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Securities Law

SEC Officials Talk Munis With Lawmakers

JAN 23, 2013 5:30pm ET
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Lawmakers have met with the Securities and Exchange Commission in recent days and discussed recommendations in the SEC’s July report on the municipal market, the former chairman of the House Financial Services Committee told The Bond Buyer Wednesday.

Rep. Spencer Bachus, R-Ala., who was committee chairman during the congressional session that ended Jan. 3, said the SEC’s report was brought up at a meeting he attended at the SEC last week. Bachus, now the committee’s chairman emeritus, an honorary title that allows him to remain a senior committee member, said concerns were raised during the meeting about lack of sufficient oversight of the municipal bond market by regulators.

Bachus said it’s premature to speculate about actions that might come from the report, which made a number of recommendations aimed at improving transparency and liquidity in the muni market, including a call for Congress to grant the SEC the authority to regulate the content and timing of issuers’ disclosures.

Bachus did not say if he would support such legislation, but said outcomes from the report would likely come from a cooperative effort by Congress and the SEC.

Bachus called regulation of the muni bond market an area of interest to him, noting that his district includes parts of Jefferson County, Ala., which filed for bankruptcy protection in late 2011.

“There was a lot of nefarious dealings in Jefferson County. I’ve got the [SEC’s muni report] on my desk,” said Bachus.

A source familiar with muni issues on Capitol Hill said the SEC has likely already drafted legislation that would grant it the authority requested in the report.

The source noted that both Democrats and Republicans support reforms to the muni market, and that the SEC’s report had unanimous support from all five SEC commissioners. In addition, the SEC’s new chairman, Elisse Walter, is a consensus builder, the source said, adding, “I think something is going to happen.”

Another committee member, Rep. Gwen Moore, D-Wis., noted Wednesday that recommendations in the SEC’s muni report must be examined to ensure they are balanced and needed.

“People are concerned about regulatory creep” and about new rules coming out of the SEC, said Moore, who has been active in municipal market issues, co-sponsoring a bill last year that would have defined municipal advisors as those engaged for compensation to provide advice.

The bill, which exempted underwriters, bankers, swap dealers and those who provide related advice, passed the House last year but stalled in the Senate.

Moore isn’t alone in her concerns about the expanding reach of the SEC. Last week, Republican SEC Commissioner Dan Gallagher said the Dodd-Frank Act, passed two-and-a-half years ago, has resulted in “a dramatic increase in the volume and pace of the SEC’s rulemaking.”

The act contains about 400 mandates that must be implemented by government agencies, and the SEC has already adopted final rules implementing about one-third of 100 mandates in its purview, Gallagher told attendees at a U.S. Chamber of Commerce event on Jan. 16. “It’s no exaggeration to say the SEC is handling 10 times its normal rulemaking volume,” Gallagher said.

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