Legislative Recommendations for Congress
• Authorize the SEC to require muni issuers to prepare and disseminate official statements and secondary market disclosures, such as financial information, for bonds while they outstanding, as well as set minimum disclosure requirements such as regarding frequency and timeframes. Provide tools to enforce these standards.
• Permit the SEC to require trustees or other entities to enforce the terms of issuers' secondary market disclosure agreements with bondholders.
• Require corporate borrowers in conduit deals to comply with corporate-style disclosure and registration requirements. Small businesses, private offerings and nonprofit entities currently exempt from these requirements would remain exempt.
• Allow the SEC to establish the form and content of issuers' financial statements used in muni offerings, as well as to designate the Governmental Accounting Standards Board as the generally accepted accounting principles standard-setter for muni financial statements. Provide the SEC with authority over GASB.
• Authorize the SEC, as it deems appropriate, to require muni issuers to have their financial statements audited by an independent or state auditor.
• Provide a safe harbor from private liability for forward-looking statements of frequent muni issuers that satisfy certain conditions.
• Permit the Internal Revenue Service to share with the SEC information it obtains from returns, audits and examinations related to munis.
Regulatory Recommendations for SEC and MSRB to Consider
• SEC should amend rules to require major alternative trading systems to publicly disseminate best bid and offer prices for municipals and, on a delayed and non-attributable basis, responses to bids-wanted auctions. ATS' generally offer live online trading, and supply bids and offers to certain dealer and institutional investor clients.
• SEC and MSRB should encourage the use of ATS' or similar electronic networks that widely disseminate quotes and provide fair access.
• MSRB should require large brokers' brokers to publicly disseminate best-bid and offer prices on any electronic network they operate, and on a delayed and non-attributable basis responses to bids-wanted auctions.
• MSRB should require muni bond dealers to report "yield spread" information to its Real-Time Transaction Reporting System to supplement existing interest rate, price and yield data.
• MSRB should require muni dealers to disclose to customers markups and markdowns of riskless principal transactions. Such transactions occur when a dealer buys and sells bonds almost simultaneously to fill an order without holding them in inventory so there is little risk of loss from market changes.
• MSRB should adopt a rule that would require muni bond dealers to seek "best execution" of customer orders for munis so that they would have to execute orders at the best possible prices.
• MSRB should issue more detailed interpretative guidance to help dealers establish "prevailing market prices" for munis to determine whether prices, including markups and markdowns, are fair and reasonable.
• MSRB should encourage or require muni dealers to provide retail customers with relevant pricing-reference information when executing transactions for them.
• MSRB should immediately enhance the EMMA data site to provide retail investors with better access to pricing and other data. SEC and MSRB should improve retail investors' understanding about the various ways they can buy or sell munis and the relative advantages and disadvantages of each.