ATLANTA -- TenneSsee local government officials joined with municipal bond industry representatives in Nashville last Tuesday to begin considering whether a statewide repository should be established to help issuers comply with the federal government's new disclosure guidelines.
The five-member group was chosen earlier this year by state Comptroller William R. Snodgrass. Snodgrass acted after the state legislature in March charged the state's funding board, of which he is a member, with the task of setting up state rules in response to pending market disclosure regulations from the Securities and Exchange Commission.
Since that time, the SEC has adopted the guidelines. Under the new rules, adopted Nov. 11, dealers will be barred from underwriting bonds, as of July 3, 1995, unless they had "reasonably determined" that the issuer has agreed to provide annual financial information and notices of material events to repositories.
In order to satisfy this provision, issuers must update key information provided in official statements. Issuers with less than $10 million of debt outstanding are exempt from the provisions.
In addition, in a release accompanying the new guidelines, the SEC encouraged states to "develop state-based depositories" to help collect such information.
The Tennessee group's municipal representative, Murfreesboro Mayor Joe B. Jackson, said in an interview last Wednesday that he spoke strongly in favor of a state depository in Tennessee at Tuesday's meeting.
"It was my recommendation that we use [a repository], because it should be a cost-effective way of complying with the regulations, and because the state is normally collecting all of this information anyway," he said.
But Jackson said he also had a number of concerns about establishing a state repository.
One of those worries, the mayor said, is the cost of such a facility. He said that he hopes the state would cover this expense, but said his city might be willing to cover a portion, if necessary.
James E. Birdwell 3d, the committee's broker-dealer representative, also said he likes the idea of a centralized state repository being responsible for obtaining information that will help issuers and dealers comply with the SEC's new rules. Birdwell is a first vice president of public finance at Morgan Keegan & Co., in Memphis.
However, he said, there are many unanswered questions about how such an entity would operate, including the exact mechanisms it would use to collect information and just how it would standardize requests for information.
"What Tuesday's meeting did was get some of these issues on the table," he said. "I look forward to continuing the discussion."
Ann V. Butterworth, director of Tennessee's division of bond finance, which is part of the comptroller's office, said the group will meet again on Jan. 3. At that time, she said, it will choose a chairman and prepare some draft documents for standardizing official statements, in addition to continuing its talks about the merits of a state repository.
Butterworth said that regardless of what the committee's recommendation is for a repository, it will continue to explore how the state should respond to the SEC's new rules.
In particular, she said, the committee will tackle the question of whether the state should mandate a standard form of disclosure for material events, Also, it will discuss whether investors in Tennessee debt should be given additional information beyond what is specified by the SEC.
State repositories are currently being considered in a number of states, including New York, North Carolina, and Texas.