A Securities and Exchange Commission member said Wednesday that many improvements to the municipal securities market can be made by the SEC without seeking regulatory authority over municipal issuers from Congress.
Speaking during an event at the U.S. Chamber of Commerce, Commissioner Daniel Gallagher said the SEC may issue interpretive releases, pursue new rules and hold industry events in response to its report on the municipal securities market, which was released last August.
As for one of the report’s most controversial recommendations, that the SEC seek legislative authority to set the content and timing of muni issuers’ disclosures, Gallagher said, “There is so much that can be done outside of that.”
“There will be the potential for several interpretive releases, including roundtables on issues and potential rulemaking where possible, whether by us or through the [Municipal Securities Rulemaking Board],” he said.
The muni report recommended a host of steps the SEC could take to improve transparency and liquidity in the muni market as well as to protect investors. In addition to recommending that the SEC seek authority to regulate muni issuers’ disclosures, the report called for the SEC use its regulatory authority to improve muni bond price transparency.
The report was signed by all five of the SEC’s commissioners.
Gallagher said he “didn’t know exactly what product will come out” of the report.
He added that the commission will likely increase its oversight of fixed-income markets, including the muni market, now that Elisse Walter is its chairman.
Walter, who succeeded Mary Schapiro as chairman, spearheaded the muni report and has long called for greater oversight by the SEC of the $3.7 trillion muni market.
“I do think, because of Elisse’s interest [and] the commission’s interest generally … you will see a focus on fixed-income issues,” said Gallagher “I think that would be a very positive thing for the agency.”
Gallagher also discussed the SEC’s pending municipal advisor definition, which is required by the Dodd Frank Act but has not yet been finalized by the SEC.
He said the SEC should make completing the definition a priority so the market can move forward, but downplayed its broader importance.
“I wouldn’t put [the definition] as a huge priority in the context of responding to the financial crisis,” Gallagher said. “However, I do think we owe clarity to the markets, and we should prioritize [the definition].”
The SEC has said it plans to issue the final definition in the first quarter of 2013.
