Regulatory initiatives take center stage: for states and localities, actions by the Municipal Securities Rulemaking Board, the Securities and Exchange Commission, and the Office of Management and Budget have taken center stage.

• Author: Gaffney, Susan
• Position: Federal Focus

As Congress and the Obama administration continue to focus their attentions on legislative matters such as health care and regulatory reform, for states and localities, actions by several regulatory agencies--the Municipal Securities Rulemaking Board, the Securities and Exchange Commission, and the Office of Management and Budget, in particular--have taken center stage.

MUNICIPAL DISCLOSURE PROPOSALS

The Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB) proposed new mandatory and voluntary rules concerning municipal securities disclosure standards. These proposed rules directly affect municipal bond issuers. The proposals were announced at a July 15 SEC hearing where SEC Chairman Mary Schapiro and other commissioners reiterated their interest in additional SEC oversight of the municipal bond market. This included calls from nearly all the commissioners for Congress to provide the SEC with more control over municipal securities, as well as issuers of municipal securities. While the rules proposed in July do not expand the SEC's authority, nor has legislation been formally discussed or introduced to do so, Chairman Schapiro has testified before Congress numerous times this year that the SEC will seek more authority in this market.

The current SEC proposed rules would amend Rule 15c2-12 and expand the requirements that need to be included in an issuer's continuing disclosure agreement. The proposed new requirements include:

* Applying disclosure rules contained within SEC Rule 15c2-12 to variable rate demand obligations.

* Requiring the disclosure of events that affect a bond's tax exemption, such as an Internal Revenue Service (IRS) proposed or final decision on whether or not the tax-exempt status of the bond is at risk.

* Requiring material event notices to be submitted within 10 business days after the event. Currently, material event notices must be submitted "in a timely manner".

* Adding to the number of listed "material events" to include tender offers; bankruptcy; insolvency, receivership or similar proceedings; mergers, consolidations, or acquisitions; the sale of all or substantively all of the assets of the obligated person or their termination; anal the appointment of a successor or additional trustee or the change of the name of a trustee.

* Requiring disclosure of information in certain areas--including rating changes, failure to pay principal and interest, and other areas that reflect financial difficulties--even if the information is not found to be "material".

Comments to the SEC on the proposed changes to Rule 15c2-12 are due September 8, 2009.

The MSRB proposed and reiterated applicable municipal bond disclosure rules to the broker/dealer community. This includes allowing issuers or their representatives to submit preliminary offering documents to the Electronic Municipal Market Access (EMMA) system. Additionally, the...