clients that may from time to time have interests that could have a direct or indirect impact on the
interests of Client. For example, the Firm serves as municipal advisor to other municipal advisory
clients and, in such cases, owes a regulatory duty to such other clients just as it does to Client. These
other clients may, from time to time and depending on the specific circumstances, have competing
interests, such as accessing the new issue market with the most advantageous timing and with limited
competition at the time of the offering. In acting in the interests of its various clients,the Finn could
potentially face a conflict of interest arising from these competing client interests. In other cases, as a
broker-dealer that engages in underwritings of new issuances of municipal securities by other municipal
entities,the interests of the Firm to achieve a successful and profitable underwriting for its municipal
entity underwriting clients could potentially constitute a conflict of interest if,as in the example above,
the municipal entities that the Finn serves as underwriter or municipal advisor have competing interests
in seeking to access the new issue market with the most advantageous timing and with limited
competition at the time of the offering.None of these other engagements or relationships would impair
the Firm's ability to fulfill its regulatory duties to Client.
III. Secondary Market Transactions in Client's Securities. The Firm,in connection with its sales
and trading activities, may take a principal position in securities, including securities of Client, and
therefore the Firm could have interests in conflict with those of Client with respect to the value of
Client's securities while held in inventory and the levels of mark-up or mark-down that may be
available in connection with purchases and sales thereof. In particular, the Firm or its affiliates may
submit orders for and acquire Client's securities issued in an Issue under the Agreement from members
of the underwriting syndicate, either for its own account or for the accounts of its customers. This
activity may result in a conflict of interest with Client in that it could create the incentive for the Firm
to make recommendations to Client that could result in more advantageous pricing of Client's bond in
the marketplace. Any such conflict is mitigated by means of such activities being engaged in on
customary terms through units of the Firm that operate independently from the Firm's municipal
advisory business,thereby reducing the likelihood that such investment activities would have an impact
on the services provided by the Finn to Client under this Agreement.
IV. Broker-Dealer and Investment Advisory Business. The Firm is dually registered as a broker-
dealer and an investment advisor that engages in a broad range of securities-related activities to service
its clients, in addition to serving as a municipal advisor or underwriter. Such securities-related
activities,which may include but are not limited to the buying and selling of new issue and outstanding
securities and investment advice in connection with such securities,including securities of Client,may
be undertaken on behalf of, or as counterparty to, Client, personnel of Client, and current or potential
investors in the securities of Client. These other clients may, from time to time and depending on the
specific circumstances, have interests in conflict with those of Client, such as when their buying or
selling of Client's securities may have an adverse effect on the market for Client's securities, and the
interests of such other clients could create the incentive for the Finn to make recommendations to Client
that could result in more advantageous pricing for the other clients. Furthermore,any potential conflict
arising from the firm effecting or otherwise assisting such other clients in connection with such
transactions is mitigated by means of such activities being engaged in on customary terms through units
7
of the Firm that operate independently from the Firm's municipal advisory business,thereby reducing
the likelihood that the interests of such other clients would have an impact on the services provided by
the Firm to Client.
V. Compensation-Based Conflicts. Fees that are based on the size of the issue are contingent upon
the delivery of the Issue. While this form of compensation is customary in the municipal securities
market, this may present a conflict because it could create an incentive for the Firm to recommend
unnecessary financings or financings that are disadvantageous to Client, or to advise Client to increase
the size of the issue.This conflict of interest is mitigated by the general mitigations described above.
Fees based on a fixed amount are usually based upon an analysis by Client and the Firm of, among
other things, the expected duration and complexity of the transaction and the Scope of Services to be
performed by the Firm. This form of compensation presents a potential conflict of interest because, if
the transaction requires more work than originally contemplated,the Firm may suffer a loss.Thus,the
Finn may recommend less time-consuming alternatives,or fail to do a thorough analysis of alternatives.
This conflict of interest is mitigated by the general mitigations described above.
Hourly fees are calculated with,the aggregate amount equaling the number of hours worked by Firm
personnel times an agreed-upon hourly billing rate. This form of compensation presents a potential
conflict of interest if Client and the Firm do not agree on a reasonable maximum amount at the outset
of the engagement,because the Firm does not have a financial incentive to recommend alternatives that
would result in fewer hours worked. This conflict of interest is mitigated by the general mitigations
described above.
PART B—Disclosures of Information Rel4arding Lellal Events and Disciplinary History
MSRB Rule G-42 requires that municipal advisors provide to their clients certain disclosures of legal
or disciplinary events material to its client's evaluation of the municipal advisor or the integrity of the
municipal advisor's management or advisory personnel.
Accordingly, the Finn sets out below required disclosures and related information in connection with
such disclosures.
