An open letter from the SEC Chairman.

• Author: Levitt, Arthur, Jr.
• Position: Examples on impact of Year 2000 computing problem on municipal securities offerings

Proper disclosure by issuers of municipal securities has been a subject close to my heart since my first days as Chairman of the Securities and Exchange Commission. The strength of our municipal securities markets is largely due to the confidence investors have in state and local government issuers of municipal securities. Today I ask you and all issuers of municipal securities to focus your attention on one of the most pressing disclosure issues we face today - Year 2000 readiness.

As you well know, unless modifications are made, at midnight on December 31, 1999, the vast majority of computer systems may not be able to distinguish the year 2000 from the year 1900. Many experts fear that this programming flaw could debilitate operating systems worldwide. Approximately 50,000 state and local governments have more than $1.3 trillion in municipal securities outstanding. Like any other organization, state and local governments, authorities, and agencies may have Year 2000 problems. As issuers of municipal securities, your Year 2000 problems also may be important to investors.

The Securities and Exchange Commission itself has recently spoken on this crucial issue. We have just issued an interpretive release that includes a section addressed specifically to issuers of municipal securities. You may access the full release on the SEC Web site at www.sec.gov or call the Office of Municipal Securities at 202/942-7300 for a paper copy. In Section III.E of the release, printed below, we provide guidance to municipal issuers and persons assisting in the preparation of their disclosures regarding Year 2000 disclosure.

We have worked together over the last few years to improve the quality and availability of disclosure in the municipal marketplace. Let us continue our partnership and encourage all issuers of municipal securities to give careful consideration to their Year 2000 problems and, when making disclosure to the marketplace, disclose all material concerns to investors.

Sincerely,

Arthur Levitt, Chairman Securities and Exchange Commission

Generally, municipal securities offerings are exempt from registration and municipal securities issuers are exempt from the reporting provisions of the federal securities laws, including line-item disclosure rules. However, they are not exempt from the anti-fraud provisions. Disclosure documents used by municipal issuers are subject to the prohibition against false or misleading statements of material facts...