Secondary market disclosure is a topic we have been reporting, and supporting, for some time now. A lot of people are spending a lot of time trying to define disclosure and how it will be made, and it will be some time before the answers emerge.
The likeliest result is that issuers will be required to send the official statements of their bond and note issues to a repository, and follow that up with at least annual reports on the 10 or 12 most significant aspects of their fiscal condition. This is neither all that expensive nor a tremendous imposition on the issuers who do things right. The Securities and Exchange Commission is eager to see that issuers and everyone else who operates in the municipal market do right.
Disclosure ought not to be very complicated once the standards are set and issuers know what kind of information they have to disclose to the people who buy their bonds. All sorts of market participants are making with the existential angst right now but, hey, everyone knows that a head on a beer means that it's good.
The Print Cavalry
I realize that everything is electronic nowadays, but I'd like to lob a shot into the fray from the ranks of the print cavalry.
I am not a Luddite when it comes to technology, but I keep reading about how investors should have a "national repository" for information about municipal bonds, which should be able to provide, in the words of The Wall Street Journal, "ready, centralized access" to disclosure information.
Well, they do, and you're holding it right now. The Bond Buyer has been collecting and disseminating news and information on "the municipal bonds" (as our founder would have put it) since 1891.
I know that this company is in the electronic repository sweeptakes. But if anyone has forgotten, I'd like to refresh their memories: For more than a century, issuers have used this newspaper to satisfy legal requirements that they disclose the sale of new issues, calls, defaults, defeasances, and redemptions. From what I can tell from a review of the files, not one issuer has been dissatisfied with the job we have done.
And I think we still can do the job. What I propose is a new category of legal advertisement, "Statement of Financial. Condition," that issuers would have to place once a year. The "Statement of Financial Condition" would join, in the newspaper of record, the ranks of all of those notices of sale, call, default, defeasance, and redemption.
Of course, not everyone, not every single retail investor out there, gets The Bond Buyer. But the overwhelming majority of municipal bonds outstanding are held by portfolio managers who read this newspaper religiously, every day, Buyers or their proxies who do not subscribe to the paper could still, with a telephone call, get the Statement of Financial Condition from us.
The Bond Buyer is "ready, centralized access" in a "national repository" of information, or as close to it as the market has ever gotten. More than a century of experience backs it up. And you don't need a modern to gain access to it; a touch-tone or rotary telephone will do.
The problem I have with electronic disclosure is that it's frequently nondisclosure. Electronic repositories are conducive to the hiding of financial information. If you want something there, you have to sit down and search for it. Not so with the hard copy of The Bond Buyer. When the paper lands on their desks each morning, all municipal market players can focus on the same information on the same day. That means the information can't help but be noticed. That, for my money, is disclosure. If you think about it, the statements could even have a positive impact on an issuer's credit standing.
Granted, the electronic repository will provide "centralized access." But only The Bond Buyer, at least to this point in history, can provide centralized awareness. One market observer told me, "That's a distinction I think is real. Something appears in the daily, and the whole market knows about it. The Bond Buyer serves as the muni market's focus."
When financial results turn sour. of course, issuers may not advertise - if they are not required to. And that's when they'll try to hide in the electronic innards of a repository, waiting for reporters to ferret out the damaging stuff.
Black. White. Print. It's worked for several hundred years, and the "system" never goes "down." So think about that, will you, all you people considering the ideal standard for secondary market disclosure. And this old cavalryman won't sell the oats just yet.