I. Material Legal or Disciplinary Event. The Firm discloses the following legal or disciplinary
events that may be material to Client's evaluation of the Firm or the integrity of the Firm's management
or advisory personnel:
• For related disciplinary actions please refer to the Firm's BrokerCheck webpage.
• The Firm self-reported violations of SEC Rule 15c2-12:Continuing Disclosure. The Firm
settled with the SEC on February 2, 2016. The firm agreed to retain independent
consultant and adopt the consultant's finding. Firm paid a fine of$360,000.
• The Firm settled with the SEC in matters related to violations of MSRB Rules G-23(c),
G-17 and SEC rule 1513(c)(1). The Firm disgorged fees of$120,000 received as financial
advisor on the deal,paid prejudgment interest of$22,400.00 and a penalty of$50,000.00.
II. How to Access Form MA and Form MA-I Filings. The Firm's most recent Form MA and
each most recent Form MA-I filed with the SEC are available on the SEC's EDGAR system at Forms
MA and MA-I. The SEC permits certain items of information required on Form MA or MA-I to be
provided by reference to such required information already filed by the Firms in its capacity as a broker-
dealer on Form BD or Form U4 or as an investment adviser on Form ADV, as applicable. Information
provided by the Firm on Form BD or Form U4 is publicly accessible through reports generated by
BrokerCheck at llttp://brokercheck.finra.org/, and the Firm's most recent Form ADV is publicly
8
accessible at the Investment Adviser Public Disclosure website at http://www.adviserinfo.sec.,izov/.For
purposes of accessing such BrokerCheck reports or Form ADV, click previous hyperlinks.
PART C—Future Supplemental Disclosures
As required by MSRB Rule G-42,this Disclosure Statement may be supplemented or amended, from
time to time as needed,to reflect changed circumstances resulting in new conflicts of interest or changes
in the conflicts of interest described above, or to provide updated information with regard to any legal
or disciplinary events of the Firm. The Firm will provide Client with any such supplement or
amendment as it becomes available throughout the term of the Agreement.
9
THE FOLLOWING PAGES CONSIST OF THE
FINAL ADOPTED DOCUMENT
DATE: July 15, 2016
SUBJECT: BCRUA Board Meeting—July 20,2016
ITEM: 7C. Consider a resolution authorizing the President to execute an Engagement
Letter with First Southwest for Municipal Advisory Services related to the
issuance of City of Leander Contract Revenue Bonds.
PRESENTER: Tom Gallier, General Manager
BACKGROUND INFO:
As of May 12th of this year, the rating agency, Standard & Poor's Global Ratings, has increased BCRUA's
Municipal Bonds from AA to AA+. This rating increase, combined with recent market reductions in
municipal bond interest rates, has created an opportunity for all three member cities to refinance the
debt that BCRUA has issued on their behalf, and recognize significant long term cost savings.
In order to initiate this process for the City of Leander, a Board Resolution must be passed, which will
authorize the Board President to execute an engagement letter with First Southwest, for municipal
advisory services. First Southwest currently serves as the financial advisor for the City of Leander.
Further action on reissuance of Leander's Contract Revenue Refunding Bonds will be scheduled for an
upcoming Board Agenda.
Staff recommends approval of this resolution.
CERTIFICATE OF INTERESTED PARTIES FORM 1295
101`1
Complete Nos.1-4 and 6 if there are interested parties. OFFICE USE ONLY
Complete Nos.1.2,3,5,and 6 if there are no interested parties. CERTIFICATION OF FILING
1 Name of business entity filing form,and the city,state and country of the business entity's place Certificate Number:
of business. 2016-84737
FirstSouthwest,a Division of Hilltop Securities Inc.
Dallas,TX United States Date Filed:
2 Name of governmental entity or state agency that is a party to the contract for which the form is 07/14/2016
being filed.
Brushy Creek Regional Utility Authority Date Acknowledged:
3 Provide the identification number used by the governmental entity or state agency to track or identify the contract,and provide a
description of the services,goods,or other property to be provided under the contract.
