WASHINGTON -- The Public Securities Association is urging the Securities and Exchange Commission to propose rules requiring issuers to submit secondary market information to Washington and to disclose the political contributions that they get from all segments of the municipal market.
This is the first time the association has called for federal regulation of issuers to address the two increasingly volatile issues. The group made the recommendations in a three-page policy statement prepared by its municipal executive committee that was issued for release today.
The group said that it would support congressional legislation if that is needed to give the SEC authority to promulgate new rules. But it opposed "imposing full corporate-style registration on municipal issuers" because of the cost to issuers and taxpayers.
PSA also said registration requirements for all 50,000 state and local issuers in the United States could significantly interfere with a state or local government's ability to finance its operations. Therefore we seek only such marginal changes as are specifically" needed.
Tomorrow, the 15-member Municipal Securities Rulemaking Board opens its four-day quarterly meeting in Colorado Springs, where it is expected to consider several tough proposals concerning political contributions and to debate the secondary market disclosure question.
Board members are considering several possible strategies concerning contributions. Among them are banning political contributions by securities firm executives to issuers whose bonds they underwrite, or requiring firms to disclose their political contributions to issuers in bond documents.
Industry sources reported yesterday that while some board members support a ban on contributions, no firm consensus has developed.
The PSA says that while it would support MSRB rules requiring dealers to disclose political contributions, "this would constitute only a partial solution because other public finance professionals would not be covered by MSRB rules."
"The SEC should promulgate regulations requiring issuers to disclose political campaign contributions from all players competing in an offering, including financial advisers, attorneys, engineers, accountants, and others," the group's statement says.
"In addition to contributions from corporate entities and partnerships, contributions from employee political action committees and from officers, partners and employees of the organization competing for a role in a municipal securities offering should be included," the statement says.
PSA notes that in many states this will require elected officials to get more information about the employer, business sector, and professional responsibilities of campaign contribution than is currently required by state law.
"While all states and the District of Columbia already require that recipients of election campaign contributions for state office report these contributions through filings with designated state officials, less than a third require that occupation and business of the contributor be included in the filing," that statements says.
PSA also issuers should be required to disclose potential conflicts of interest, and to do so with a central repository rather than in official statements. But the group said it supports a requirement that issuers' official statements refer to the fact that investors can get information about political contributions in the MSRB's central repository.
The MSRB is studying ways to beef up its Continuing Disclosure information Pilot system, and the SEC is expected to propose a rule later this year mandating secondary market disclosure by certain issuers.
The PSA said today: "The SEC should promulgate regulations requiring issuers to submit secondary market disclosure information to the Continuing Disclosure Information System of the MSRB. All issuers should be required to submit basic information such as that suggested under the American Bankers Association Guidelines."
PSA said any issuer that borrows $1 million or more per year should be required to submit information regarding any "material fact that should be known by the market. PSA stands ready to work with issuers, the SEC and others in determining definitions of materiality."