When a market raises more than $300 billion in a year, it had better run according to the rules if it is to continue to expand and serve both issuers and investors. And a fundamental rule of efficient capital markets is that issuers provide investors with sufficient ongoing information to enable them to evaluate securities intelligently.

Secondary market disclosure in the municipal market has never equaled disclosure in the corporate securities market, but that is changing. Richard Roberts, the commissioner on the Securities and Exchange Commission who has been most concerned with reforming the municipal securities market, spoke at a meeting of the Municipal Analysts Group of New York on Friday, and he said that the SEC no later than February would issue an interpretive release dealing with disclosure.

What is needed from most bond issuers is a comprehensive annual financial report released within a reasonable length of time after the end of the fiscal year and the timely dissemination of notices of any "material events." Roberts said. At a minimum, this information must be transmitted to a national repository in a timely manner, he also said.

The most direct way to effect this change, SEC Chairman Arthur Levitt Jr. has said, would be to have Congress require states and cities to follow the same registration and reporting rules as corporations and foreign governments. Levitt, however, saw little chance that such legislation would be enacted, and the SEC has been seeking alternatives.

What the SEC staff is exploring is a rule to prohibit municipal securities dealers from recommending municipal bonds unless the issuer makes ongoing information available. Dealers obviously don't want this rule, and Roberts conceded on Friday that it is "awkward." With legislation ruled out, however, some change must still be made to insure the efficiency and integrity of the municipal bond market.

As Roberts told the analysts last Friday, "It will be interesting to see what approach ultimately carries the day." In February we'll know the answer when the SEC publishes its interpretive release, a kind of less-than -optimum rule to improve secondary market disclosure. Ultimately, we'd guess, Congress will enact the legislation Levitt finds politically too difficult to pursue now, and munis will then become full-fledged members of the mainstream capital market.

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