BCRUA-2016-FA
Financial Advisory
4 Nature of interest
Name of Interested Party City,State,Country(place of business) (check applicable)
Controlling I Intermediary
Feinberg, Hill A Dallas,TX United States X
Peterson, Robert W Dallas.TX United States X
Muschalek,John R. Dallas,TX United States X
Edge,J Michael Dallas.TX United States X
Leventhal, Laura Dallas,TX United States X
Hilltop Securities Holdings LLC Dallas,TX United States X
5 Check only if there is NO Interested Party. ❑
6 AFFIDAVIT I swear,or affirm,under penalty of perjury,that the above disclosure is true and correct.
11RY P(/, KELLY NICOLE BRAGG
Notary Public,State of Texas -
s`• � My Commission Expires
September 10, 2015
` (f Signature of authorized agent of contracting business entity
AFFIX NOTARY STAMP/SEAL ABOVE
r
Sworn to and subscribed before me,by the said C)-4.�tc, U)1 L.LLo-VY15 this the 1 day of V ,
20 114 ,to certify which,witness my hand and seal of office. 1
J� �lL� r � �' t"1,9 �r
gnature o officer admini ering oat Printed name of officer dministering ath Title of offlifer administering oath
Forms provided by Texas Ethics Commission www.ethics.state.tx.us Version V1.0.1021
CERTIFICATE OF INTERESTED PARTIES
FORM 1295
10f1
Complete Nos.1-4 and 6 if there are interested parties. OFFICE USE ONLY
Complete Nos.1,2,3,5,and 6 if there are no interested parties. CERTIFICATION OF FILING
1 Name of business entity filing form,and the city,state and country of the business entity's place Certificate Number:
of business. 2016-84737
FirstSouthwest,a Division of Hilltop Securities Inc.
Dallas ,TX United States Date Filed:
2 Name of governmental entity or state agency that is a party to the contract for which the form is 07/14/2016
being filed.
Brushy Creek Regional Utility Authority Date Acknowledged:
07/19/2016
3 Provide the identification number used by the governmental entity or state agency to track or identify the contract,and provide a
description of the services,goods,or other property to be provided under the contract.
BCRUA-2016-FA
Financial Advisory
4 Nature of interest
Name of Interested Party City,State,Country(place of business) (check applicable)
Controlling I Intermediary
Feinberg, Hill A Dallas,TX United States X
Peterson, Robert W Dallas,TX United States X
Muschalek,John R. Dallas,TX United States X
Edge, J Michael Dallas,TX United States X
Leventhal, Laura Dallas,TX United States X
Hilltop Securities Holdings LLC Dallas,TX United States X
5 Check only if there is NO Interested Party. ❑
6 AFFIDAVIT I swear,or affirm,under penalty of perjury,that the above disclosure is true and correct.
Signature of authorized agent of contracting business entity
AFFIX NOTARY STAMP/SEAL ABOVE
Sworn to and subscribed before me,by the said this the day of
20 ,to certify which,witness my hand and seal of office.
Signature of officer administering oath Printed name of officer administering oath Title of officer administering oath
Cnrm�v. -;A-A h..T.,...,.- C+hi.... .........,+h:...-.-+.,+..+...- V1 n I n��
CONFLICT OF INTEREST QUESTIONNAIRE FORM CIO
For vendor doing business with local governmental entity
This questionnaire reflects changes made to the law by H.B. 23, 84th Leg., Regular Session. OFFICEUSEONLY
This questionnaire is being filed in accordance with Chapter 176,Local Government Code,by a vendor who Date Received
has a business relationship as defined by Section 176.001(1-a) with a local governmental entity and the
vendor meets requirements under Section 176.006(a).
By law this questionnaire must be filed with the records administrator of the local governmental entity not later
than the 7th business day after the date the vendor becomes aware of facts that require the statement to be
filed. See Section 176.006(a-1), Local Government Code.
A vendor commits an offense if the vendor knowingly violates Section 176.006, Local Government Code.An
offense under this section is a misdemeanor.
1 Name of vendor who has a business relationship with local governmental entity.
FirstSouthwest, a Division of Hilltop Securities Inc.
2
❑ Check this box if you are filing an update to a previously filed questionnaire.(The law requires that you file an updated
completed questionnaire with the appropriate filing authority not later than the 7th business day after the date on which
you became aware that the originally filed questionnaire was incomplete or inaccurate.)
3 Name of local government officer about whom the information is being disclosed.
Not Applicable
Name of Officer
4 Describe each employment or other business relationship with the local government officer,or a family member of the
officer,as described by Section 176.003(a)(2)(A). Also describe any family relationship with the local government officer.
Complete subparts A and B for each employment or business relationship described. Attach additional pages to this Form
CIO as necessary.
A. Is the local government officer or a family member of the officer receiving or likely to receive taxable income,
other than investment income, from the vendor?
Yes a No
B. Is the vendor receiving or likely to receive taxable income,other than investment income,from or at the direction
of the local government officer or a family member of the officer AND the taxable income is not received from the
local governmental entity?
FlYes F1 No
-5J Describe each employment or business relationship that the vendor named in Section 1 maintains with a corporation or
other business entity with respect to which the local government officer serves as an officer or director,or holds an
ownership interest of one percent or more.
