NABL Asks MSRB to Clarify Subscription-Only Parts of EMMA

The National Association of Bond Lawyers is asking the Municipal Securities Rulemaking Board to clarify which aspects of its planned Electronic Municipal Market Access portal will only be accessible by subscription.

Though the board has said that the entire portal will be free for market participants, NABL is unclear why the board said it will also charge subscribers for access to some of the data on the site.

NABL's questions stems from at least two statements made in the MSRB's Jan. 31 notice asking for public comment on the EMMA system, which the board plans to launch in a pilot format by March 10 as a municipal counterpart to the Securities and Exchange Commission's EDGAR system.

In the notice, the MSRB said that EMMA will allow "free public access" to the continuing disclosure documents, but added that "such disclosure would be available on a real-time basis through paid subscriptions to the complete EMMA document collection for re-dissemination or other use by subscribers."

The notice also said that the board will offer "real-time subscriptions" to EMMA that will be designed to provide "real-time access to such documents and information as they are submitted and processed."

"When read together, these statements seem to indicate that only paid subscribers would have immediate access to all of EMMA's documents," the NABL letter said. "Is this the MSRB's intent? Or is the MSRB's intent that all would have immediate access, but that paid subscribers would have immediate receipt of the information (through an RSS technology or otherwise)?" RSS refers to "really simply syndication" news feeds.

Ernesto Lanza, the board's senior associate general counsel, stressed yesterday that the entire portal will be free for issuers to file to and for investors to access. The subscription service will be geared toward "bulk users," particularly information vendors, who will pay to access a data stream, he said. Lanza added that the board has yet to work out the subscription particulars, including fees, but would elaborate on them in a future release.

The board's notice last month detailed the multi-phase process of creating EMMA, which initially will serve as a pilot portal that will feature voluntary filings of official statements and advance refunding documents. It will eventually become a full-fledged Edgar-type system that will include primary and secondary market filings, plus real-time price data.

The board said in last month's notice that it expects to collect key indexing information both at the time of the issuance of the securities and when continuing secondary-market disclosures are submitted to EMMA. It asked issuers to comment on its plans to require that at issuance, underwriters of new issues say whether a continuing disclosure undertaking exists, identify any "obligated persons," other than the issuer, who are responsible for such disclosures, and provide the date when annual financial information is to be disseminated.

In another comment letter released yesterday, the Securities Industry and Financial Markets Association focused on the submission of indexing information, and said that the association assumes the information will be collected as part of a revised form tied to the MSRB's Rule G-32 on disclosure for new issues.

SIFMA said the identification of obligated persons would have "little value" in some cases because a financing can have numerous individuals who fit that description. The group also noted, among other arguments, that continuing disclosure is not required with respect to an obligated person or borrower unless information is material, and in such cases when the OS contains financial and operating data about the obligated person.

"Attempting to disclose which obligated persons can be expected to file on EMMA seems unnecessarily complicated since the official statement itself, which is on the portal, has a summary paragraph stating who will be filing continuing disclosure and where it will be filed," the SIFMA letter said, adding that also requiring issuers to state the date by which annual financial information is expected to be disseminated is likely to be vague and "not useful."

Though the board plans to start the pilot portal next month and will be prepared to establish a permanent system during the summer, it cannot implement the permanent system until the SEC approves changes to its Rule 15c2-12 on disclosure. The SEC staff is expected to draft the changes to the rule by the end of March. EMMA would replace the four existing nationally recognized municipal securities information repositories, or NRMSIRs.

A third letter by three governmental groups - the Government Finance Officers Association, the National Association of State Auditors, Comptrollers, and Treasurers, and the National Association of State Treasurers - was primarily concerned with 15c2-12, cautioning the board that its support for EMMA is dependant on the SEC's proposed changes to the rule. The letter adds that the board should allow submissions to EMMA during its pilot stage in accordance with 15c2-12, so that issuers will not have to make submissions to both EMMA and the NRMSIRs during the transition period. In reference to a request from the board on whether it should allow continuing disclosure information to be provided through third parties, the letter said third parties should only be allowed to submit information "if and only if the issuer has affirmatively designated the third party agent to do so."

But SIFMA warned that posting disclosure should not be delayed by a requirement of authorization from an issuer, warning that a delay could compound compliance with disclosure requirements.

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