EMMA Moving Ahead

WASHINGTON - The Securities and Exchange Commission is set to vote Wednesday on long-awaited proposals that will require municipal issuers to file secondary market disclosures with the Municipal Securities Rulemaking Board's new Electronic Municipal Market Access, or EMMA, system.

Specifically, the commission plans to vote to propose for comment changes to its Rule 15c2-12 on disclosure. The changes will require that EMMA replace the four existing nationally recognized municipal securities information repositories, or NRMSIRs, and will effectively eliminate the need for the Central Post Office disclosure facility that is currently operated by the Municipal Advisory Council of Texas.

SEC commissioners also will vote to propose for comment EMMA-related rules submitted by the MSRB that will describe the submission process for the continuing disclosures as well as how they will be displayed on EMMA.

It will be free to submit and access documents on EMMA, but the board will offer paid subscriptions for a real-time feed of information filed to the system, the details of which will also be outlined in the board's proposal to the commission.

The planned vote on the EMMA proposals is noteworthy because it marks progress on the only proposal market participants could agree on from a list of muni market initiatives unveiled last summer by SEC chairman Christopher Cox.

Cox's call for a municipal market equivalent of the SEC's EDGAR system was cautiously welcomed by critics, notably issuer groups, who objected to his other initiatives geared toward boosting municipal disclosure and accounting standards.

Susan Gaffney, director of the Government Finance Officers Association's federal liaison center here, said Friday that the issuer group is looking forward to EMMA.

"It will be a great benefit for issuers and investors alike," Gaffney said, adding that GFOA is eager to read the details of the proposed SEC rule change once it becomes public.

The current version of 15c2-12, which first took effect on a phased-in basis beginning in July 1995, bars dealers from underwriting munis unless the issuer of the bonds has contractually agreed to disclose to all four NRMSIRs financial and operating information at least annually, as well as when any of 11 specified material events occurs, such as rating changes, bond calls, and adverse tax opinions, or events affecting the tax-exempt status of the bonds. They must send material event notices to either the NRMSIRs or the MSRB, as well as to any State Information Depository in their state.

One NRMSIR, DPC Data Inc., said last year that establishing EMMA would harm its business, but declined to comment Friday. It is expected that EMMA would not harm the other NRMSIRs, which would be able to continue incorporating issuer disclosure information into their information services and products. However, it would result in the shutdown of the CPO because its sole purpose is to collect issuers' secondary market disclosure documents and transmit them to the NRMSIRs.

Commission officials had previously hoped to have the proposed changes to 15c2-12 completed by the end of the first quarter, but the internal review process has taken longer than expected, SEC officials have said.

Neither the SEC nor the MSRB proposals have been released publicly. The MSRB plans to release their proposal shortly after filing it with the commission, while the SEC plans to publish the proposed changes to 15c2-12 in the days followed the commission's vote, officials at the board and the SEC said last week. A comment period for both proposals will begin once they are published in the Federal Register and is expected to last 30 days, a knowledgeable source said.

Though a notice posted last week on the commission's Web site listing the agenda for the meeting said the 15c2-12 proposal aims to "enhance the disclosure of information regarding municipal securities," the SEC spokesman stressed that the changes are tailored narrowly to EMMA, and will not call for additional disclosure changes.

For months, the SEC and the MSRB staff have worked closely so that both proposals come out simultaneously and complement each other. For example, the changes to 15c2-12 will say that filings must be made in an electronic format, while the MSRB's proposal will designate which electronic formats are acceptable for EMMA.

Though this week's vote is crucial, the board is already well into the first phase in establishing EMMA.

In late March, the board launched a voluntary pilot portal to collect the vast pool of offering documents and trade data from the board's Municipal Securities Information Library and Real-Time Transaction Reporting System in order to test market participants' ability to access them.

In the next phase, which the MSRB refers to as the "access-equals-delivery" component, which it hopes to begin late this summer or early fall, broker-dealers will be required to electronically file official statements for new muni issues on the online site in lieu of having to send paper copies to investors.

Though the board plans to submit to the SEC final versions of its rules for access-equals-delivery shortly after the commission proposes the continuing disclosure rules, rollout of access-equals-delivery component of EMMA will occur before the board adds the continuing disclosure part of the system, MSRB officials have said.

The board expects to launch the continuing disclosure component of EMMA sometime this winter, following the comment periods and assuming that the commission gives final approval to both proposals.

Upcoming Events

Already a subscriber? Log in here
Please note you must now log in with your email address and password.