WASHINGTON — More than 90% of municipal analysts surveyed believe they are more likely to hear about material events from the news than from issuers’ continuing disclosure notices, according to a new study.

While the Municipal Securities Rulemaking Board’s EMMA website has improved access to information that issuers disclose, analysts say they are cut off from significant amounts of additional information they believe is material, according to the study on the quality and relevance of muni disclosure.

The study, published in the Municipal Finance Journal and based on interviews last year with 269 members of the National Federation of Municipal Analysts, was conducted by Mark Robbins and Bill Simonsen of the University of Connecticut.

“The conversation is clearly not finished between analysts and finance officers about when and where to disclose changes to issuer financial conditions,” Robbins, an adviser to the Government Finance Officers Association’s debt committee, said in an interview.

Specifically, the survey suggests that the release of unaudited financial information, as well as the inclusion of cash-flow projections, especially for revenue bonds, would improve continuing disclosure.

“These items are considered relatively important by analysts and are fairly hard to get, especially for monitoring existing bonds,” according to the survey.

Mark Stockwell, chairman of the NFMA and director of municipal research at PNC Capital Advisors in Philadelphia, said the study gives credence to ongoing efforts by the NFMA,  GFOA and other market groups to create templates for so-called interim disclosures — or unaudited financial data — that analysts find especially lacking.

“EMMA is a tool that’s still a work in progress, which is why we’re working with issuers and other muni organizations to try to come up with consensus on the kinds of information that should be provided on an ongoing basis,” Stockwell said.

While issuers are required to disclose just 11 events under the Securities and Exchange Commission’s Rule 15c2-12 on disclosure, most bond analysts said that a much broader list of events — some 25 of the 38 analysts were asked about in the survey — should be disclosed when they occur.

Of those 25 events, 14 fall outside the current requirements of 15c2-12, while just one — bankruptcy filing — was included in changes to the rule that the SEC adopted in May to expand the quantity and timeliness of continuing disclosures. Those changes are to take effect Dec. 1.

“Given this result, and the finding that the vast majority of respondents expect to hear about material events first through the news media, the industry has a long way to go with material event disclosure,” the survey concludes.

Specifically, bankruptcy filing was at the top of the list of events that analysts believed should be disclosed, according to 98.9% of the survey’s respondents.

Meanwhile, 86.5% said that issuers should disclose when a natural disaster such as a hurricane destroys at least 15% of the issuer’s property-tax base — the next mostly highly sought after disclosure that is not currently an event under 15c2-12.

Other events that fall outside the rule but that a majority of analysts said should be disclosed include: “loss of largest taxpayer ... notice of placement on 'credit watch’... litigation filed with potential award amounting to 25% of operating expenditures ... and short-term [cash] investment loss of 50%.”

In addition to more than 90% of the analysts agreeing with the statement: “I am more likely to learn about material events from news accounts than from disclosure materials.” About 80% of them also believed that debt service funds should always be separately reported in issuers’ financial statements.

Just 20% of analysts agree that general obligation bonds “have no meaningful distinctions in default risk” and only about 33% believe that government financial statements accurately represent retiree health care benefit liabilities.

Analysts also were asked to weigh the shelf life of annual audited financial statements, which the vast majority said are completely useful for a year or less. Some 29.3% of the analysts found annual financial information is useful for zero to three months, and 37.9% believe it is useful for a period of four to six months.

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