WASHINGTON -- Some municipal bond issuers just havenht gotten a grip on what's happening in the world of securities regulation.

That was apparent from the spleen-venting that went during a workshop on disclosure held at the Goverment Finance Officers Association's annual meeting last week in Minneapolis.

Rather than concentrating on finding ways to make the Securities and Exchange Commission's new disclosure initiatives work, some issuers at the meeting approached the problem by going into denial.

"We're honest people. But you are saying that you think we're dishonest. I strenuously object" to that charcterization, Joseph R. Caputo, the comptroller of Suffolk County, N.Y., told David Sirignano, the SEC's senior adviser for corporation finance. Sirignano was a principal drafter of the SEC's legal interpretation on disclosure that was issued March 9.

Caputo was far from the only local official to vent anger at the SEC's drive to force improvements in municipal disclosure.

D. Catherine Mueller, manager of accounting and finance for the Kent County, Mich., department of public works, told the session, "I resent the implication that there is some kind of fraud, dishonesty, and lack of proper disclosure" by issuers.

And there were several others. One unidentified official at the session echoed the thoughts of many issuers when he said: "Maybe iths time to start cracking down on the few that are guilty [of failing to provide adequate disclosure] and leave the rest of us alone."

Unfortunately, Caputo, Mueller, and the others are missing the point.

Since teh 1987 stock market crash, the SEC and other securities regulators have been trying to head off problems before they become disasters, rather than spending all their time trying to punish wrongdoers later.

This emphasis on prevention has been coupled with a substantial increase in the commitment to protecting investors, especially since Arthur Levitt Jr. took over as SEC chairman almost a year ago.

Sirignano captured the essence of the SEC's current mission when he told issuers at the Minneapolis meeting that the agency aims to heads off problems before they happen, not to try to clean them up later.

"We're trying to anticipate problems, not react. It's very easy to beat up regulators after [a savings and loan] crisis when billions of dollars walk out of door... We don't think that's the way you approach a problem," Sirignano said.

All market participants would be wise to heed Sirignano's words and start finding ways to work with the SEC to improve disclosure without putting undue burdens on law-abiding participants.

Making the new dsiclosure proposals of work makes a lot more sense than wasting energy fighting the SEC.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.