n today’s municipal market there is a heightened focus on the quality and transparency of disclosure practices by issuers. Investor relations programs are not a substitute for the requirements of Securities and Exchange Commission (SEC) Rule 15c2-12, but are a means to share that required disclosure information and further go beyond those disclosure requirements to promote the efficient sale of debt instruments in both the primary and secondary markets and improve the reception of debt offerings.
Any investor relations program that proactively provides disclosure information is optional, but issuers should look at such a program in the context of meeting all continuing disclosure responsibilities according to their continuing disclosure agreements (CDA) and other applicable regulations.
GFOA recommends that governmental bond issuers consider developing an investor relations program in conjunction with their continuing disclosure policy. The centerpiece of such a program is a commitment to provide full and comprehensive disclosure of annual financial, operating, and other significant information in a timely manner consistent with federal, state and local laws.
Issuers may consider and are encouraged to promote the accessibility of required disclosure information and to consider providing additional information to investors beyond that provided for in their contractual disclosure commitments. An investor relations program should address the following:
- Investor Relations website: One way for issuers to provide financial transparency to investors is by posting disclosure information on an investor relations website and regularly updating that site with financial data supplemental to the requisite annual reports and material events notices that must be filed with the MSRB’s Electronic Municipal Market Access (“EMMA”) website. (See Chapter 5 Sale of Municipal Debt – Improving Transparency and Investor Access to the Municipal Market). This investor relations website may be a website that the issuer hosts as part of their governmental platform or a website the issuer contracts with a third party. In any event, the issuer must control, maintain and update the content of the website. Issuers should consult with their counsel regarding appropriateness of disclosing information prior to posting publicly. Disclosures to the market should be dated, clearly state that the disclosure speaks only as of its date, and that the issuer has not undertaken to update or correct the information based on events occurring after that date. Public statements, press releases, website postings, and statements to the press and governing board proceedings are all widely and publicly available and are often monitored by rating agencies, investor analysts and other market participants. However, issuers should take steps to ensure that an investors relations program website does not promote political-speak that may include non-disclosure information. “Newsworthy” developments such as natural disasters or the emergence of financial setbacks or challenges present heightened risk. Issuer websites can be useful tools for providing a reliable source of accurate information in the case where other information is often confusing.
- Responding to investor questions. Consideration should be given to means of communication to all investors when a single investor poses a question. Investors may contact issuers directly from time to time with questions regarding the issuer’s finances or operations. Fielding questions from investors is not prohibited, but it is a best practice for issuers to identify a single point person for responding to such inquiries to maintain consistency and to respond to inquiries with information that is already available to the general public when possible. Any material information should be disseminated to the market at large.
- Rating agencies. It is important to maintain a good relationship with the rating agencies and fund analysts, including distribution of disclosure information and keeping them informed of any changes that could affect credit quality and actions to address financial problems.
- Bond accountability website. Local agencies should post information to the internet that enables the public to track expenditures of bond proceeds back to the capital plan. This transparency increases accountability and oversight. Additionally, some governmental entities may have policy or statutory requirements relating to accountability, including the use of citizen’s oversight committees, annual performance audits, and financial audits on the use of bond proceeds.
- Marketing activities. Engaging in marketing activities to alert investors of a pending bond sale can be effective, especially if the debt instruments are sold competitively. Such activities may include the scheduling of investor meetings (whether in-person or online), conference calls, and webcasting of issuer conference calls and on-site visits.
- Alignment. Consideration should be given to the fact that any record, created as a result of the Investor Relations Program, may be subject to internal policies and/or federal, state and local laws concerning document retention and freedom of information.
- Securities and Exchange Commission Enforcement Actions in the Municipal Securities Markets, Government Finance Review, August 1996.
- Making Good Disclosure, Robert Dean Pope, GFOA, 2001.
- GFOA Best Practice, Using a Web Site for Disclosure, GFOA, 2002.
- GFOA Best Practice, Web Site Presentation of Official Financial Documents, 2009.
- GFOA Best Practice, Understanding Your Continuing Disclosure Responsibilities, 2010.
- Disclosure Roles of Counsel, John McNally, Project Coordinator, ABA/National Association of Bond Lawyers, 2009.
- EMMA - http://emma.msrb.org/