WASHINGTON -- Securities and Exchange Commission member Richard Roberts turned up the heat on issuers this week to improve secondary market disclosure by urging them to develop uniform reporting documents.
"I think that if the industry wants to maintain its self-regulatory mode it will have to come up with acceptable form and content guidelines of some sort or else somebody is going to take the ball away from you," warned Mr. Roberts during a workshop session on municipal disclosure held Monday at the American Bar Association's annual meeting in Atlanta.
"Everything is up in the air" over the development of a central repository for secondary market disclosure because it is very difficult to obtain uniform documents from issuers, said Mr. Roberts, who is considered the strongest advocate of municipal bond disclosure in the SEC.
Several SEC members, including Chairman Richard Breeden, want a system that can accept secondary market disclosure information on paper, as well as by electronic means. But accepting reams of widely varied state and local government reports on paper and finding a way to disseminate the information to the market is a massive project, he said.
The SEC in June tabled a proposal by the MSRB to create an electronic system that rapidly transmits pre-default notices from trustees to the market, because the system would not accommodate paper submissions. The proposed Continuing Disclosure Initiative/Electronic Submission system would have been limited initially in its scope, but could have been expanded to allow for submission of other types of important secondary market information, such as quarterly and annual reports.
"I applaud the MSRB" for its efforts, he said. "At the same time, it has to be acknowledged that everyone would like a central repository that deals with both paper and electronic submissions. Unfortunately, to deal with paper would expand considerably the scope of the MSRB project. And I do not know if they are prepared to undertake a paper project. I don't know if the commission would be satisfied with strictly an electronic repository," he said.
However, one thing is certain, Mr. Roberts said. "If we don't come to some conclusion pretty quickly it would be my own prediction that members of Congress will very soon become involved, particularly on the House side," he said, referring to concerns expressed periodically about municipally disclosure by Rep. John Dingell, D-Mich.
MSRB Chairman David Hartley said last week that the board is considering modifying its proposal for a central repository to include written as well as electronic submissions. Mr. Roberts lauded the board for the move, but said much needs to be done by the market itself.
"Because of the diversity of this market, one size may not fit all. Work will need to be undertaken on a section-by-section, state-by-state basis to produce acceptable formats for disclosure," he said.
A recent report detailing the information on issuers available in North Carolina, Texas, Ohio, and California that was prepared by the National Association of State Auditors, Comptrollers and Treasurers shows there is a multitude of types and sources of information.
"The report describes information provided to state auditors, data centers, state building authorities, state housing finance agencies, state water commissions, municipal advisory councils and local governments, among others," he said. "What is clear is that there is not a dearth of information."
But before an efficient central repository for secondary market information can be established, he said, issuers and investors must develop uniform forms that will present information that is relevant and can be economically justified. "In my view, it simply is not realistic to expect any repository to act as a dumping ground for useless information."
Mr. Roberts said the Government Finance Officers Association's guidelines on primary and secondary market disclosure are an "excellent starting point" in the push for uniform disclosure. "They've certainly tried to pick uup the ball." He said it also would be helpful if buyers of municipal bonds would become more involved in the push for better secondary market disclosure.
Large buyers may, in fact, weigh in as early as next week with an announcement raising their concerns about the level of secondary market disclosure in the market.
Mr. Roberts conceded that coming up with uniform documents is easier said than done. He said the market includes a large number of small and infrequent issuers whose securities rarely trade and therefore would find it an unnecessary expense to provide ongoing reports.
