WASHINGTON — Securities and Exchange Commission staff are in late stages of finalizing the municipal advisor definition and are considering concerns raised about the definition by state and local governments, the head of the SEC’s Office of Municipal Securities told state and local finance officials meeting here Thursday.
Speaking to members of the Government Finance Officers Association’s committee on governmental debt management, John Cross said the final MA definition is on his office’s “internal, short-term agenda” and that he hopes to present the definition to the SEC’s commissioners “late this spring for potential consideration.”
“Our big project … this spring, is the municipal advisor regulation project,” Cross said. “That is our main, immediate and consuming task.”
He noted that market participants, many of whom considered the SEC’s initial 2010 definition too broad, submitted some 1,000 comment letters to the SEC. Hundreds of those requested that public officials and appointed board members be excluded from the definition, including GFOA.
“Let me just say one thing on that: message received,” Cross told attendees.
Cross also sought to allay concerns by GFOA committee members about the recommendation in the SEC’s July report for legislative authority to regulate the content and timing of issuers’ disclosures.
He said the recommendation is aimed at allowing the SEC to set some principles-based disclosure standards, and would improve the current “awkward, indirect” regulatory system, under which the SEC requires dealers to have continuing disclosure agreements with issuers.
Cross acknowledged concerns by one GFOA member, who noted that her office can’t complete its financial disclosures until it receives financial information from other government agencies. That can take months and make it difficult for her office to meet an SEC deadline.
He said it’s possible the SEC could allow issuers to carve out subsidiaries’ financial data.
Cross described principals-based standards. They would be “rules that say, ‘Here are the kinds of topics you should address in disclosures,’” he said, adding topics could include information about debt levels or details about the security or credit enhancements.
Such requirements would differ from corporate disclosure rules, which require firms to file detailed statements, Cross noted.
Legislation granting the SEC authority over issuers has not been proposed in Congress and Cross said he doesn’t know “what kind of appetite” for it exists on Capitol Hill.
He added that the SEC can advise lawmakers on the issue and help craft legislative language.
Cross also discussed regulatory recommendations in the SEC’s report, which are aimed at improving price transparency and market liquidity. He said the recommendations are on the SEC’s agenda and have support from several commissioners.
In addition, Cross said the SEC is working on updates to its 1994 interpretive release on disclosure, but that the updates will follow more pressing items, like the MA definition.