Not Applicable
6
E-1Check this box if the vendor has given the local government officer or a family member of the officer one or more gifts
as described in Section 176.003(a)(2)(B), excluding gifts described in Section 176.003(a-1).
7 FirstS thwest, a Di ion f Hilltop Securities Inc.
By Z
Signiffure o ndor doing business with the governmental entity Date
Form provided by Texas Ethics Commission www.ethics.state.tx.us Revised 11/30/2015
FirstSouthwest
A Division of Hilltop Securities.
Chris W.Allen
Managing Director
July 14,2016
Mr. Steve Sheets
Sheets&Crossfield,P.C.
309 East Main Street
Round Rock,Texas 78664
Re: Municipal Advisory Services, Brushy Creek Regional Utility Authority, Inc.
Dear Mr. Sheets:
On behalf of FirstSouthwest, a Division of Hilltop Securities Inc. ("FirstSouthwest"), we
appreciate the opportunity to provide municipal advisory services to Brushy Creek Regional Utility
Authority,Inc.(`BCRUA"or the"Issuer")related to the issuance of City of Leander Contract Revenue
Bonds and/or other similar instruments by the Issuer (the "Municipal Advisory Services"). The
following outlines the terms of the engagement:
Scope of Services:
FirstSouthwest will provide its professional services as a municipal advisor to advise the Issuer
regarding the issuance of municipal securities and any municipal financial products, all as more fully
described in the Scope of Municipal Advisory Services attached hereto as Appendix A.
Duration:
This engagement shall begin upon the written acceptance by an authorized representative of
the Issuer below and shall remain in effect until terminated by either party upon giving of at least thirty
(30) days prior written notice to the other party of its intention to terminate, specifying in such notice
the effective date of such termination. In the event of such termination,it is understood and agreed that
only the amounts due FirstSouthwest for services provided and expenses incurred to the date of
termination will be due and payable.
Compensation and Expenses:
In consideration for providing the Municipal Advisory Services as set forth in Appendix A, it
is understood and agreed that the fee due to FirstSouthwest for each issuance will be 0.225%of the par
amount of municipal securities sold relating to Phase 1 Improvements and 0.175%of the par amount
of municipal securities sold thereafter (with a $25,000 minimum fee due on any single issuance of
municipal securities). Payment of fees related to the issuance of municipal securities shall be
contingent upon and payable upon the delivery of the municipal securities. The above charges shall be
multiplied by 1.25 times for the issuance of refunding bonds,reflecting the additional services required.
direct 512.481.2000
Hilltop Securities Inc. mobile 512.750.1492
300 West 6th Street fax 512.481.2010
Suite 1940 Chris.Allen@hilltopsecurities.com
Austin,Texas 78701 HilltopSecurities.com
gCe-t(R- P-r�4 ..0 -26-70
The Issuer shall be responsible for transaction related expenses including but not limited to
bond counsel, bond printing, rating agency fees, CPA fees for refundings, Official Statement
preparation and printing,paying agent fees,escrow agent fees,verification agent fees,travel expenses,
and miscellaneous costs associated with the issuance of municipal securities. The Issuer agrees to
reimburse FirstSouthwest for all such expenses advanced by FirstSouthwest. The payment of
reimbursable expenses that FirstSouthwest assumes on behalf of the Issuer is not contingent upon the
delivery of the municipal securities and shall be due and payable upon receipt of an invoice submitted
by FirstSouthwest therefor.
FirstSouthwest will provide any additional services to those outlined herein upon mutual
agreement of the parties as to both the services to be performed and the payment of additional
compensation.
Conflict of Interest Disclosures:
FirstSouthwest is providing its Disclosure Statement of Municipal Advisor (the "Disclosure
Statement"), attached hereto as Appendix B, current as of the date of this agreement, setting forth
disclosures by FirstSouthwest of material conflicts of interest, if any, and of any legal or disciplinary
events required to be disclosed pursuant to MSRB Rule G-42. The Disclosure Statement also describes
how FirstSouthwest addresses or intends to manage or mitigate any disclosed conflicts of interest, as
well as the specific type of information regarding, and the date of the last material change, if any, to
the legal and disciplinary events required to be disclosed on Forms MA and MA-I filed by
FirstSouthwest with the SEC.
We look forward to working with BCRUA during this engagement. Please acknowledge
acceptance of these terms with the signature of an authorized representative of the Issuer in the space
provided below and return two copies to me.
Sincerely,
om,14,a-
Chris W.Allen
Managing Director
Agreed and Accepted:
Brushy Creek Regional Utility Authority,Inc.
iJ
By: Title:
Name: Date:
2
APPENDIX A
SCOPE OF MUNICIPAL ADVISORY SERVICES
This Appendix A sets out the scope of the Municipal Advisory Services to be performed by
FirstSouthwest.
