SEC Official Urges Muni Issuers to Improve Disclosures

Director of the SEC Office of Municipal Securities Dave A. Sanchez urged municipalities to use up-to-date information in their securities disclosures and cautioned that outdated terminology and stale reporting practices could undermine investor confidence.

Speaking at a Government Finance Officers Association event, Mr. Sanchez focused first on the misuse of the term "financial advisor" in official documents, saying many municipal issuers were using imprecise language when they should be using the regulatory title "municipal advisor." He said that some municipalities left out language requiring professionals to be registered with the SEC and the MSRB when they issue requests for proposals ("RFPs"). In some cases, he said, RFPs stated that registration wasn't required.

Mr. Sanchez also raised concerns about inflexible continuing disclosure agreements that failed to adapt to changing conditions. He revisited guidance the SEC issued in 1994 and criticized modern disclosure undertakings that still refer to specific outdated tables or data formats without offering flexibility. He encouraged issuers to use broader language such as "tables of the type" instead of citing specific tables to avoid confusion and better accommodate future changes.

On voluntary disclosures, Mr. Sanchez acknowledged that Rule 15c2-12 ("Continuing Disclosure") does not require issuers to provide information beyond contractual obligations. He urged issuers to do so to improve transparency and reduce risk. He recommended that issuers consider sharing interim financial reports, capital improvement plans, or information prepared for rating agencies through the MSRB's EMMA system.

Mr. Sanchez also addressed concerns about legal liability, stating that issuers could mitigate risks by including meaningful cautionary language when releasing forward-looking or unaudited information.