Government Accounting Advisor: Disclosure Updates in Municipal Securities Accounting


The Municipal Securities Rulemaking Board is seeking public comment on a potential approach to enhance investor and public access to information about the direct purchase and bank loan transactions of municipal securities issuers. The MSRB is considering whether to require municipal advisors to disclose information about the bank loans and direct purchases of their municipal entity clients to the MSRB’s Electronic Municipal Market Access (EMMA) website.

Direct purchases and bank loan agreements may contain key terms that impair the rights of existing bondholders. MSRB Executive Director Lynnette Kelly commented: “The lack of transparency around the full picture of an issuer’s indebtedness has long concerned the MSRB. For a number of years, the MSRB has been encouraging state and local governments to voluntarily disclose bank loan financings and other similar obligations on EMMA, yet only a small number have done so. We are now considering whether rulemaking is necessary to ensure investors have the information they need with respect to these financings to make informed investment decisions.”

The MSRB intends the concept proposal to gather input on ways to improve the availability and timeliness of information about direct purchases and bank loan financings for the benefit of investors and the public generally. A press release, background sheet and comment link can be found by clicking here.

The Securities Industry and Financial Markets Association (SIFMA) has released a white paper on SEC Rule 15c2-12, which requires dealers, when underwriting certain types of municipal securities, to ensure that the state or local government issuing the bonds has agreed to provide certain information to the Municipal Securities Rulemaking Board about the securities on an ongoing basis. The paper examines the existing framework for disclosure in the municipal securities market and suggests ways the framework and related guidance for compliance could provide better disclosure for investors.

Among SIFMA’s recommendations is to assign to municipal advisors (MAs) responsibility for checking that statements in offering documents on competitive transactions are accurate when MAs are engaged by issuers to help prepare official statements. SIFMA’s other suggested changes to the rule include the following:

Update the collection of disclosure information to reflect the availability of information on the EMMA system (i.e., notification of ratings changes and provision of the final official statement to potential customers, etc.).

Specify a date on which annual financial information will be provided and harmonize with continuing disclosure agreements.

The full white paper can be found by clicking here.

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