If someone is currently trying to sell you a solution for complying with the Financial Data Transparency Act, a Securities and Exchange Commission official suggested a key question to ask.
"I think your first question to them should be 'Are you from the future?,'" said Adam Wendell, deputy director of the SEC's Office of Municipal Securities, sparking a burst of laughter from the crowd gathered Sunday for a session on the FDTA held as part of the Government Finance Officers Association's 119th Annual Conference in Washington, D.C.
The rulemaking process for the FDTA, an act signed into law in December 2022, is a two-stage process. Phase one is a joint rulemaking involving the SEC and various other agencies that is designed to set general joint data standards, Wendell said. While the muni-specific rulemaking will be in phase two, the final rulemaking for phase one hasn't been finalized yet, he said.
Given that the rulemaking process hasn't reached the end of phase one yet, "we don't even have our marching orders as to what the municipal-market specific rulemaking will look like," he said.
"So again, I hope there are folks from the future who know this and have gotten it all done already," Wendell quipped, adding, it would "make our job a lot easier."
"To my knowledge, that's not the case yet," he said.
The second phase of rulemaking is a two-year process and the clock for it starts when the final joint rule is adopted, Wendell said.
"So that two-year clock hasn't started yet for phase two," which will be a second notice-and-comment rulemaking, Wendell said.
"We will make a proposal, there will be a comment period," the SEC official said, adding, "everyone in this room can and should comment."
Final rule adoption will follow, he said, "and that final rule adoption will have a compliance date, which will not be the date of the final rule adoption. It will be some date after that."
The FDTA, signed into law on Dec. 23, 2022, as Title LVIII of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, includes a section on data transparency relating to municipal securities. It directs the SEC to adopt data standards for information submitted to the Municipal Securities Rulemaking Board.
During the panel, Emily Brock, director of GFOA's Federal Liaison Center, pointed to wording that says the SEC "shall consult market participants in establishing data standards."
That's "a beautiful clause that I'm very proud of," Brock said.
"It's not a 'may,' it's a 'shall,' that's a very important word distinction in Washington, D.C.," she said. "That doesn't say, 'Hey, SEC, yeah, you can talk to market participants if you want to.' This says you have to."
Brock added there are other key clauses she's proud of given the lobbying required to ensure certain things were clarified before the bill passed. One of them allows the SEC to scale data standards to reduce the burden on smaller entities.
"We said, 'You do realize that there are a lot of municipal entities out there that aren't Hewlett Packard or Coca‑Cola,'" said Brock, who during the panel ticked off a list of examples including a mosquito abatement district, a water system and a university.
"They are complexities galore," she said. "So, SEC, you have the capacity to scale those data standards to make it so there is compatibility across those different types of entities that are in our marketplace."
Conceptually, the scaling clause could also mean there are some muni entities that have to comply, and others that don't, Brock said.
During the panel, Brock asked Wendell when the right time would be to tell the SEC where and how to scale.
Wendell said based on his understanding, that is something that the SEC is directed to address in phase two.
"So, like I said, there will be at least one more notice-and-comment period for that," Wendell said, adding however that "whenever you have things that are useful to us, we're always happy to talk."
