MSRB proposes posting timing of annual financial disclosures

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The timing of issuers' annual financial disclosures could soon be more prominently displayed on the Municipal Securities Rulemaking Board’s EMMA site.

In a filing to the Securities and Exchange Commission Wednesday, the MSRB is proposing displaying the timing of annual financial disclosures on the securities details pages on the site. The change would be achieved through amending EMMA Information Facility IF-3, which outlines the basic functions of the EMMA site.

“By promoting greater transparency and awareness of the financial disclosures available in the municipal securities market, the board believes the proposed rule change would promote the protection of investors and the public interest and the prevention of fraudulent and manipulative acts and practices,” the MSRB wrote in its filing to the SEC.

The board approved the proposed rule change at its July board meeting. The proposal would not change how issuers submit information.

A “submission calculator” would show the number of days between the posting of an annual financial disclosure and the end date of the financial period. The calculation would be triggered once the submission is made to EMMA.

“The goal is to make that calculation that an investor could currently do, more apparent on the EMMA website,” said David Hodapp, MSRB assistant general counsel.

The new feature would provide an informational box including a link to the disclosure of annual information and/or an audited financial statement for the most recent fiscal period and the end date of the financial period detailed in the disclosure. It would also include the date the disclosure was posted to EMMA and a static calculation of the number of days between the posting of the first disclosure for that fiscal period and the end date of the financial period detailed in that disclosure.

For example, if an issuer posts its audited financial statements to EMMA on December 23, 2020 and then categorizes the disclosure as an “audited financial statements or CAFR” and then identifies the fiscal year-end as June 30, 2020, the disclosure timing would be shown as 176 days.

The proposal comes in the wake of several statements by SEC Chair Jay Clayton in which he expressed interest in encouraging more timely annual financial information from issuers and emphasized his focus on retail investors. He has said he is concerned about “stale” financial statements and indicated that the SEC may be looking to take additional steps to improve disclosure in the municipal market.

“The timeliness of financial disclosures is often cited as an important factor in their usefulness to investors and other market participants, and the subject of how to improve the timeliness of financial disclosures in the municipal securities market has been, and continues to be, a significant concern of the commission and various market participants,” the MSRB wrote in the filing.

At a National Federation of Municipal Analysts conference in May, investors and analysts asked the MSRB to take actions to make clear when issuers have last filed financial disclosures.

In the past, the MSRB has discussed using a “counter” so stakeholders could know how long it has been since an issuer has filed a financial statement. The counter would have been updated each day to display the number of days elapsed between an issuer’s annual fiscal period end and the current date.

“The board thought about active counters and they determined that a counter would tick up on a daily basis could be confusing because we know that retail investors are not going to our website necessarily every day so they wouldn’t understand the nature of the number changing on a daily basis,” Hodapp said. “So an active ticker is something we thought would be less intuitive to EMMA users.”

The proposed rule change will be published on the SEC’s website and then published on the Federal Register. Stakeholders can then submit comments during the SEC’s formal comment period.

If the SEC does approve the rule change, the calculator could go into effect as soon as early 2020.

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Municipal disclosure MSRB rules SEC regulations Government finance SEC MSRB Washington DC
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