New Issuances of Municipal Securities. At the direction of or upon the request of the Issuer,
FirstSouthwest shall provide advice to the Issuer on any new issuances, including reofferings of
outstanding issuances that are treated for purposes of the federal securities laws and/or federal tax laws
as new issuances, throughout the term of this Agreement. The activities to be performed by
FirstSouthwest may include, depending on the specific circumstances of an issuance and any request
or direction of the Issuer,one or more of the following:
Planning for New Issuance
1. Survey and Analysis. Surveying the financial resources of the Issuer in connection with its
capacity to authorize, issue and service the contemplated issuance. This survey would be expected to
include an analysis of any existing debt structure as compared with the existing and projected sources
of revenues which may be pledged to secure payment of debt service and, where appropriate, would
include a study of the trend of the assessed valuation, taxing power and present and future taxing
requirements of the Issuer.In the event revenues of existing or projected facilities operated by the Issuer
are to be pledged to repayment of the contemplated issuance,the survey would be expected to take into
account any outstanding indebtedness payable from such revenues,additional revenues to be available
from any proposed rate increases,and additional revenues resulting from improvements to be financed
by the contemplated issuance, as projected by consulting engineers engaged by the Issuer.
2. Future Financings. In connection with the contemplated issuance, considering and
analyzing future financing needs as projected by the Issuer's staff and consulting engineers or other
experts, if any,engaged by the Issuer.
3. Recommendations.Making recommendations to the Issuer on the contemplated issuance,
including such elements as the date of issue, interest payment dates, schedule of principal maturities,
options for prepayment, security provisions, and such other provisions as may be appropriate.
4. Market Information. Advising the Issuer of FirstSouthwest's view of current bond market
conditions, other related forthcoming bond issues and general information (including applicable
economic data) which might normally be expected to influence interest rates or bidding conditions
relevant to setting an appropriate date and time for the sale of the issuance.
5. Elections. In the event it is necessary to hold an election to authorize the contemplated
issuance, assisting in coordinating the assembly of such data as may be required for the preparation of
necessary petitions, orders, resolutions, ordinances, notices and certificates in connection with the
election, including assistance in the transmission of such data to the Issuer's bond counsel.
Debt Management and Financial Implementation for New Issuance
6. Method of Sale.Evaluating the particular financing being contemplated,giving consideration to
the complexity,market acceptance,rating,size and structure in order to make a recommendation as to
an appropriate method of sale,and:
a. If the issuance is to be sold by a competitive sale:
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(1) Supervising the sale of the municipal securities;
(2)Disseminating information to prospective bidders,organizing such informational meetings
as may be necessary,and facilitating prospective bidders' efforts in making timely submission
of proper bids;
(3) Assisting the staff of the Issuer in coordinating the receipt of bids,the safekeeping of good
faith checks and the tabulation and comparison of submitted bids;
(4) Advising the Issuer regarding the best bid and provide advice regarding acceptance or
rejection of the bids; and
(5) Obtaining CUSIP numbers on behalf of the Issuer.
b. If the issuance is to be sold by negotiated sale:
(1) Recommending for the Issuer's final approval and acceptance one or more investment
banking firms,as sole underwriter or as managers of an underwriting syndicate,for the purpose
of negotiating the purchase of the municipal securities;
(2) Cooperating with and assisting any selected sole or managing underwriter and its counsel,
as well as any disclosure counsel retained by the Issuer, in connection with the preparation of
any preliminary or final official statement or offering memorandum. FirstSouthwest will
cooperate with and assist the underwriters in the preparation of a bond purchase contract, an
underwriters' agreement and other related documents;
(3) Assisting the staff of the Issuer in the safekeeping of any good faith checks and providing
a cost comparison to the then-current market of expenses, interest rates and prices which are
proposed by the underwriters;
(4) Advising the Issuer on the fairness of the price offered by the underwriters;
(5) Advising the Issuer in connection with any terms and conditions it may wish to establish
with respect to order priorities and other similar matters relating to the underwriting of the new
issuance;
(6) If the new issuance will have a retail order period, advising the Issuer on retail eligibility
criteria and other features of the retail order period and reviewing information provided by the
underwriters to the Issuer in connection with retail orders received; and
(7) At the request of the Issuer, reviewing required disclosures by underwriters to the Issuer
relating to their role as underwriter, conflicts of interests, material terms and risks of the
issuance, and any other matters, and providing any appropriate advice to the Issuer in
connection with such disclosures.
7. Offering Documents for Competitive Offerings. Coordinating the preparation of the notice of
sale and bidding instructions, preliminary official statement(including cooperating with and assisting
any disclosure counsel retained by the Issuer), official bid form and such other documents as may be
required and submitting all such documents to the Issuer for examination, approval and certification.
