Does the SEC Want to Hear from NJ Bond Issuers?

by Matthew D. Jessup on March 24, 2011

Earlier this week, the Securities and Exchange Commission (SEC) announced that additional field hearings examining the state of the municipal securities market were being suspended due to budgetary constraints. In lieu of these hearings, the SEC is asking market participants to submit comments on a wide range of municipal securities market topics, including “disclosure and transparency, financial reporting and accounting, and investor protection and education”. A complete list of topics may be found on the SEC’s website (

The New Jersey Government Finance Officers Association (GFOA) recently asked Ed McManimon for his opinions on whether the GFOA should formulate a response to the SEC. Here is Ed’s response:

Our view is that the SEC is really looking for comments and suggestions from the market itself, not the Issuers. It is the SEC’s hope that the Financial Community will urge more specific procedures for municipal debt, similar to corporate debt, so that it might serve as a catalyst for more regulation of tax-exempt debt, or replacing tax-exempt debt with taxable debt or more routine disclosure, etc. I believe that any comments from the GFOA or extended government community will be a waste of effort and will at this point fall on deaf ears. However, we should be prepared to react to extreme positions that may result from their exercise.

I am also concerned that it would be difficult for us to make a strong case at this stage since, candidly, in my opinion, the lax and inconsistent compliance by many local governments with fairly benign initial and continuing disclosure and related issuing requirements has probably spurred this effort on and makes it hard to confront this exercise by the SEC in any meaningful way.

We need to get our house in order by making sure all local governments and all Finance Officers and all auditors and all bond attorneys, etc., understand the significance of continuing disclosure filing requirements, arbitrage calculations on a regular basis and the benefit of maintaining current updated financial information if you want to access the market effectively and keep regulators from proposing more stringent, costly and onerous requirements on all of us.

To further Ed’s point, note the statement made by the SEC on its website: “[P]rotecting investors in the municipal securities market is a core function of the Commission and the staff is continuing its’ [sic] efforts to gather information about the market and develop recommendations for improving the state of the municipal securities market.”

Readers that know Ed know that he is always interested in the contrarian view. Leave us a comment below and share your view. And if you decide to submit a comment to the SEC, let us know.

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