The U.S. securities industry lobby group, the Securities Industry and Financial Markets Association (SIFMA), is suing the U.S. Securities and Exchange Commission (SEC) to overturn regulatory relief designed to help small issuers raise capital amid the Covid-19 disruption.

SIFMA filed a suit today that seeks to vacate a registration exemption adopted by the SEC in response to the pandemic, which allows “municipal advisors” to solicit banks and credit unions for private placements by municipal issuers without registering as brokers.

The trade group said that while it generally approves of the SEC’s efforts to ease rules in response to the effects of the pandemic, in this instance, the exemption “is not supported by existing market data and creates a host of negative consequences for not only other market competitors but also issuers and investors alike.”

“The [exemption] creates an uneven playing field that exclusively benefits municipal advisors at the expense of more regulated broker-dealers, and ultimately we believe at the expense of issuers and market transparency,” said Kenneth Bentsen, Jr., president and CEO of SIFMA.

SIFMA argued the measure reduces investor protections and reporting requirements, without generating cost savings for municipal issuers or additional market liquidity.

The group also said the SEC has not adequately justified its exemption decision, and that it should go through the formal rule-making process.

“The SEC in effect suspended SEC regulatory requirements for one type of business entity, at the expense of another. Further, we believe the SEC failed to follow the proper procedure by taking such sweeping action absent a formal rule-making with notice and comment, along with a genuine cost benefit analysis,” Bentsen Jr. said.