ST. PETERSBURG, FLA. -- The municipal bond industry does not need regulation by Congress or the Securities and Exchange Commission to ensure adequate disclosure, the head of a national municipal analysts' group said Friday.
"I want to reaffirm our position that the industry should pursue voluntary disclosure," said Katherine R. Bateman, chairwoman of the National Federation of Municipal Analysts. "We are not supportive of [SEC Chairman Richard] Roberts' stance" that further regulation is needed.
Bateman made her comments in an interview while attending the annual fall meeting of the Southern Municipal Finance Society, one of the regional constituents of the analysts' federation.
Bateman also said she was "disappointed" that Roberts did not specify in his speech before the group on Wednesday that municipal disclosure should include details on an issuer's operations as well as financial data.
"I guess one of my biggest fears is that our hands will be tied if there is a regulation in place that asks only for financial and not operating data," she said. "The information on operations is key to an analysis of a lot of credits."
On Wednesday, Roberts clearly affirmed the need for external regulation of disclosure in the municipal bond market. He said, however, that he would not propose commission guidelines on disclosure until the Municipal Securities Rulemaking Board drafts its rule on secondary disclosure.
The MSRB is expected to draft the rule at a meeting scheduled for Sept. 29 and Sept. 30. As discussed by the board in a press conference last month, the proposed rule would require underwriters to recommend to issuers that they pledge to provide ongoing disclosure. The rule would also require that dealers tell customers whether the issuers had done so.
Bateman said Friday that a group from the analysts' federation would meet tomorrow with top officials from the MSRB and the Government Finance Officers Association.
"We are committed to being involved in the process of working toward better disclosure mechanisms in the municipal market," Bateman said.
Not all members of the analysts' federation agreed with the stance it has taken on the regulation of disclosure.
"When you compare the availability of information in the corporate market with that in the municipal market, you will see that on the municipal side investors have a hard time making an intelligent decision," Maryann Romeo, a federation board member, said in an interview.
"It seems like voluntary disclosure is not accomplishing what it set out to do, and mandated disclosure seems at this point to be the only course," she said.
Romeo stressed that her thoughts about disclosure were her own and do not reflect the federation's stance. Romeo is also past president of the Southern Municipal Finance Society.
On the dealer side, many investment bankers present at the St. Petersburg conference shared Bateman's concern about the prospect of government regulation of disclosure in the municipal market.
"I'm glad to see the issue of disclosure moving into the forefront because it is so important," said George Pugh Jr., executive vice president at Craigie Inc. in Richmond.
"But I am extremely disappointed that there is the prospect that dealers will have to bear the consequences of inaccurate market disclosure." Pugh said. "If the information we get from issuers is inaccurate, it is our ox that is gored."
Pugh is also vice chairman of the municipal executive committee of the Public Securities Association.