The U.S. Securities and Exchange Commission will seek comment ona rule that would require swap dealers advising pension funds,endowments and municipalities to place the interests of suchinvestors above their own.

SEC commissioners voted 5-0 today to propose a rule that wouldimpose the fiduciary duty as part of business-conduct practices forswap dealers advising so-called special entities. Dealers wouldalso have to “reasonably believe” the investors have an independentrepresentative capable of evaluating risks, according to an SECfact sheet released in Washington.

The Dodd-Frank Act called on regulators including the SEC, whichoversees security-based swaps, to crack down on abuses in sales tostates, cities and school districts after swaps pushed JeffersonCounty, Alabama, to the brink of bankruptcy. The Commodity FuturesTrading Commission, which oversees swaps tied to interest rates,has already proposed a similar rule.

“The rules we are proposing today would level the playing fieldin the security-based swap market by bringing needed transparencyto this market and by seeking to ensure that customers in thesetransactions are treated fairly,” SEC Chairman Mary Schapiro saidin a statement.

The SEC will seek public comment through Aug. 29 on the rule,which would also require dealers to provide counterparties withmaterial information about swaps, including risks and conflicts ofinterest. Dealers would have to provide information on dailyvaluations and determine whether recommendations to clients meetsuitability standards.

Dealers would also be required to verify whether a client is aspecial entity, and to comply with so-called pay-to-play rules thatrestrict campaign contributions to politicians who hold the powerto award contracts, according to the fact sheet. Special entitiesgenerally include federal agencies, states, employee benefit plansand endowments, the SEC said.