WASHINGTON -- Municipal officials may want to coordinate the statements they make to investors about their bond issues to avoid running afoul of the federal antifraud statutes, a top SEC official told bond lawyers yesterday.
"I'm not suggesting [that each issuer have] a single spokesperson. But you might encourage a more coordinated approach," Elisse Walter, deputy director of the Securities and Exchange Commission's division of corporation finance, said at the opening workshop session of the National Association of Board Lawyers' 1994 Washington Seminar.
Walter, whose division crafted an interpretive release on issuers' disclosure obligations that was approved by the commission March 9, made her statement in response to a comment from the audience.
The audience member said he comes from a state that has three elected officials who have clear responsibility for bond issuance and ongoing disclosure. "These officials regularly issue press releases. The problem is that they tend to say very different things about the same information. These people are speaking in an official capacity. There may be political motivations. And it's picked up by the financial press," the participant said.
"It certainly illustrates a problem," Walter said. "And I think the difference is one of degree. You are suggesting something that reaches the extreme. You have facts going north and south."
The first thing one would do in a context like that is alert officials that there is the "prospect" that there could be liability and that a more organized approach to disclosing information might be wise, Walter said.
"This is a very common pattern not only at the state level but at the local level throughout the United States," said Jeffrey Green, general counsel of the Port Authority of New York and New Jersey, who also served on the panel. "It's a very difficult line to draw," Green said, noting that the issue is complicated further by how to disseminate the information.
"Assume all three of those statements each time winds up in the repository or repositories where an issuer sends information. Hopefully, it will be in the same repository," Green said.
"There are situations," said one audience participant, "where you have a state treasurer, state auditor and state comptroller. They are different offices established by the state legislature. In that situation you might have three different viewpoints, perhaps three different approaches to the same goal. The question is, how do you deal with discrepancies of viewpoints?"
Dean Pope, a partner with Hunton & Williams in Richmond, who moderated yesterday's panel, pointed to a provision in the SEC's legal interpretation that touches on the issue.
"Since access by market participants to current and reliable information is uneven and inefficient, municipal issuers presently face a risk of misleading investors through public statements that may not be intended to be the basis of investment decisions, but nevertheless may reasonably be expected to reach the securities markets," said the SEC release.
"To minimize the risk of misleading investors, municipal issuers should establish practices and procedures to identify and timely disclose, in a manner designed to inform the trading market, material information" about the bonds and the issuer, the release said.
The SEC's legal interpretation defines ways that municipal market participants can better meet disclosure requirements under the antifraud provisions of the federal securities laws in five areas, including disclosure of an issuer's financial condition and results of operations and cash flows. The SEC says the interpretive release is currently in effect, although the agency is accepting comments on the document until July 15.