CHARLESTON - Congress should give the Securities and Exchange Commission the authority to set baseline standards for issuers’ primary and secondary market municipal securities disclosures, the SEC commissioner charged with conducting a review of the muni market said Tuesday.
In a keynote address here kicking off a three-day conference of the National Federation of Municipal Analysts, SEC Commissioner Elisse Walter said that in order to enhance investor protection in the muni market additional authority from Congress would be helpful.
“Of course, it’s far to early to tell if this will go forward, but I am extremely pleased that a number of key members of Congress have indicated an interest in municipal securities market reform, and, in particular, in more timely and consistent financial disclosures by municipal securities issuers,” Walter said, noting a House Ways and Means Committee panel has scheduled a hearing on pension transparency for Thursday.
Asked by a bond lawyer after her speech what the SEC specifically wants from Congress, Walter said the commission should not seek a repeal of the Tower Amendment, which prohibits the SEC and the Municipal Securities Rulemaking Board from requiring issuers to file disclosure documents with them before selling municipal securities.
“We don’t need Tower repealed,” said Walter, who advocated the amendment’s repeal in a 2009 speech at Fordham Law School but has since changed her mind.
Rather the SEC should seek the authority to set some “basic disclosure standards “ in the primary and secondary markets, to provide a “baseline,” she said.
The commission would exercise such authority with discretion, Walter added, recognizing differences among the size and sophistication of issuers. The idea would be for the standards to provide investors some assurance that they could scrutinize and compare every disclosure in roughly the same way, so they could draw comparisons among different documents, she said.
In an interview after the speech, Walter said the SEC continues to struggle with its lack of direct authority, under the federal securities laws, over disclosure by issuers.
Under current law, the SEC regulates issuers indirectly, through its jurisdiction over underwriters and through the antifraud provisions of the federal securities laws, which ban false or misleading statements of material fact and omissions of material facts in documents related to the sale of securities.
“If legislation were seriously considered, it could be put in context,” Walter said, adding, “I don’t think we’re looking to write a telephone book.”
Walter has been overseeing a review of the municipal market, which is expected to result in a report that could call for legislation, rulemaking and/or changes in industry practices. She has been seeking comments from market participants and others at public hearings and, in the wake of budget cuts, through the SEC’s Web site.