After such examination, approval and certification, FirstSouthwest shall provide the Issuer with a
supply of all such documents sufficient to its needs and distribute sets of the same to prospective bidders
for the municipal securities. FirstSouthwest also shall provide copies of the final official statement to
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the winning bidder purchasing the municipal securities in the MSRB-designated electronic format and
in accordance with the notice of sale and bidding instructions promptly after the Issuer approves the
final official statement for distribution.
8. Credit Ratings. Making recommendations to the Issuer on the advisability of obtaining one or
more credit ratings for the issuance and, when directed by the Issuer, coordinating the preparation of
such information as may be appropriate for submission to any rating agency. In those cases where the
advisability of personal presentation of information to a rating agency may be indicated,FirstSouthwest
will arrange for such personal presentations, utilizing such composition of representatives from the
Issuer as may be approved or directed by the Issuer.
9. Trustee, Paying Agent, Registrar, Professionals and Other Transaction Participants. Upon
request, providing advice to the Issuer in the selection of a trustee and/or paying agent/registrar,legal,
accounting or other professionals, and other transaction participants relating to any issuance, and
assisting in the negotiation of agreements pertinent to these services and the fees incident thereto.
10. Financial Publications. When appropriate, advising financial publications of the forthcoming
sale of the municipal securities and providing them with all pertinent information.
11. Consultants. After consulting with and receiving directions from the Issuer, arranging for such
reports and opinions of recognized independent consultants as may be appropriate for the successful
marketing of the issuance.
12. Auditors. In the event formal verification by an independent auditor of any calculations incident
to the issuance is required,making arrangements for such services.
13. Issuer Meetings.Attending meetings of the governing body of the Issuer,its staff,representatives
or committees as requested when FirstSouthwest may be of assistance or service and matters within the
scope of this engagement are to be discussed.
14. Printing.To the extent authorized by the Issuer,coordinating all work incident to printing or final
production,physical or electronic, of the offering documents.
15. Bond Counsel. Maintaining liaison with bond counsel in the preparation of all legal documents
pertaining to the authorization, sale and issuance of the municipal securities.
16. Changes in Laws. Providing to the Issuer copies of proposed or enacted changes in federal and
state laws,rules and regulations having,or expected to have,a significant effect on the municipal bond
market of which FirstSouthwest becomes aware in the ordinary course of its business, it being
understood that FirstSouthwest does not and may not act as an attorney for,or provide legal advice or
services to,the Issuer.
17. Delivery of the Municipal Securities.As soon as a bid for the purchase of a competitive issuance
is accepted by the Issuer or the bond purchase contract for a negotiated issuance is signed by the Issuer,
coordinating the efforts of all concerned to the end that the municipal securities may be delivered and
paid for as expeditiously as possible and assisting the Issuer in the preparation or verification of final
closing figures incident to the delivery of the municipal securities.
18. Debt Service Schedule,Authorizing Resolution.After the closing of the sale and delivery of the
issuance, delivering to the Issuer a schedule of annual debt service requirements for the issuance and,
in coordination with bond counsel, assuring that the paying agent/registrar and/or trustee has been
provided with a copy of the authorizing ordinance,order or resolution.
5
APPENDIX B
DISCLOSURE STATEMENT OF MUNICIPAL ADVISOR
This Disclosure Statement is provided by FirstSouthwest,a Division of Hilltop Securities Inc.("the
Firm") to you (the "Client") in connection with our current municipal advisory agreement, ("the
Agreement"). This Disclosure Statement provides information regarding conflicts of interest and legal
or disciplinary events of The Firm that are required to be disclosed to Client pursuant to MSRB Rule
G-42(b)and(c)(ii).
PART A—Disclosures of Conflicts of Interest
MSRB Rule G-42 requires that municipal advisors provide to their clients disclosures relating to any
actual or potential material conflicts of interest, including certain categories of potential conflicts of
interest identified in Rule G-42, if applicable.
Material Conflicts oflnterest—The Firm makes the disclosures set forth below with respect to material
conflicts of interest in connection with the Scope of Services under the Agreement with the Firm,
together with explanations of how the Firm addresses or intends to manage or mitigate each conflict.
General Mitigations—As general mitigations of the Firm's conflicts,with respect to all of the conflicts
disclosed below,the Firm mitigates such conflicts through its adherence to its fiduciary duty to Client,
which includes a duty of loyalty to Client in performing all municipal advisory activities for Client.
