WASHINGTON -- The American Bankers Association's secondary-market disclosure guidelines for trustees were released Tuesday after nearly two years in development, but market participants are not expecting an immediate push by issuers and their lawyers to implement the standards.
"I wouldn't expect to see a sudden market rush," said Cary Blancett, a bond lawyer with Hale and Dorr in Boston, who said the greatest difficulty will be in convincing issuers to take on the potential liability. "There is no legal duty to disclose in the secondary market," and taking on the task can mean incurring new risk, he said.
"How do we convince the issuer that it makes sense?" said Mr. Blancett, noting that he makes it a practice to inform his issuer clients of the benefits of disclosure but does not press them to take action.
"I don't think people will change their procedures immediately," said Stephen Rosholt, a partner with Faegre & Benson in Minneapolis. "But I think over a period of months people would start to utitlize them."
The guidelines, prepared by the association's corporate trust committee, call on trustees and issuers to include provisions in indenture agreements that spell out clearly what continuing disclosure trustees may release to the market. They also urge issuers to write side agreements to existing indentures for the billions of dollars of outstanding municipal bonds. Those agreements would detail what information trustees can disclose to the market.
The bankers urge trustees to send market-sensitive data to one or more of the information vendors designated by the Securities and Exchange Commission as private repositories until a national repository for secondary-market information is operational. The guidelines include a five-page memorandum that lists the procedures to follow and the telephone numbers to call when sending documents to the MUNIFACTs Secondary Market Disclosure Service provided by The Bond Buyer; KENNYALERT Disclosure Service provided by J.J. Kenny Co.; and Bloomberg Financial Markets' disclosure service.
All three vendors agree to publish market sensitive information on the same day it is received if it arrives by 3:00 p.m. eastern standard time. They also will exercise "best efforts" to publish on the same day material that is received after 3:00 p.m., says the memorandum, noting that issuers can send data by first class mail, overnight delivery, or facsimile machine.
The vendors also say that if trustees want to send advance copies of announcements, they will hold them in "strict confidentiality" until the designated release time. All of the vendors reserve the right to edit or condense notices for distribution.
The bankers said they will conduct symposiums on the implementation of the secondary-market disclosure guidelines. Corporate trust managers are invited to attend the sessions, which will be held in New York and Los Angeles on Feb. 10, 1992.
The Bond Buyer says it will transmit all time-sensitive notices via its MUNIFACTS News Wire Service and that issuers' disclosure histories will be available through the MUNIVIEW municipal database. Kenny Information Systems will transmit via KENNYALERT Service, which uses the McGraw-Hill Municipal Screen, The Blue List Bond Ticker on Telerate, and the Kennywire.
Bloomberg will transmit all time-sensitive notices using its Bloomberg Business News systems and the Bloomberg Municipal Database.
Jeffrey Powell, vice president for the The First National Bank of Chicago and a key drafter of the standards, said his bank will send copies of the guidelines to all if its issuer clients next month and ask for direction.
"Basically we are going to leave the ball in their court. Some may respond quickly" while other may not, he said. "The need to think about the opportunity that this provides them and the further consequences" of not incorporating the new standards in new and existing indentures, he said.