SEC Commissioner Elisse B. Walter: "Bringing Municipal Bond Trading Into the Light" (Speech) (with Lofchie Comment: Important Speech)

In a speech at the MSRB-SIFMA Municipal Bond Summit, Commissioner Walter discusses the findings of the SEC's study on the municipal securities market (published on July 21 of this year) and addresses issues in the structure of the municipal securities market. Commissioner Walter states that the market has lagged behind other market segments in "leveraging advances in communication and technology to enhance the transparency of prices and the efficiency of trading," which she believes has hurt investors as well as municipal issuers in the process.

The cited report covers market structure and disclosure broadly, and makes recommendations for changes in legislation, SEC and MSRB regulations, and industry practice.

Lofchie Comment: This seems to me to be an important speech. Commissioner Walter proposes a large number of changes in the municipal securities markets, many of which are analogous to existing changes in the corporate market. I do note that various of her proposed changes to the municipal securities markets are drawn from the regulation of corporate equities, rather than corporate debt; e.g., she advocates that the MSRB require securities dealers to disclose markups on riskless principal transactions. Accordingly, in that instance, she is proposing a change to the municipals market that could influence the direction of regulation in the corporate market, as opposed to the other way around. It is also notable that Commissioner Walter indicates she will actively seek to enter into a "robust dialog" with Congress for the purpose of giving the SEC more authority over both market structure and required disclosures. In her remarks, Commissioner Walter observes (without complaining) that the SEC is burdened by, in addition to its ordinary responsibilities, implementing both Dodd-Frank and the JOBS Act. She does not indicate how that might affect her agenda or the SEC's resources, though I would think that more active oversight of municipal disclosure would be a significant undertaking given the number of issuers and issues (she says there are over 1 million different municipal bonds outstanding).

View speech in full here (links externally to SEC website).