Disclosure and Federal Regulation of the Market for Municipal Securities (2003)
In the overall goal to improve issuer disclosure practices, the Government Finance Officers Association recognizes that the increase in the variety and types of state and local government issuers and obligations as well as the changing market for these obligations makes it desirable periodically to review Association policies, the first of which was adopted in 1974, on the disclosure of information and the role of the federal government and others in the disclosure process.
After such review, the Association reiterates its longstanding policy that any federal government involvement in state and local government disclosure practices should reflect the balance of power between states and the national government under our system of federalism. There should be no further direct or indirect federal involvement in state and local government disclosure practices beyond that which is required to fulfill the federal government's investor protection and antifraud responsibilities. Furthermore, there is and should remain a distinction between the federal government's role in these areas with respect to private, corporate entities and public, governmental issuers of securities.
In particular, the Municipal Securities Rulemaking Board (MSRB) should not be authorized to regulate state and local government issuers, either directly or indirectly. Nor should the Securities and Exchange Commission (SEC) seek to regulate the market access of state and local governments in the pursuit of financing their governmental purposes.
The Association's Disclosure Guidelines for State and Local Government Securities, which include guidelines for new offerings and continuing disclosure as well as procedural statements, contain recommendations that are widely followed by state and local governments and their advisors. The Guidelines, together with the activities of the Governmental Accounting Standards Board (GASB) in establishing standards of accounting and financial reporting for general purpose financial statements, have contributed to significant improvements in state and local government financial practices over the last three decades.
It is widely acknowledged that state and local governments comply with public meeting rules, Freedom of Information Act requests and other applicable state requirements and that the form and content of information already available to constituents with respect to state and local government obligations meet the needs of the securities market. Accordingly, it is the policy of the Association that neither the Securities and Exchange Commission nor any other federal government agency or organization sponsored by the federal government should adopt or expand any rule or regulation with respect to the form and content of information provided by state and local governments with respect to their securities.
It is the policy of the Association that a broad, national and efficient market in which to raise capital funds for public projects is vital to state and local governments. To that end, the Association supports efforts to enhance the timeliness of distribution and general availability of information in both the primary and secondary markets for municipal securities. The Association has historically and continuously demonstrated leadership on behalf of states and local governments as it has worked with GASB and others in the creation and evolution of reporting standards. This historical support includes the creation and evolution of the SEC Rule 15c2-12 directed Nationally Recognized Municipal Securities Information Repositories (NRMSIR) system for the collection and storage of disclosure information and for more efficient dissemination of information to the securities market.
Consistent with the Association's leadership on behalf of state and local governments, the Association supports evolution of the centralized collection, storage and dissemination of disclosure information provided by state and local governments in the following areas:
- All relevant information should be collected in various forms and formats and made available to all investors (institutions and retail alike) through a range of media.
- Information should be easily accessible and accuracy in reproducing information must be ensured.
- The costs of information storage and dissemination should be paid by market participants and should not be subsidized directly or indirectly either by the federal government or state and local governments.
- The collection, storage and dissemination of information by private vendors should be encouraged to be innovative, efficient and reduce costs.
Further, in keeping with the Association's leadership and to intercept direct and possibly unfavorable SEC action, the Association, along with other market participants, should continue to discuss more efficient methods for governmental issuers to use when filing their secondary market disclosure, as required under SEC Rule 15c2-12. A system that allows for electronic filing of documents to one location, versus physically mailing these documents to several separate entities, will be more cost effective to issuers, and will allow the marketplace to gather and use information in an easier format.
This new system should allow governmental issuers to have:
- A return receipt for submitted documents;
- Confidence that their submissions are accurately filed and equally available to the market, including retail investors;
- A tickler system that reminds governmental issuers when their annual filings are due;
- Access to capture their CUSIP (Committee on Uniform Security Identification Procedures) numbers, free of charge, and to use a uniform cover sheet with their filings;
- For a period of time or for a fee, the ability to submit their documents in paper form for a third party to convert into an electronic file;
- Cost sharing among participants, with minimal new cost to governmental issuers;
- Ongoing Association and issuer community input regarding the start-up and ongoing mechanics of such a system to ensure that the system is to assist governmental issuers with their filing needs; and
- No change to SEC Rule 15c-12 or other SEC or federal action that would impose greater disclosure requirements than what currently exist or than those required to ensure electronic filing by governmental issuers, and to permit and facilitate issuer filings at a single filing location. SEC actions, even to promote these two objectives, should be in a form as narrow as possible, avoiding changes to SEC Rule 15c2-12 whenever possible
Adopted: May 20, 2003