The Municipal Securities Rulemaking Board announced yesterday that it will not be able to launch its primary market disclosure "access-equals-delivery" system or its continuing disclosure test pilot on May 11, citing filing and approval delays.
MSRB general counsel Ernesto Lanza said that May 11 ultimately proved "unfeasible," given that public comment periods for both proposals only recently expired. Comments for the continuing disclosure pilot were due on April 27 and for access-equals-delivery on Tuesday. The Securities and Exchange Commission must approve the proposals before they can take effect.
"But we're ready to move forward once the approval does come in," Lanza said.
The only public comment the board received to both proposals was from the American Bankers Association, which demanded that the MSRB agree to a licensing agreement for the use of Cusips on EMMA, the central repository the board is developing to house primary and secondary market disclosures. EMMA stands for Electronic Municipal Market Access, and is billed as the muni-market equivalent to the SEC's Edgar system for corporate disclosure documents, now known as IDEA.
In its letter, the ABA warned that the board must, among other things, take steps to ensure the security of the Cusips by blocking access to EMMA unless users have a password, a move MSRB officials are unwilling to make.
But Lanza said that the board is close to an agreement with the ABA that will resolve the dispute, which revolves primarily around legal disclaimers on the site rather than monetary fees.
Cusips, which are used to identify municipal and government securities as well as stocks of all registered U.S. companies, are "owned" by the ABA and administered by CUSIP Global Services, which is operated by Standard & Poor's
"We're in agreement with what needs to be done. We just need to finalize the actual language of the agreement," Lanza said, referring to the pending agreement with the Cusip service.
Jim Taylor, managing director of CUSIP Global Services, said in a statement: "Over the years we have worked in close collaboration with the MSRB on a number of initiatives to provide solutions for investors. Although several important issues remain to be resolved between the MSRB and CUSIP Global Services, in principle we believe that a comprehensive municipal bonds data base like EMMA would tremendously assist market transparency, an important step toward restoring investor confidence. In this spirit are committed to resolving our remaining differences."
If the SEC approves the access-equals-delivery system as expected, dealers would be able to post primary market disclosure documents in an electronic format to EMMA in lieu of sending them to investors in paper form.
EMMA would become the "official public distribution channel" for all primary disclosure documents, including preliminary and final official statements, advance refunding and escrow documents, as well as other information such as price data, according to the board.
Individual submissions would be available on the site for free or in a real-time, bulk subscription stream for $20,000 a year, under the board's proposal.
Meanwhile, the proposed continuing disclosure pilot will give issuers and investors a chance to voluntarily test EMMA's secondary market disclosure component before it becomes mandatory on July 1, when changes to the SEC's Rule 15c2-12 on disclosure go into effect.
The rule changes designate the MSRB as the sole nationally recognized municipal securities information repository, effectively replacing four existing NRMSIRs. The SEC approved the changes last year as part of an effort to create a free, central repository for continuing disclosure documents, including annual financial and operating information, audited financial statements, and material event notices.
In a separate notice issued yesterday, the MSRB announced it will host four "webinars" for issuers and "associated persons" on the submission of continuing disclosure documents to EMMA via the Web.
Each webinar will last about one hour and is free, but limited to the first 25 people who pre-register. The webinars will be held at 2:30 p.m. Eastern Daylight Time on May 11, May 13, May 19, and May 21.