Issuer disclosure timeliness on tap at FIMSAC meeting

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Two topics of muni market interest — disclosure and ratings — will be on the docket when the Securities and Exchange Commission's Fixed Income Market Structure Advisory Committee meets next week.

FIMSAC will meet Feb. 10 at the SEC's Washington headquarters, the commission announced Thursday. The agenda includes a discussion of a draft recommendation related to the timeliness of issuer disclosure, an increasingly hot topic that has created tension between groups representing issuers and the major group representing municipal analysts.

According to the agenda, that discussion will take place in the early afternoon and panlists will include former SEC chair Elisse Walter, Government Finance Officers Association Federal Liaison Emily Brock, Akiko Mitsui of Vanguard, and Fidelity's Hannah Sullivan.

Walter was a force for municipal market issues during her time as a commissioner, and was the driving force behind the SEC's 2012 Report on the Municipal Securities Market. She is still remembered for a noteworthy 2009 speech in which she suggested that Congress should repeal the Tower Amendment from the securities laws, allowing primary muni market disclosure by issuers to be directly regulated by the SEC.

FIMSAC is an outside advisory committee, formed in 2017 to provide the SEC with external expertise on various fixed-income issues. It has made a variety of recommendations to the SEC, but the SEC is not bound by FIMSAC's suggestions.

The 1 p.m. discussion about the timeliness of municipal disclosure comes as the Municipal Securities Rulemaking Board appears set to add to EMMA a timer which would track how many days after the close of a financial reporting period an issuer filed its audited report for that time.

The proposal met with a generally unfavorable response from the major market groups who commented to the SEC, particularly from issuers who have said they are concerned about both the functionality of such a system and the potential for abuse of it by dishonest actors who might mislabel documents in an effort to "beat the clock."

The National Federation of Municipal Analysts has said issuers need to do better, and there has been increasing tension between the National Federation of Municipal Analysts and GFOA with multiple GFOA debt committee members suggesting that analysts are asking for too much. NFMA members, by contrast, believe their asks are reasonable and not outside what is already the norm in some sectors.

Another piece of the backdrop is a recent Merritt Research Services report showing that issuers have not improved in filing more timely despite an increased focus on the issue since SEC Chair Jay Clayton first mentioned it publicly in December in 2018.

Some market participants have begun to wonder if the SEC might consider mandating certain deadlines for the filing of audited financials, though Clayton has said he prefers for the industry to generate its own solutions to problems.

Elisse Walter, right, will take part in a discussion of the timeliness of muni market disclosure.

Also on FIMSAC's docket is a 9:45 a.m. scheduled discussion on the topic of rating agencies and the issuer-pay model. For issuers to pay for a rating is considered by some to create an inherent conflict of interest for the agency, though laws passed after the Great Recession aimed to curb agencies' susceptibility to providing inflated pictures of investment quality.

The meeting is scheduled to adjourn at 3 p.m., and will be webcast.

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Municipal disclosure SEC regulations Secondary bond market
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