WASHINGTON -- The second House hearing on problems facing the municipal bond market is tentatively scheduled for Oct. 7, an aide to the House Energy and Commerce Committee's telecommunications and finance subcommittee said yesterday.
The hearing, which is expected to concentrate on secondary market disclosure on and political contributions, will feature testimony by officials of the Government Finance Officers Association, Public Securities Association, National Federation of Municipal Analysts, National Association of Bond Lawyers, Bond Investors Association, and National Association of State, Auditors, Comptrollers, and Treasurers.
Testifying on behalf of issuers will be Jeffrey Green, general counsel of the Port Authority of New York and New Jersey and a member of the executive board of the GFOA, and Harvey Eckert, deputy secretary for comptroller operations in Pennsylvania and a spokesman for NASACT on disclosure.
Green and Eckert are expected to argue against any new legislation aimed at shoring up disclosure in the municipal market, particularly any move to repeal the Tower Amendment wholly or in part. The amendment restricts the authority of the Municipal Securities Rulemaking Board and the Securities and Exchange Commission to require disclosure by issuers.
They are likely to point to the industry's continued progress under an array of voluntary projects aimed at improving disclosure and to urge regulators to give the market more time to progress.
Also testifying will be Richard Lehmann, head of the bond investors group in Miami Lakes, Fla., which has championed tighter disclosure standards and firmer requirements for the sale of suitable bonds to investors.
Lehmann is expected to back the MSRB's recent proposal to ban contributions aimed at influencing deals and require disclosure of other contributions. "I don't think it's the best solution, but it's the only one that's doable within the present powers that the MSRB and SEC have," Lehmann said in a telephone interview yesterday.
He also is likely to urge regulators to call for improved disclosure by indenture trustees. "That's one area where somebody has to take some responsibility." said Lehmann, who complained that investors run into a brick wall when attempting to get information about potential bond purchases from trustees.
Testifying for the PSA will be Gerald P. McBride, chairman of the PSA's municipal executive committee and executive vice president for the tax-exempt division of Prudential Securities.
McBride is expected to tell regulators that issuers must shoulder more of the regulatory burdens of the market. Any new rules should require issuers to submit secondary market information to Washington and to disclose the political contributions that they get from all segments of the municipal market, the PSA is expected to argue.
Katherine Bateman. chairwoman of the analysts federation. meanwhile. is likely to tell regulators to move cautiously as they write a secondary market disclosure rule.
The SEC staff launched the regulation writing process last week when it asked market participants to develop a list of items, by January, that they feel generally should be disclosed to investors.
But analysts worry that while issuers would be required to hand over data included on such a list, they will refuse to provide anything not on the list, no matter how relevant. It is unclear who will testify on behalf of the analysts. Bateman is assistant vice president at John Nuveen & Co. in Chicago.
Andrew Kintzinger, president-elect of NABL and a partner with Briggs and Morgan in Minneapolis, will testify on behalf of the bond lawyers group. Kintzinger said a group of securities law experts in NABL is currently developing testimony. He had no futher details.
The telecommunications and finance subcommittee, chained by Rep. Edward J. Markey, D-Mass., held its first hearing on municipals on Sept. 7, when it heard from three Washington regulators, including SEC chairman Arthur Levitt Jr., MSRB chairman Charles W. Fish, and John Pinto, executive vice president of regulation at the National Association of Securities Dealers.
Markey yesterday outlined top issues for the coming hearing. "We're particularly interested in hearing from the industry on how best to improve disclosure. halt improper political contributions or other influence peddling, improve public access to information on quotations, transactions, and markups, and strengthen sales practice rules and surveillance systems to better protect investors from abuses." he said.