WASHINGTON -- The word has come down from on high.

The Securities and Exchange Commission staff has announced that it is developing a disclosure standard for the secondary market in municipal securities and wants input from all sectors of the market by January.

The move was announced last Wednesday by Christopher Taylor, the executive director of the Municipal Securities Rulemaking Board, in a speech before the Municipal Forum of New York.

To find out why the SEC is wasting no time in devising a disclosure standard, just look at the recent actions of firms like Glenview, Ill., financial adviser R. V. Norene & Associates.

On Aug. 27, the president of the firm, Ronald Norene, sent letters to a number of his suburban Chicago clients urging them to think twice about participating in the awards program of the National Federation of Municipal Analysts.

The program honors issuers that pledge to provide investors with annual audited financial statements and "other pertinent credit information" about their outstanding securities.

Jeffrey Esser, the executive director of the Government Finance Officers Association, had written GFOA members on Aug. 1.2 urging them to join the awards program.

One of the issuers was the Village of Mount Prospect Ill., which is a client of Norene. Its finance director, David Jepson, wrote Norene asking for his advice on whether the village should participate.

"I have a big problem with the written commitment to provide other pertinent credit information," Norene responded on Aug. 19.

"This brings up the specter of a bondholder suing the city for damages if the value of his securities drops because" there was important information he thought he should receive but didn't, Norene wrote.

"Even if the lawsuit is determined not to have merit, the city still has to defend itself, which costs money.

"A city/village is routinely involved in land use/zoning decisions that can impact the tax base and/or employment levels within the community," Norene wrote Jepson. "At which point does it become pertinent? -- when deliberations begin or when they end?"

Norene also wondered what happens if a major employer and taxpayer in the area approaches the city and confidentially explores getting some tax breaks as a condition of remaining in the area. "Is this pertinent information that should be reported to the investment community immediately upon the city staff being alerted?"

Some GFOA members have been quick to jump on the awards program bandwagon. The analysts federation has formally recognized more than 200 issuers for pledging timely disclosure.

Ron Norene, however, wonders how many issuers that have signed on with the federation fully understand that they have to provide more than annual financials.

In in a telephone interview last week, Norene said he is "certainly worried" about what Washington might do regulation-wise. Nevertheless, he says his concern is that his clients "not sign some blank check."

The GFOA last week issued a 15-page memorandum to issuers fulling explaining the federation's award program.

But if Norene has big problems with the pledge to provide other pertinent credit information, other people have a big problem with his attitude.

"I should thank him," SEC member Richard Roberts said in a telephone interview last week. "This will make it easier to sell my involuntary approach." Roberts told bond analysts meeting in St. Petersburg, Fla., on Sept. 15 that his patience "has basically expired" with voluntary efforts to improve ongoing disclosure.

"What it boils down to," said GFOA's Esser, is that people will always look for excuses "to avoid disclosing what ought to be disclosed. Admittedly, I have a greater chance of being run over by a bus [if I venture out] than if I stay here in my office."

Robert Doty, chairman of the analysts awards program, said, "These people who are trying to be alarmist are doing a terrible, terrible disservice to the market and their clients. They are going to lead these issuers straight into a very comprehensive [regulatory] system. I resent it.

"They have gotten us into a fix where regulators feel they have to do something to break this logjam."

And break the logjam is exactly what regulators now say they plan to do.

What's the moral of the story? Maybe people like Ron Norene should lighten up about the risks facing their clients.

Or maybe not. Norene is one of a growing number of advisers and bond lawyers who have a problem with the "other pertinent credit information" request.

Perhaps it really is unrealistic for any group to think it can pull off a voluntary disclosure system with 100% participation given the risks perceived by market advisers.

Whatever the answer, it's too late now. The SEC has arrived. Welcome to the world of federal regulation.

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