MSRB Seeks Comment on Proposal to Require Disclosure of Direct Purchases and Bank Loans (MSRB Reg. Notice 2016-11)
Commentary by Steven Lofchie
The Municipal Securities Rulemaking Board ("MSRB") requested comments on a concept proposal requiring municipal advisors to disclose information (1) about the private placement of municipal securities with a single purchaser ("direct purchases"), and (2) about the bank loans of municipal entity clients. The MSRB stated that these bank securities may be subject to MSRB rules. The proposed disclosure would be disseminated publicly through the MSRB Electronic Municipal Market Access ("EMMA") system.
For several years, the MSRB encouraged state and local government entities to disclose information about their bank loan financings to EMMA in order to provide investors with a better sense of an issuer's indebtedness. However, few disclosures have been made so far.
The MSRB solicited comments on a variety of issues, including the utility of this disclosure, the kinds of information about indebtedness that should be disclosed, the relevance of information about market practices and market participants in the space, as well as other questions about the expansiveness of a potential requirement, and possible alternative solutions or additional steps that should be taken by the MSRB to further its goal of transparency.
Comments on the concept proposal must be submitted by May 27, 2016. If the MSRB decides to proceed with the development of a disclosure requirement, then it will publish a second request for comments.
Commentary
Politicians and regulators might want to consider requiring governmental issuers and their employees to follow the same standards of conduct that apply to private issuers and their employees.