WASHINGTON — Market participants and industry groups forged a tentative consensus around pension-disclosure guidance floated last month by the National Association of Bond Lawyers, with analysts and issuers overcoming initial reluctance to embrace the plan.
A broad array of municipal market groups gathered for a three-hour meeting Tuesday to discuss NABL’s plan to boost disclosure in the public sector about state and local government pension liabilities. It was the first such assemblage since the group unveiled its pension project in early May.
The session, hosted by NABL, included representatives from the Government Finance Officers Association, the Securities Industry and Financial Markets Association, the National Association of State Retirement Administrators, the National Federation of Municipal Analysts, the National Association of State Treasurers, and the National Association of State Auditors, Comptrollers and Treasurers.
In addition, representatives from the Governmental Accounting Standards Board and the California Public Employee Retirement System, or CalPERS, participated by phone.
John McNally, who is the NABL president and a partner at Hawkins Delafield & Wood LLP in Washington, circulated the 13-page draft guidance with the goal of jump-starting a discussion among muni market participants. He cited heightened regulatory interest in disclosure by public pension plans, including a landmark securities fraud settlement last year between the Securities and Exchange Commission and the state of New Jersey — the first such settlement with a state.
Initially, the NABL project sparked a mixed response. Some issuers balked at the notion of one-size-fits-all disclosure, though NABL styled the guidance as series of considerations, not a template or a roster of best practices. Shortly after NABL released its guidance, NFMA chairman Greg Clark said the analysts’ group was weighing development of a pension-disclosure white paper, potentially undercutting NABL’s efforts to forge a consensus.
But two SEC officials — commissioner Elisse Walter and Mark Zehner, the deputy chief of the enforcement division’s municipal securities and public pension unit — touted the NABL project, hailing it as a voluntary industry initiative.
Several participants at this week’s meeting said muni market groups appeared to coalesce — albeit reluctantly, for some — around NABL’s project.
“There was absolutely no one saying, 'No, we can’t do this,’ ” said Kenneth Artin, a partner at Bryant Miller Olive in Orlando who heads NABL’s pension-disclosure task force.
According to Artin, the groups agreed to share NABL’s draft guidance with their members and provide formal comments by July 25. NABL’s pension task force will redraft the guidance, based on the comments, and the groups will reconvene for more discussions in Washington on Aug. 24.
Issuers remained subdued, calling the meeting constructive, though they still harbored concerns.
The NABL draft is “still a work in progress,” Ben Watkins, Florida’s director of bond finance, said in an e-mail. He participated in the meeting by phone.
Another issuer, who initially balked at the NABL project, also struck a cautious note. “It’s a lot better for us to be sitting around doing this voluntarily than trying to react to something that’s imposed on us,” said Frank Hoadley, Wisconsin’s capital finance director and a member of GFOA’s governmental debt-management committee.
Hoadley last month said GFOA would be concerned to see the NABL project become law or an SEC rule. At the GFOA conference in San Antonio last month, he prodded issuers to boost continuing disclosure on their own, or federal regulators might mandate improvements for them.
Maryland Treasurer Nancy Kopp, who was representing NAST and NASACT at the meeting, said the ultimate goal of the pension discussions is to “arrive at an understanding of what information would be most beneficial to the potential purchasers of our bonds and what is just extraneous information.”
There is “a shared determination” among the groups “to paint a picture of where each of the pension systems are and where they are going,” she said.
The participants are hoping to put together a pension disclosure guide that accommodates the gamut of issuers: from small, infrequent issuers to states as well as special-purpose issuers.
Another meeting participant suggested some may be inclined to support the NABL efforts based on pragmatism and self-interest.
“There seemed to be a realization among the groups that more disclosure is in general in the best interests of the market,” said Clark, the NFMA chairman. He also said the NFMA has scuttled its pension-disclosure white paper and will work with the bond lawyers.
For NABL, that creates an opportunity. “Everybody around the table recognizes the need to keep it moving forward,” Artin said.