Regulatory Disclosures | Willdan

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MSRB Rule G-42 Disclosures

Pursuant to Municipal Securities Rulemaking Board (“MSRB”) Rule G-42, on Duties of Non-Solicitor Municipal Advisors, Municipal Advisors are required to make certain written disclosures to clients which include, amongst other things, Conflicts of Interest and any Legal or Disciplinary events of Willdan Financial Services (“Willdan”) and its associated persons.

The following are potential conflicts of interest to be considered.

  • Willdan represents that in connection with the issuance of municipal securities, Willdan may receive compensation from an Issuer or Obligated Person for services rendered, which compensation is contingent upon the successful closing of a transaction and/or is based on the size of a transaction. Consistent with the requirements of MSRB Rule G-42, Willdan hereby discloses that such contingent and/or transactional compensation may present a potential conflict of interest regarding Willdan’s ability to provide unbiased advice to enter into such transaction. The contingent fee arrangement creates an incentive for Willdan to recommend unnecessary financings or financings that are disadvantageous to its clients, or to advise its clients to increase the size of the issue. This potential conflict of interest will not impair Willdan’s ability to render unbiased and competent advice or to fulfill its fiduciary duty to its clients.
  • Willdan’s fees may be based on hourly fees of Willdan’s personnel, with the aggregate amount equaling the number of hours worked by such personnel, multiplied by an agreed-upon hourly billing rate. This form of compensation presents a potential conflict of interest because it could create an incentive for Willdan to recommend alternatives that would result in more hours worked. This conflict of interest will not impair Willdan’s ability to render unbiased and competent advice or to fulfill its fiduciary duty to its clients.
  • Willdan’s fees, may be a fixed amount established at the outset of the Agreement. The amount is usually based upon an analysis by Willdan and its client of, among other things, the expected duration and complexity of the transaction and the Scope of Services to be performed by Willdan. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, Willdan may suffer a loss. Thus, Willdan may recommend less time-consuming alternatives, or fail to do a thorough analysis of alternatives. This conflict of interest will not impair Willdan’s ability to render unbiased and competent advice or to fulfill its fiduciary duty to its clients.
  • The fee paid to Willdan increases the cost of investment to its clients. The increased cost occurs from compensating Willdan for municipal advisory services provided.
  • Willdan 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 another Willdan client. For example, Willdan serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to multiple clients. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, Willdan could potentially face a conflict of interest arising from these competing client interests. Specifically, Compass Municipal Advisors, LLC (“CMA”) an affiliate of Willdan, serves as both the Program Administrator and as Municipal Advisor for the South Carolina Association of Governmental Organizations (“SCAGO”). CMA fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with all of its clients.
  • Willdan Engineering, Willdan Energy Services, and any other division of Willdan Group, Inc. (collectively, the “Affiliates”), may provide certain services to or on behalf of an Issuer or Obligated Person that may be directly related to Willdan’ activities as a Municipal Advisor. For example, Willdan Engineering could provide (i) on-call planning and engineering services, (ii) building and safety services, and (iii) planning and environmental and other services. The Affiliates’ business with the Issuer could create an incentive for Willdan to recommend to the Issuer a course of action designed to increase the level of the Issuer’s business activities with the Affiliates or to recommend against a course of action that would reduce or eliminate the Issuer’s business activities with the Affiliates.
  • In addition to the general mitigations described above, this conflict of interest is further mitigated by several factors. Willdan discloses to the Issuer or Obligated Person the nature of its relationship with each of its Affiliates and will remain fully responsive at all times during the course of the engagement to inquires by the Issuer or Obligated Person regarding any specific details or concerns regarding such relationship, including with regard to any referral fee arrangements between Willdan and any Affiliates. Each such Affiliate is subject to its own body of professional responsibilities and engineering standards to which it must adhere and that assist in mitigating the potential consequences of this conflict. In addition, the services provided by Willdan and its Affiliates will each be agreed to separately by written agreement entered into with an Issuer or Obligated Person, each of which sets out the direct compensation to be paid by the Issuer or Obligated Person for such services and empowers the Issuer or Obligated Person to terminate the relationship as determined by the Issuer in accordance with the agreement’s terms. Further, in the event that Willdan makes a recommendation to an Issuer or Obligated Person that could influence the level of business with an Affiliate, Willdan will, at the request of an Issuer or Obligated Person, provide an analysis of potential alternatives to such recommendation and the relative benefits and costs of the recommendation and any such alternatives.
  • Willdan does not make any payments directly or indirectly to obtain or retain the client’s municipal advisory business.
  • Willdan does not receive any payments from third parties to enlist Willdan’s recommendation to the clients of its services, any municipal securities transaction, or any municipal finance product.
  • Willdan does not act as a principal in any transactions related to municipal advisory agreements.

Disclosures of Information Regarding Legal Events and Disciplinary History

The MSRB has made available on its website (www.msrb.org) a municipal advisory client brochure that describes the protections that may be provided by MSRB rules and how to file a complaint with the appropriate regulatory authority. As part of its SEC registration, Willdan is required to disclose to the SEC information regarding criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations, and civil litigation involving Willdan.

I. Material Legal or Disciplinary Event. Pursuant to MSRB Rule G-42, Willdan has determined that no such event exists.

II. How to access Form MA and Form MA-I Filings. Willdan’s most recent Form MA and Form MA-I filed with the SEC are available on the SEC’s EDGAR system Company Search Page (currently available at: https://www.sec.gov/edgar/searchedgar/companysearch.html) and searching for either “Willdan Financial Services, Inc.” or Willdan’s CIK number, which is 0001782739.