The Securities and Exchange Commission may vote by February on whether to issue a legal interpretation aimed at shoring up disclosure by municipal issuers, commissioner Richard Roberts said yesterday.

"It is my understanding that the staff has been working furiously to develop the interpretive release mentioned in the SEC staff's report [to Congress] with an eye toward commission action no later than February of next year," Roberts said in a speech before the Municipal Analysts Group of New York.

The SEC staff sent a report to the House Energy and Commerce Committee this fall saying that it needs authority from Congress to require issuers to provide primary and secondary market disclosure. If Congress does not act - and agency officials have said they do not expect it to - then the SEC staff will prepare a "memorandum and draft release" on the subject.

The documents would recommend that the SEC "use its interpretive authority to provide guidance regarding the disclosures required by the antifraud provisions of the federal securities laws."

The report also says that the staff will recommend a rule barring dealers from recommending outstanding bonds unless the issuer makes available ongoing information about its financial condition.

Roberts said that the staff has been involved in a "virtual endless series of meetings" with various market participants to better understand the market's structure and needs as it develops a standard. "Of course, one interesting question is how to handle outstanding issues. It appears to me that a grandfather clause is necessary, thereby making the rule prospective only."

In other comments, Roberts conceded that a controversial requirement for secondary market disclosure that he has been seeking in upcoming amendments to the SEC's money market rule may be too harsh.

Roberts proposed in 1991 that money market fund managers be barred from holding the bonds of issuers that do not pledge in official statements to provide secondary market disclosure. He hoped that the provision would be one of a series of amendments that the SEC is expected to adopt this month aimed at tightening the credit quality standards for tax-exempt money market funds. The commission is tentatively scheduled to vote Dec. 15 on whether to propose a package of amendments.

But in an interview following Friday's speech, Roberts said that his recommendation, which has drawn heavy criticism, may have been too harsh.

"In response to the criticism, I have attempted to narrow my" initial recommendations, Roberts said. "I've readjusted my sights."

He said, for instance, that the SEC should require continuing disclosure in "limited" situations, such as when the credit quality of a letter of credit provider deteriorates.

An illustration is the seizure of Mutual Benefit Life Insurance by the New Jersey Insurance Commission, he said. Mutual Benefit insured, and provided liquidity for, roughly $110 million of variable rate demand notes held by at least 11 money market funds.

"I recognize that it is awkward and clumsy to place a secondary market disclosure requirement in Rule 2a-7, even if tailored specifically to certain money market fund problems," Roberts said. "I challenge the money market fund industry today to design a better solution. I believe they can."

Roberts said a limited disclosure standard regarding money market funds is needed because some fund portfolio managers in the past have run into uncooperative bond trustees and issuers who have refused to provide notice of letter of credit substitutions.

"While LOC provider substitutions apparently do not occur frequently, it is possible that even one substitution of a high credit quality provider with a lower credit quality provider could cause a municipal money market fund to ~break the buck,'" Roberts said. "This result would not only economically adversely affect the fund's shareholders, but would do irreparable harm to the credibility of money market funds in general."

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