WASHINGTON - Securities and Exchange Commission Chairman Arthur Levitt and the Municipal Securities Rulemaking Board will hold a closed-door meeting with industry groups next week to begin developing a list of the minimum items of ongoing disclosure that all issuers would have to reveal.
Christopher Taylor, executive director of the MSRB, said that Levitt and the board will meet Wednesday with a "cast of thousand" including representatives of issuers, analysts, bond lawyers, dealers, and others, at the Pierre Hotel in New York City to kick off the process of developing an SEC standard for ongoing disclosure.
Taylor made the remarks in a speech before the National Council of State Housing Agencies in San Francisco on Tuesday and elaborated on them in a telephone interview yesterday. The housing council, a pioneer in secondary market disclosure, is one of the issuer groups invited to the New York meeting.
The announcement comes two weeks after Taylor said that the SEC staff met with MSRB staff in early September, when the MSRB was asked to supply by January a list of the minimum items of disclosure that all issuers should be required to reveal.
"Putting that in simple English, they intend to develop a list of significant disclosure items that all issuers will be required to provide the market to avoid being held in violation of the SEC rules," Taylor said Tuesday. "It's been talked about and threatened for years, but now it is here. This process will begin ... in New York City next week."
Taylor said that while it will be helpful to issuers, investors, and dealers to know with certainty what items are most important, the board has a "major concern."
"The board believes that there must be central tracking of who have agreed to provide this information and when and what did they last provide," Taylor said. The board also believes "that the information must be available in a central place - the Municipal Securities Information Library.
"Without these two conditions being met, the dealer community would not be in a position to comply with existing and any future dealer conduct rules requiring the use of that information.
"Can you imagine each dealer scrambling to find out these important data from all the issuers of the bonds he trades? It would bring the secondary market in municipal bonds to a halt."
Taylor noted that the SEC has said it is considering adopting a "dealer conduct rule" that would bar dealers from recommending securities" unless the dealer had the minimum disclosure information. "The definition of recommendation would likely encompass almost all transactions in the secondary market."
Taylor also announced Tuesday that the board is contemplating putting more teeth into its rule that restricts the gifts and gratuities that dealers can give to issuer clients outside of political contributions.
Rule G-20 limits gifts to no more than $100 a year per recipient. But it also exempts the giving of "small reminder gifts like a calendar and the occasional meal or sporting event," Taylor said. Such small gifts cannot be "so frequent or so large as to suggest" any attempt to buy the business, he said.
He said the board at its November meeting will consider issuing a rule that would require dealers to keep records of those gifts that fall into the exception category.
If the board proposes such a rule, it will be tightening a standard that has gotten little use in years. At a congressional oversight hearing on municipals Sept. 9, Rep. Edward J. Markey, D-Mass., said that the National Association of Securities Dealers, which enforces MSRB rules, has not initiated a single enforcement procedure under Rule G-20 in 10 years.
Markey wanted to know why the MSRB has not used G-20 to go after improper political contributions, but Taylor said G-20 is a prohibition on commercial bribery, not contributions.
Taylor said a former board member told him recently that bribes are a bigger problem for the integrity of the municipal market than improper contributions. He said that the member spoke of "non-elected officials calling dealers with whom they did business and asking, suggesting, demanding to make contributions to certain charities, to buy tables at certain events, etc."
"Ladies and gentlemen, that sort of thing has no place in this business."
