WASHINGTON -- In his strongest statement to date, Richard Roberts of the Securities and Exchange Commission now believes that voluntary industry efforts to fill "gaping" holes in ongoing municipal bond disclosure are not working fast enough and says that new SEC rules or legislation is needed.

But Roberts will not push for commission action before he reviews a rule being drafted by the Municipal Securities Rulemaking Board to spur lagging secondary market disclosure, according to the text of a speech he was scheduled to deliver last night at the Southern Municipal Finance Society's annual fall conference in St. Petersburg, Fla.

"My patience has basically expired," Roberts said in the text of the 16-page speech, which was released to reporters yesterday afternoon. "I personally am prepared to ditch the voluntary approach and to pursue an involuntary approach through regulation or legislation."

"But I am also prepared to wait and to review the MSRB initiative ... assuming it is published soon," the text says.

Roberts has never before stated clearly that he favors SEC rules or congressional action to beef up the regulation of the market instead of MSRB standards or voluntary industry efforts.

He came close in an Aug. 24 speech before the National Association of State Auditors, Comptrollers and Treasurers, when he said his "patience is growing increasingly thin" with voluntary efforts to improve ongoing disclosure and that he is "leaning" toward recommending new SEC regulations or legislation.

Roberts noted in his written speech that SEC Chairman Arthur Levitt told Congress last Thursday that legislation giving the SEC clear authority to require issuers to provide secondary market disclosure is the only meaningful way to ensure comprehensive disclosure in the municipal market.

"However, in almost the same breath, Chairman Levitt indicated that legislation was unlikely" because it would trigger all-out opposition by state and local officials, Roberts said, referring to the new SEC chairman's testimony before the House Energy and Commerce Committee's subcommittee on telecommunications and finance.

Levitt's comments came as the panel held the first of a series of oversight hearings on whether new securities rules or legislation is needed in the municipal arena. Levitt outlined the findings of an SEC staff report requested by the chairmen of the full committee and the subcommittee, Rep. John Dingell, D-Mich., and Rep. Edward J. Markey, D-Mass.

"Thus, as attractive as the legislative alternative is to me, I am not optimistic that such an approach will work," Roberts was to say last night.

Roberts said he was more sanguine about two regulatory alternatives contained in the SEC staff's report and outlined by Levitt at the House hearing. Levitt said the agency could issue a legal interpretation making clear that the anti-fraud provisions of the federal securities laws require issuers to provide ongoing disclosure to the market.

The agency also could bar dealers from recommending bonds to investors unless the issuer has pledged to make available ongoing information about the financial condition of the issuer.

The SEC rule would be stricter than a rule that the MSRB is expected to draft at a meeting scheduled for Sept. 29 and 30. The rule, discussed briefly by the board at a press conference late last month, would require underwriters to recommend to issuers that they pledge to provide ongoing disclosure for their issues. Underwriters would be required to explain to the issuer the significance of continuing disclosure in the secondary market.

The rule also would require dealers to tell customers whether the issuer has committed to provide continuing disclosure for an issue and to explain that the lack of ongoing disclosure can affect the price and liquidity of their bonds.

Roberts said that if the SEC proposes the rule that the commission is considering, it may specify that the rule applies to new issues only, not to deals already in the secondary market. Also, issues less than $1 million and state general obligation bonds could be exempt from the standard, he said.

Roberts said that issuers could probably satisfy the rule's requirements by providing an annual audited by financial statement within a reasonable length of time after the end of the fiscal year and by issuing notices when a material event occurs.

The Public Securities Association warned recently that a rule barring sales of bonds that do not have an issuer pledge of ongoing disclosure could wreak havoc with the market. "What if the issuer doesn't provide the disclosure," PSA vice president George Brakatselos said yesterday. "It's a problem."

"I acknowledge that broker-dealers are very heavily regulated already," Roberts was to say last night. "However, Congress made the decision years ago that broker-dealers are the appropriate party to bear this burden, and Congress does not appear at the present to be likely to change that view."

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