Three Securities and Exchange Commission members voted unanimously yesterday to propose changes to its Rule 15c2-12 on disclosure that would make the Municipal Securities Rulemaking Board's EMMA system a free, centralized repository for all municipal secondary market disclosures.
The SEC plans to publish the proposed rules in the Federal Register for public comment, as well as a notice filed this week by the MSRB that outlines how the board will run the continuing disclosure component to EMMA, which stands for Electronic Municipal Market Access.
EMMA currently is operating in a pilot format that only features primary market disclosure documents and trade data pulled from the board's Municipal Securities Information Library and Real-Time Transaction Reporting System.
Both the proposed SEC rules and MSRB notice will be subject to a 45-day public comment period, beginning when they are published in the Federal Register. The commissioners who approved the proposed rules were chairman Christopher Cox, Paul Atkins, and Kathleen Casey. The newest commissioner, Elisse Walter, who had a hand in writing the secondary disclosure amendments to 15c2-12 when she was on the commission staff in the early 1990s, recused herself from voting. The SEC currently only has four members.
Coxsaid the proposed rules aim to provide investors with more information about municipal securities for free over the Internet to help them make better decisions about their investments.
"The recent turmoil in the credit markets, including the liquidity problems of municipal auction-rate securities and rating downgrades of municipal bond insurers, only highlights the importance of disclosure and greater transparency in these markets," Cox said. "The greater availability of information as a result of the proposed amendments could bolster investor confidence in the municipal securities market, encourage improvement in the completeness and timeliness of investment disclosure, and foster increased interest in municipal securities by retail customers."
The secondary market disclosure provisions of 15c2-12, which took effect on a phased-in basis beginning in July 1995, bar dealers from underwriting munis unless the issuers of the bonds have contractually agreed to disclose to nationally recognized municipal securities information repositories, or NRMSIRs, annual financial and operating information, as well as when any of 11 specified material events occurs, such as rating changes, bond calls, or adverse tax opinions or events affecting the tax-exempt status of the bonds. Issuers must send material event notices to either the NRMSIRs or the MSRB, as well as to any state information depository in their state.
The proposed amendments to the rule would effectively supplant EMMA for the NRMSIRs and SIDs, which would continue to function as information vendors that receive their documents from EMMA instead of directly from issuers, SEC officials said yesterday.
Issuers and others using EMMA will be able to submit and access documents for free, but the MSRB will offer paid subscriptions for a near-real-time feed of trade data filed to its RTRS, according to the board's notice that was sent to the commission late Tuesday.
Under the MSRB's proposal, secondary market disclosure submissions to EMMA must be made as portable document format, or PDF, files. Beginning with the first calendar quarter at least nine months after approval by the SEC, such files must be word-searchable, so that users will be able to search for specific terms used within documents through a search-or-find function.