WASHINGTON - The National Federation of Municipal Analysts on Friday reaffirmed its support for voluntary efforts to improve secondary market disclosure and said it remains opposed to mandatory federal standards.
The group announced its position in a letter to the Securities and Exchange Commission, the Municipal Securities Rulemaking Board, and the National Association of Securities Dealers. It was signed by Katherine Bateman, federation chairperson, and Jeffrey Baker, head of the federation's industry practices and procedures committee.
The letter warns that a requirement by Congress or the SEC that issuers provide secondary market disclosure could actually result in less information reaching analysts, rather than more.
If a federal rule requires issuers to supply specific ongoing information to market participants, such as annual financial reports, then issuers could refuse to supply any other data not mandated by federal regulators, Bateman and Baker said in phone interviews.
If an SEC rule only required issuers to supply audited financial statements and an analyst needed utility statistics, the issuer could decline to provide that information by contending it had already fulfilled its disclosure requirements, Bateman said.
She also expressed concern that small issuers might be exempt from any ongoing SEC disclosure rules, even though analysts have the most difficulty obtaining ongoing information from that sector of the market.
"Our major concern for any potential regulation is that the primary users of secondary market disclosure may not receive all the material information needed to perform a thorough analysis of a given entity," wrote Bateman, assistant vice president and sector manager for higher education securities at John Nuveen & Co. in Chicago, and Baker, vice president of Chase Manhattan Bank in New York.
The analysts' group issued its statement the same day the MSRB ended a four-day closed-door meeting in Colorado Springs, where the 15-member panel was expected to consider proposals that would shore up lackluster ongoing disclosure in the municipal market and regulate political contributions by underwriters. The MSRB is expected to formally announce its decisions on Wednesday.
Top SEC officials said in late June that the agency is likely to propose a rule that would mandate disclosure in the secondary market.
SEC member Richard Roberts said Friday he was "disappointed" that the analysts would not, at present, back a federal rule on secondary market disclosure. "They are a well-known, reputable organization, and their comments carry weight," he said.
The SEC, MSRB, and National Association of Securities Dealers were asked by the House Energy and Commerce Committee on May 26 to prepare a report by late summer on whether federal regulation needs to be tightened in the municipal securities market, including whether new rules are needed to improve secondary market disclosure.
The municipal analysts' group has been an advocate of improved secondary market disclosure in recent years. It has awarded certificates of recognition to dozens of municipalities nationwide for pledging ongoing disclosure in official statements.
The group also is in the process of issuing model three-page formats for issuers to use on a sector-by-sector basis to make ongoing disclosure over the MSRB's Continuing Disclosure Information Pilot.