AUSTIN - The Municipal Advisory Council of Texas is considering establishing its statewide repository for tax-exempt bond information as part of the secondary disclosure system proposed by the federal Securities and Exchange Commission.
At a meeting last week, the council board authorized its executive director to meet June 7 with SEC officials to discuss the investment banking group's current system that provides financial information on 4,500 issuers in the state.
Executive director Dan Black also will ask how the state system could fit into the SEC's plans to set up a nationwide repository that would be a clearinghouse for municipal bond issuers' annual financial and other operating information.
"We don't have an official position on being a statewide repository," Black said. "We are just going to give them an idea of what the Municipal Advisory Council does."
For decades, the council, which has more than 100 investment banking firm members, has provided secondary disclosure information on most issuers in Texas, except for health and housing. Audited reports on the finances of most issuers, from cities to schools, are updated annually, meeting or possibly surpassing what the SEC requires, investment banking sources said.
"We are the most technically advanced in the state as far as gathering information," said Stephen Young, the council's vice chairman and manager of Southwest regional trading and the municipal underwriting desk at Dean Witter Reynolds Inc. in Dallas. "It would be a logical step for the Municipal Advisory Council to become a statewide repository."
However, Young and council chairman Robert Vanosky said the organization would take its lead from the SEC and would only bid to become come a repository if a statewide system, and not just one central repository, is established.
"It may be easier for issuers to file and less expensive for dealers to retrieve information from a statewide repository," said Vanosky, who is executive vice president and co-head of the fixed income group for Rauscher Pierce Refsnes.
Vanosky said he believes the Municipal Advisory Council would be the best choice for a state repository.
"The quickest and most efficient way for Texas to move forward on a state repository would be to consider the Municipal Advisory Council," Vanosky said. "A state agency is always a possibility, but since the council has been collecting information for decades, they are in a far better position to put together a repository."
Albert Bacarisse, executive director for the Texas Bond Review Board, which represents state government, had a similar point of view. "They have a head start over anyone else," Because said. "I know of no state agency considering it."
He said the cost and the technology needed to implement a repository could be prohibitive.
At a meeting of state-level issuers last week, Fredric Weber, an attorney with Fulbright & Jaworski in Houston, said that setting up a nationwide repository would take a large investment in technology and other items to provide information on about 80,000 issuers in the United States.
"The cost are staggering," Weber said. "If I were in the state's position, I would hesitate to get involved in this."
Part of the problem is that states and other agencies don't know exactly what the SEC will require. On March 9, the SEC approved a proposal that would bar dealers from under-writing an offering unless the issuer has agreed to provide to a nationally recognized repository annual financial and other operating information as well as notices of material changes.
The rule, published March 17 in the Federal Register and open to comment until July 15, also would bar dealers from recommending a bond in the secondary market without having previously reviewed that information.
However, the requirements for an organization that wants to become a Nationally Recognized Municipal Securities Information Repository, or NRMSIR, have not been outlined.
Three organizations serve as unofficial nationwide repositories: J.J. Kenny Co., The Bond Buyer, and Bloomberg Financial Markets. Several states, including New York and North Carolina, have talked about statewide repositories.
"It's awfully early to decide what we will be doing because the SEC doesn't know what they want yet," said Pete Stare, a Municipal Advisory Council board member and senior vice president in charge of trading for Masterson Moreland Sauer Whisman in Houston.
The council could submit a comment by the July 15 deadline to the SEC on its position about repositories However, it does not intend to comment on other issues, Vanosky said, because the organization wants to allow investment banking members to respond individually.
