WASHINGTON -- SEC chairman Arthur Levitt said yesterday that the commission will take up its staff's recommended final secondary market disclosure proposals for the municipal market at its next meeting on Nov. 10.
Levitt also said the Securities and Exchange Commission will discuss at its meeting the need to make municipal bond price information more available to investors.
"What I'm driving for is the greatest kind of transparency" in the municipal market, he told reporters after speaking at a conference on securities regulation in New York City that was sponsored by the Practising Law Institute.
But it was not clear from his remarks whether the commission will move forward with or defer a controversial proposal to require dealers to disclose markups in riskless principal transactions.
The SEC could instead support and call for improvements in price transparency initiatives underway by the Public Securities Association and Municipal Securities Rulemaking Board, soUrces said.
The PSA said yesterday that it is moving forward with initiatives to make bond price information available to investors in the hopes that the SEC will drop its risk-less principal transaction proposal.
"Improved publicly available price information on municipal bonds will benefit investors more than the mark-up, mark-down information sought by the Securities and Exchange Commission in its proposed amendments to Rule 15c2-13," Heather Ruth, the PSA's president, told members in a recent newsletter describing the plans.
Riskless principal transactions are those in which a dealer buys and sells bonds almost simultaneously to fill an order without holding them in inventory, so that there is little risk of loss from sudden market changes.
The SEC's proposed amendments requiring dealers to disclose markups and markdowns, which have been opposed by market participants in more than 300 comment letters, could create disparity among firms and have "an anticompetitive result that could ultimately lead to higher costs for issuers and investors," Ruth said.
The PSA's plans include getting national and regional newspapers to publish actual bond prices, which are expected to be made available from a MSRB, pilot pro, gram on price transparency, as well as generic yield scales for bonds with a range of maturities and credit ratings.
An SEC spokesperson praised the PSA efforts, but would not comment on the riskless principal transaction proposal.
"The PSA's proposals are a helpful effort to improve price transparency," said Jennifer Kimball, director of the SEC's office of public affairs, policy evaluation, and research. "They obviously are in line with chairman Levitt's efforts to get price information into the hands of investors," she said, referring to Arthur Levitt, the chairman of the SEC.
Meanwhile, Thomas Masterson, a securities firm official co-chairing the PSA committee developing the bond price information program, said it is not aimed at persuading the SEC to abandon its riskless principal transaction proposal.
"I don't think that's the issue," he said in an interview Wednesday night. "I think the issue is can we do something to improve our customer's awareness of what they're buying and the value of what they own. If we can do that, I think we'll broaden the marketplace and help ourselves along the way,"
Masterson, who is chairman of Masterson Moreland Sauer Whisman inc., a regional broker-dealer in Houston, said the bond pricing information program "is a kind of new day dawning" for the municipal market that "will evolve" over time.
"It's something our industry has never really undertaken before," he Said.
Masterson said he has already talked with the president of one regional newspaper about carrying municipal bond price information.
He would not identify the paper, but said its president owns municipal bonds and has first-hand experience with the problem of getting good, reliable price information. He seemed very supportive of the idea of publishing such information, Masterson said.
"It doesn't do the investor a great deal of good if [prices] appear on Munifacts or Bloomberg," Masterson said. "It has a whole lot more meaning if [prices] appear in daily newspapers or weekly financial magazines."
The 13-member PSA Ad Hoc Committee on Transparency, which was formed this summer, is also co-chaired by Michael McCarthy, a general partner at Goldman, Sachs & Co.
Other members include: Walt Chambers, chairman, president and chief executive officer of the Ohio Co.; Robin Faulkner, vice president and senior counsel of Merrill Lynch & Co.; Robert Foran, senior managing director at Bear, Stearns & Co.; John Gilchrist, chairman of First Chicago Capital Markets Inc.; W. Robb Hough Jr., president of William R. Hough & Co.; Peter Imhoff, managing director of Dillon Read & Co.; Si Matthies Jr., senior vice president of Norwest Investment Services Inc.; Thomas Strand, president and chief executive officer of Dougherty, Dawkins, Strand & Bigelow Inc.; David Thompson, president of Griffin, Kubik, Stephens & Thompson Inc.; Kenneth Williams, managing partner at Stone & Youngberg; and Barry Zucker, president and chief executive officer of J.B. Hanauer & Co.