Disclosure services provider Digital Assurance Certification LLC has forced the Securities and Exchange Commission to both remove from its Web site any mention of the Central Post Office disclosure system and to back away from the idea of making use of the CPO mandatory for muni issuers.
The SEC had put a link to the CPO on its Web site and Martha Mahan Haines, the chief of its Office of Municipal Securities, has publicly praised the CPO and encouraged issuers to use it as a central filing place through which they can send their secondary market disclosure documents to the four nationally recognized municipal securities information repositories.
Haines also has stated repeatedly in public that she planned to urge the SEC staff to amend the commission’s Rule 15c2-12 on disclosure to require muni issuers to use the CPO.
The rule currently requires issuers to send annual financial and operating information, as well as notices of material events, to each of the NRMSIRs.
But market participants complained that issuers were not sending their documents to all four repositories and that the NRMSIRs were logging the documents in different ways. As a result, dealers and other market participants who needed to check on issuers’ disclosure filings to comply with Rule 15c2-12 or for other purposes would have to go to several or all of the NRMSIRs.
The CPO, which the Municipal Advisory Council of Texas began operating in September 2004 for the Muni Council, a group of 18 muni market groups working to improve secondary market disclosure, was designed to serve as a one-stop filing place for issuers’ secondary disclosure documents that would eliminate the inconsistencies in the way the NRMSIRs received and stored the documents.
But DAC sued the Texas MAC earlier this year, charging the CPO infringes on a patent it obtained Dec. 26 that extends back to April 25, 2002.
DAC also complained to the SEC about references to the CPO on its Web site and in remarks by commission staff, according to a recent letter that SEC senior counsel Richard J. Ufford sent Jeffrey R. Zuckerman, a lawyer with Pillsbury Winthrop Shaw Pittman LLP, which is representing DAC.
“I write in response to your letter dated Feb. 6, 2007, concerning content on the SEC Web site and various statements attributed to SEC staff,” Ufford said in his letter to Zuckerman, which was dated April 17, but not publicly released until yesterday.
“The SEC is committed to presenting information on its Web site and elsewhere that is accurate, clear, complete, and unbiased both in its content and presentation. This agency does not endorse any private product or service,” Ufford told DAC’s lawyer.
“We have revised the Web site to avoid any appearance that the content is not objective,” Ufford said. “We will also continue to monitor these issues. Finally, the SEC does not have pending any rulemaking proposals to specify a particular method of compliance with Rule 15c2-12.”
Neither SEC nor DAC officials would provide a copy of the Feb. 6 letter or comment on the correspondence.
But sources said yesterday that the SEC’s longstanding prohibitions against endorsing any private product or service, or competing with the private sector, would preclude it from requiring issuers to use the CPO.
Years ago, when the Municipal Securities Rulemaking Board set up systems to collect official statements and secondary market disclosure notices, private vendors worried the board would compete with them and harm their business ventures. But SEC officials made clear at the time that there was a prohibition against the SEC or MSRB competing with the private sector.
