Analysts call for better organization of coronavirus disclosures

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A group of analysts wants the Municipal Securities Rulemaking Board to add more structure and organization to its continuing disclosure filing system as issuers flock to file thousands of coronavirus-related disclosures.

In a letter sent to the MSRB Wednesday, the National Federation of Municipal Analysts asked for the MSRB to create a separate category for credit-related COVID-19 disclosures, publish guidance with examples of how and where to file, and use its education platform and other outreach efforts to ensure issuers and obligors have guidance on how to effectively communicate with investors.

“The MSRB’s current laissez-faire approach to these filings is both a missed opportunity to provide leadership and order to disclosure filings during the most significant credit event in memory and risks that critical credit information provided by issuers is not readily accessible by investors,” wrote Lisa Washburn, NFMA industry and media liaison.

Thousands of COVID-19 related disclosures have flooded the MSRB’s EMMA site through more than 20 categories since the beginning of the year as issuers grapple with how the virus will affect their finances. Just over the past week, COVID-19 continuing disclosures increased by 25%.

The MSRB could help provide infrastructure to make information on EMMA more organized, said Lisa Washburn, NFMA industry and media liaison.

Many of those filings have been logged in the “other” category, Washburn said, that can house information ranging from a notice of an upcoming bondholder call to a payment default.

“There isn’t a category for COVID,” Washburn said. “Already the ‘other’ category was housing way more than it should. By adding COVID in there, it’s becoming a larger category that is used to communicate information ranging from non-essential to extremely important. This means in order to know what is important or not, you have to open all the notices that are coming through to see what they’re related to.”

As of last week, out of 1,045 event-based disclosures, there were 451 filings under “other event-based disclosures.”

The MSRB has said if the disclosure doesn’t fit into one of the Securities and Exchange Commission Rule 15c2-12 categories, then the EMMA system is flexible to let participants decide where they want to file. Under Rule 15c2-12, dealers have to ensure that issuers enter into an agreement to provide certain information to the MSRB on an ongoing basis.

“The NFMA believes that the MSRB’s approach of allowing tens of thousands of issuers to independently decide how, when, and where to file these disclosures on EMMA demonstrates an underappreciation for investors’ long-standing concerns regarding the ability to effectively utilize the reporting system,” Washburn wrote.

The MSRB could help to provide the infrastructure to make the information on EMMA more organized for use by market participants, Washburn said.

“This is a hopefully short-term acute problem that we need organization around now,” Washburn said. “Six months from now, we might be in a post-COVID crisis world. It’s right now that we need leadership in the organization of how this information flows in the marketplace.”

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