WASHINGTON - The Securities and Exchange Commission plans to propose a long-awaited rule change next month that would require municipal issuers to file secondary market disclosures with the Municipal Securities Rulemaking Board's new Electronic Municipal Market Access system, or EMMA, SEC chairman Christopher Cox said yesterday.

Cox also said the commission will soon propose rules addressing conflicts of interest and other issues relating to the credit rating agencies that it registers as nationally recognized statistical rating organizations, or NRSROs, so that their ratings can be used by market participants to comply with commission and other rules.

Cox told reporters about the timing of the proposed changes to the SEC's Rule 15c2-12 on disclosure and the credit rating agency rules following a House Appropriations subcommittee hearing on the commission's fiscal 2009 budget.

He told the lawmakers that it is "vitally important" for Congress to consider providing additional funding for the SEC to allow it to ramp up its oversight of the rating agencies and its consolidated supervised entities program, through which it monitors the financial and operational health of the five largest Wall Street firms. Currently, the CSE program is voluntary, but Cox urged Congress to consider making SEC supervision mandatory.

Despite the call for additional funding for those two projects, Cox said that the commission will have sufficient resources to carry out its existing programs in fiscal 2009, which begins Oct. 1, if Congress approves the $914 million the Bush administration requested for the SEC.

"The request will allow the SEC to fully maintain our current program of strong enforcement, examinations and inspections, disclosure review, and regulation," he said.

Some lawmakers on the panel, including its chairman, Rep. Jose Serrano, D-N.Y., had pressed Cox on whether the $914 million request - which represents an increase of less than 1% over funds for the fiscal current year - will be sufficient.

Meanwhile, the changes to Rule 15c2-12 will require that EMMA replace the four existing nationally recognized municipal securities information repositories, as well as the Central Post Office disclosure facility that is currently being operated by the Municipal Advisory Council of Texas. Commission officials had previously hoped to have the proposed rule changes completed by the end of the first quarter, but the internal review process has taken longer than expected, a source said yesterday.

Once the proposed rule changes are issued for public comment, it could take an additional six months for the commission to approve them, SEC officials have said. Changes to 15c2-12 are crucial if the board is to make EMMA a free, centralized repository for both primary- and secondary-market disclosures.

But the board is already well into the first of four phases in establishing EMMA.

In late March, the board launched a voluntary pilot portal to pool the vast trove of offering documents and trade data from the board's Municipal Securities Information Library and Real-Time Transaction Reporting System and test market participants' ability to access them.

The launch of the pilot portal is noteworthy because it marks action on the only proposal among a list of muni market initiatives unveiled last summer by Cox on which market participants could agree. Cox's call for a centralized repository was cautiously welcomed by critics, notably issuer groups, who objected to his other initiatives geared toward boosting municipal disclosure and accounting standards.

In the second phase of EMMA, which the MSRB refers to as the "access-equals-delivery" component and hopes to begin operating this summer after obtaining approval from the SEC, broker-dealers will be permitted to electronically file official statements for new muni issues on the online site in lieu of having to send paper copies of them to investors.

The board then plans to move forward with the third phase, which will provide market participants with secondary market disclosure documents, sometime around the beginning of August.

The final phase will require submission - and provide real-time dissemination of - continuing disclosure documents and real-time trade data. The board hopes to have the final phase running by the beginning of December, but it is dependent on the SEC's approval of its changes to 15c2-12.


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