WASHINGTON -- The National Association of State Auditors, Comptrollers and Treasurers is launching a study designed to identify the continuing disclosure practices of bond issuers in 10 states, beginning this month with Tennessee and Pennsylvania.
The study, which is being cosponsored by Moody's Investors Service and Fitch Investors Service, is a continuation of a four-state pilot project completed by NASACT earlier this year, said Harvey Eckert, president of the group and deputy secretary for comptroller operations in Pennsylvania.
In the study of disclosure practices in North Carolina, Ohio, Texas, and california, NASACT concluded that while there is no central collection point in the states, a considerable amount of state and local financial information is accumulated by various departments and authorities within their borders.
NASACT last month told the Securities and Exchange Commission it objects to a pilot disclosure program proposed by the Municipal Securities Rulemaking Board, under which trustees and eventually issuers themselves could file three-page notices of market sensitive information on paper, by facsimile machine, or electronically to a central repository.
"In our view, the pilot system would be carried out in competition with private vendors and at significant cost to issuers," Mr. Eckert told the SEC in written comments on the Continuing Disclosure Initiative pilot program. "In addition, there has been insufficient study of the need for the system, especially given the questionable usefulness of a system that limits submissions to no more than three pages."
The MSRB's proposal is geared toward the release of short, market-sensitive notices, but the board says longer documents like annual reports can be summarized in the three pages and, for those who want the full text or further details, the name of a contact person provided. In addition, the board has not ruled out expanding its program later to take in longer documents, a staff member said.
"This project will tell us much more than we now know about continuing information disclosure by issuers," Mr. Eckert said about the new phase of the NASACT study. He said on-site visits will begin soon and will involve reviews of statutes, rules, and disclosure policies, as well as interviews with state agencies, debt issuers, commissioners, legislatures, and state and local government associations.
Mr. Eckert said in his state, local governments are required by law to get state approval for offerings over $100,000 or that comprise 30% or more of the municipality's bond authorization limit. The governments must submit to the state's division of municipal statistics their annual budget, an annual audited financial report, and a statement of financial condition.
"There's no purpose reinventing the wheel," said Claire Cohen, executive managing director at Fitch, about the NASACT study. "It would provide us a good inventory of precisely what information is being collected now, who's collecting it, and what is available."
"Anything that benefits the industry has got to benefit the rating agencies one way or another in what we'll gain in knowledge and understanding," she added. "Perhaps the states themselves would be surprised to find out how much information they collect."
NASACT said the results of its study will be released as they become available and work should be completed by next summer. The Government Finance Officers Association is participating in NASACT's project.