This duty of loyalty obligates the Firm to deal honestly and with the utmost good faith with Client and
to act in Client's best interests without regard to the Firm's financial or other interests. In addition,
because the Firm is a broker-dealer with significant capital due to the nature of its overall business,the
success and profitability of the Firm is not dependent on maximizing short-term revenue generated
from individualized recommendations to its clients but instead is dependent on long-term profitably
built on a foundation of integrity, quality of service and strict adherence to its fiduciary duty.
Furthermore, the Firm's municipal advisory supervisory structure, leveraging our long-standing and
comprehensive broker-dealer supervisory processes and practices, provides strong safeguards against
individual representatives of the Firm potentially departing from their regulatory duties due to personal
interests.The disclosures below describe,as applicable,any additional mitigations that may be relevant
with respect to any specific conflict disclosed below.
I. Affiliate Conflict. The Firm,directly and through affiliated companies,provides or may provide
services/advice/products to or on behalf of clients that are related to the Firm's advisory activities
within the Scope of Services outlined in the Agreement. First Southwest Asset Management(FSAM),
a SEC-registered affiliate of the Firm, provides post issuance services including arbitrage rebate and
treasury management. The Firm's arbitrage team verifies rebate and yield restrictions on the
investments of bond proceeds on behalf of clients in order to meet IRS restrictions. The treasury
management division performs portfolio management/advisor services on behalf of public sector
clients. The Firm, through affiliate First Southwest Advisory, provides a multi-employer trust tailor-
made for public entities which allows them to prefund Other Post-Employment Benefit liabilities. The
Firm has a structured products desk that provides advice to help clients mitigate risk though investment
management, debt management and commodity price risk management products. These products
consist of but are not limited to swaps (interest rate, currency, commodity), options, repos, escrow
structuring and other securities. Continuing Disclosure services provided by the Firm work with issuers
to assist them in meeting disclosure requirements set forth in SEC rule 15c2-12. Services include but
are not limited to ongoing maintenance of issuer compliance, automatic tracking of issuer's annual
filings and public notification of material events. The Firm administers two government investment
pools for Texas governments; the Short-Term Asset Reserve Fund (TexSTAR) and the Local
Government Investment Cooperative (LOGIC). These programs offer Texas government entities
6
investment options for their cash management programs based on the entities specific needs. The Firm
and the aforementioned affiliate's business with a client could create an incentive for the Firm to
recommend to a client a course of action designed to increase the level of a client's business activities
with the affiliates or to recommend against a course of action that would reduce or eliminate a client's
business activities with the affiliates. Furthermore,this potential conflict is mitigated by the fact that
the Firm and affiliates are subject to their own comprehensive regulatory regime as a member of
multiple self-regulatory organizations in which compliance is verified by not only internal tests but
annual external examinations.
II. Other Municipal Advisor or Underwriting Relationships. The Firm serves a wide variety of
other clients that may from time to time have interests that could have a direct or indirect impact on the
interests of Client. For example, the Firm serves as municipal advisor to other municipal advisory
clients and, in such cases, owes a regulatory duty to such other clients just as it does to Client. These
other clients may, from time to time and depending on the specific circumstances, have competing
interests, such as accessing the new issue market with the most advantageous timing and with limited
competition at the time of the offering. In acting in the interests of its various clients, the Firm could
potentially face a conflict of interest arising from these competing client interests. In other cases, as a
broker-dealer that engages in underwritings of new issuances of municipal securities by other municipal
entities,the interests of the Firm to achieve a successful and profitable underwriting for its municipal
entity underwriting clients could potentially constitute a conflict of interest if,as in the example above,
the municipal entities that the Firm serves as underwriter or municipal advisor have competing interests
in seeking to access the new issue market with the most advantageous timing and with limited
competition at the time of the offering.None of these other engagements or relationships would impair
the Firm's ability to fulfill its regulatory duties to Client.
III. Secondary Market Transactions in Client's Securities. The Firm,in connection with its sales
and trading activities, may take a principal position in securities, including securities of Client, and
therefore the Firm could have interests in conflict with those of Client with respect to the value of
Client's securities while held in inventory and the levels of mark-up or mark-down that may be
available in connection with purchases and sales thereof. In particular, the Firm or its affiliates may
submit orders for and acquire Client's securities issued in an Issue under the Agreement from members
of the underwriting syndicate, either for its own account or for the accounts of its customers. This
activity may result in a conflict of interest with Client in that it could create the incentive for the Firm
to make recommendations to Client that could result in more advantageous pricing of Client's bond in
the marketplace. Any such conflict is mitigated by means of such activities being engaged in on
customary terms through units of the Firm that operate independently from the Firm's municipal
advisory business,thereby reducing the likelihood that such investment activities would have an impact
on the services provided by the Firm to Client under this Agreement.
