SEC Reports on the Municipal Securities Market
Commentary by Steven Lofchie
The SEC issued a comprehensive report describing the business and legal structure of the municipal securities markets, with extensive recommendations to help improve the structure of the market and enhance the disclosures provided to investors.
In this report, the SEC recommends potential legislation, and identifies potential rulemaking by the SEC or the MSRB.
In addition, the report discusses several disclosure issues, including:
- the timing and content of financial information;
- disclosures relating to pension and other post-employment benefit plans that create financial risks to issuers;
- derivatives use by issuers and obligated persons; and
- conflicts of interest including pay-to-play practices.
The SEC also reviews the current structure of the municipal securities market and discusses potential initiatives to improve pre-trade and post-trade price transparency and support the oversight of dealer pricing obligations.
Commentary
Given the political delicacy of the SEC regulating municipal issuers directly, and the limits on the SEC's resources to do so, it would not be surprising if most of the additional legal or regulatory burdens suggested by the report ended up falling on broker-dealers rather than on issuers. Pages 139-50 of the report suggest a number of new regulatory compliance requirements that might be imposed on broker-dealers.