WASHINGTON — The Securities and Exchange Commission will kick off its much-awaited series of hearings on the municipal market this month, holding the first on Tuesday, Sept. 21, in San Francisco.
The hearing will be one of at least five, with others to be held in Chicago, Washington, D.C., Tallahassee, and Austin, according to the SEC’s announcement. They will be followed by a staff report summarizing the lessons learned and making possible recommendations for regulatory and legislative changes, as well as the best practices that market participants could adopt, the agency said.
The hearings will include local market participants and will examine such issues as the Municipal Securities Rulemaking Board, Build America Bonds, investor protection and education, financial reporting and accounting, market stability and liquidity, municipalities as conduit borrowers, offering participants, professionals and market intermediaries, and Section 529 college savings plans, the SEC said.
But some market participants are already criticizing or raising questions about the first hearing’s agenda, which will feature opening remarks by SEC officials and five panels of speakers from the muni market.
“This is really a questionable way to conduct a public hearing, to pre-decide who’s going to speak,” said one market participant who did not want to be identified. “It should be open to the public. That’s the basic Administrative Procedures Act procedure for a public hearing.”
“I can understand they might want some presentations to be made,” but they should then open up the meeting to anyone else who wants to speak, “otherwise it’s just a show-type thing,” the source said. Other market participants said several groups are not represented at the hearing — non-dealer financial advisers, industry representatives, and conduit transaction participants.
Some market players questioned the wisdom of holding field hearings with speakers from major municipal market groups. “If they want to talk to [the National Association of Bond Lawyers or the Government Finance Officers Association], they can to do that in Washington, D.C., anytime they want,” the source said.
“I just want to know whether the public is going to be able to talk at these hearings,” said Robert Doty, president of Sacramento-based financial advisory firm American Governmental Services Co..
In its release, the SEC invites members of the public and other interested parties to submit comments related to field hearing topics by using the comment form on its website, www.sec.gov or via e-mail to email@example.com.
"We are taking significant steps to hear the broadest possible range of views, and look forward to receiving suggestions for speakers and topics for upcoming hearings," said SEC spokesman John Nester.
Besides commissioner Elisse Walter, who is heading the muni market inquiry and chairing the first hearing, the opening speakers will be Meredith Cross, director of the corporation finance division, and Henry Hu, director of the risk, strategy and financial innovation division.
Cross’ division oversees corporate disclosure and its staff reviews all of the annual and quarterly financial statements that publicly held companies file with the SEC, as well as registration statements for newly offered securities and documents related to tender offers to buy large shares of corporations.
Hu’s division, which is only a year old, helps identify developing risks and trends in the financial markets. Absent from the opening line-up is a representative of the SEC’s trading and markets division, where the Office of Municipal Securities has been located. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires an independent Office of Municipal Securities be established within the SEC that reports directly to chairman Mary Schapiro.
During the hearing, Amy Starr, senior special counsel within the corporation finance division, will chair three panels on selected disclosure practices, disclosure of certain significant liabilities, and investor experiences. Martha Mahan Haines, the current director of the Office of Municipal Securities, will chair two panels on rating impacts and practices, and issuers’ internal controls. Panelists will include California Treasurer Bill Lockyer, Washington Treasurer James McIntire, and Brian Mayhew, chief financial officer of the Bay Area Toll Authority, as well as representatives of the National Federation of Municipal Analysts, NABL and GFOA. Michael Rufino, senior vice president in the office of sales practice at the Financial Industry Regulatory Authority, will speak on the internal controls panel.
The hearing is scheduled for 9:00 a.m. to 4:30 p.m. at the Embarcadero at the Port of San Francisco, Pier 1.