IV. Broker-Dealer and Investment Advisory Business. The Firm is dually registered as a broker-
dealer and an investment advisor that engages in a broad range of securities-related activities to service
its clients, in addition to serving as a municipal advisor or underwriter. Such securities-related
activities,which may include but are not limited to the buying and selling of new issue and outstanding
securities and investment advice in connection with such securities,including securities of Client,may
be undertaken on behalf of, or as counterparty to, Client, personnel of Client, and current or potential
investors in the securities of Client. These other clients may, from time to time and depending on the
specific circumstances, have interests in conflict with those of Client, such as when their buying or
selling of Client's securities may have an adverse effect on the market for Client's securities, and the
interests of such other clients could create the incentive for the Firm to make recommendations to Client
that could result in more advantageous pricing for the other clients. Furthermore,any potential conflict
arising from the firm effecting or otherwise assisting such other clients in connection with such
transactions is mitigated by means of such activities being engaged in on customary terms through units
7
of the Firm that operate independently from the Firm's municipal advisory business,thereby reducing
the likelihood that the interests of such other clients would have an impact on the services provided by
the Firm to Client.
V. Compensation-Based Conflicts. Fees that are based on the size of the issue are contingent upon
the delivery of the Issue. While this form of compensation is customary in the municipal securities
market, this may present a conflict because it could create an incentive for the Firm to recommend
unnecessary financings or financings that are disadvantageous to Client, or to advise Client to increase
the size of the issue. This conflict of interest is mitigated by the general mitigations described above.
Fees based on a fixed amount are usually based upon an analysis by Client and the Firm of, among
other things,the expected duration and complexity of the transaction and the Scope of Services to be
performed by the Firm. This form of compensation presents a potential conflict of interest because, if
the transaction requires more work than originally contemplated,the Firm may suffer a loss.Thus,the
Firm may recommend less time-consuming alternatives,or fail to do a thorough analysis of alternatives.
This conflict of interest is mitigated by the general mitigations described above.
Hourly fees are calculated with, the aggregate amount equaling the number of hours worked by Firm
personnel times an agreed-upon hourly billing rate. This form of compensation presents a potential
conflict of interest if Client and the Firm do not agree on a reasonable maximum amount at the outset
of the engagement,because the Firm does not have a financial incentive to recommend alternatives that
would result in fewer hours worked. This conflict of interest is mitigated by the general mitigations
described above.
PART B—Disclosures of Information Regarding Legal Events and Disciplinary History
MSRB Rule G-42 requires that municipal advisors provide to their clients certain disclosures of legal
or disciplinary events material to its client's evaluation of the municipal advisor or the integrity of the
municipal advisor's management or advisory personnel.
Accordingly, the Firm sets out below required disclosures and related information in connection with
such disclosures.
I. Material Legal or Disciplinary Event. The Firm discloses the following legal or disciplinary
events that may be material to Client's evaluation of the Firm or the integrity of the Firm's management
or advisory personnel:
• For related disciplinary actions please refer to the Firm's BrokerCheck webpage.
• The Firm self-reported violations of SEC Rule 15c2-12:Continuing Disclosure. The Firm
settled with the SEC on February 2, 2016. The firm agreed to retain independent
consultant and adopt the consultant's finding. Firm paid a fine of$360,000.
• The Firm settled with the SEC in matters related to violations of MSRB Rules G-23(c),
G-17 and SEC rule 1513(c)(1). The Firm disgorged fees of$120,000 received as financial
advisor on the deal,paid prejudgment interest of$22,400.00 and a penalty of$50,000.00.
II. How to Access Form MA and Form MA-I Filings. The Firm's most recent Form MA and
each most recent Form MA-I filed with the SEC are available on the SEC's EDGAR system at Forms
MA and MA-I. The SEC permits certain items of information required on Form MA or MA-I to be
provided by reference to such required information already filed by the Firms in its capacity as a broker-
dealer on Form BD or Form U4 or as an investment adviser on Form ADV, as applicable. Information
provided by the Firm on Form BD or Form U4 is publicly accessible through reports generated by
BrokerCheck at http://brokercheck.finra.org/, and the Firm's most recent Form ADV is publicly
8
accessible at the Investment Adviser Public Disclosure website at http://www.adviserinfo.see.g_ov/.For
purposes of accessing such BrokerCheck reports or Form ADV, click previous hyperlinks.
PART C—Future Supplemental Disclosures
As required by MSRB Rule G-42, this Disclosure Statement may be supplemented or amended,from
time to time as needed,to reflect changed circumstances resulting in new conflicts of interest or changes
in the conflicts of interest described above, or to provide updated information with regard to any legal
or disciplinary events of the Firm. The Firm will provide Client with any such supplement or
amendment as it becomes available throughout the term of the Agreement.
9