BRADENTON, Fla. - On the heels of the Securities and Exchange Commission's proposal to strengthen muni disclosure requirements, Tennessee Comptroller Justin Wilson said states also should do more to ensure their borrowers and investors are more educated.

The SEC last week began taking comments on changes to its Rule 15c2-12 on disclosure that would eliminate exemptions for variable-rate demand obligations as well as expand the types of events issuers must disclose on an ongoing basis. The proposal also would require issuers to file material event notices no later than 10 business days from when an event occurs.

"The SEC changes seem geared toward making sure investors are armed with the kind of information they need to decide whether or not to purchase a particular municipal bond," Wilson said. "I want Tennessee's cities and counties and their taxpayers to understand what they're getting themselves into when they borrow money."

The Volunteer State is in the process of trying to improve debt management practices, including how local governments use variable-rate debt and derivatives.

Wilson began the effort earlier this year after small municipalities and counties that used variable-rate debt and swaps encountered difficulties restructuring them because of downgrades and market changes.

Wilson has proposed new draft guidelines for qualifying local issuers to use variable-rate debt and derivatives agreements. The draft guidelines, which can be viewed at, ultimately must be approved by the State Funding Board.

"We are on schedule to have some revised guidelines ready to submit at the Aug. 5 meeting of the State Funding Board," Wilson spokesman Blake Fontenay said Friday. "At that point, we will take additional public comment, with an eye toward having the final version of the guideline changes in place by fall."

Wilson also is working on debt management guidelines for all issuers, including disclosure requirements for fees and other costs local governments pay in debt financing and derivative transactions.

"While the SEC can't directly regulate the local governments who enter into these transactions, state governments can," Wilson said. "Tennessee should be a leader in creating the proper safeguards to ensure that people on both ends of the transactions - borrowers as well as investors - go into these deals with their eyes wide open."

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