WASHINGTON -- The Securities and Exchange Commission has adopted a reasonable and fair package of secondary market disclosure requirements for the municipal bond market.
While some of the requirements are far less onerous than those proposed last March, they are still tough and appear to have enough teeth to force issuers, underwriters, and bond counsel to supply information that investors badly need.
Some might call the final package of requirements a compromise. In reality, the final rules might be better termed an act of mutual accommodation, one that should satisfy all the parties involved.
For dealers, the rules mean they should now get the material and updated annual information they need from issuers without being forced to pore over the most minute details of an issuer's finances each time they sell a bond.
For issuers and bond counsel, the package staves off the remote, yet much feared, threat of legislation to apply SEC-style registration to the municipal market. It also appears to mean that issuers will not have to provide much information beyond what they are already providing, except they will have to update that information on an annual basis.
For investors, the rules should mean a greatly improved availability of information and more informed recommendations from their brokers. And for the SEC, the rules should allow the agency to improve protections for investors without getting into a political fight with states and localities and Congress over vastly tougher regulations or possible legislation -- a fight the SEC was likely to lose in the 103d Congress, and certainly would lose in what is expected to be an antiregulatory 104th Congress that convenes in January.
On the surface, the new requirements appear to provide a balance that is good for both the industry and the investor. But SEC rules, like most government regulations, are like icebergs -- the greatest danger lurkss below the surface. That's why it will be impossible to say if the industry can live with the new rules Until it has 'a chance to read and dissect the actual language of the requirements, which The Bond Buyer will reprint in installments beginning today.
Unless someone finds a few killer footnotes, however, the rules appear to be quite workable.
Now that the rules have been approved, the industry has a responsibility to make sure they work as they are phased in over the next six to 14 months.
SEC chairman Arthur Levitt issued a clear warning on Thursday when he said the requirements are "but one step ... greater progress is anticipated and is indeed expected."
The municipal industry now must meet that challenge or face the consequences.