Law and legal issues

The derivatives industry supports clearinghouses and data repositories that would make over-the-counter markets more transparent, but fears any efforts to regulate beyond this would be duplicative and costly, the head of the International Swaps and Derivatives Association told lawmakers yesterday.

Issuers and industry officials yesterday said they are disconcerted about a "disconnect" between the high rates issuers are paying for variable-rate demand obligations that have become bank bonds, and the low rates banks are receiving on loans from the Federal Reserve after using the bonds for collateral.

The "new normal" in the municipal bond market isn't, well, normal.

WASHINGTON - Merchant Capital LLC has agreed to pay $55,000 to settle Securities and Exchange Commission charges that it violated muni bond rules by treating issuer officials, family members and friends to upscale restaurants and Broadway shows and then reimbursing itself with public money, including bond proceeds.

WASHINGTON - Rep. Jim Himes, a freshman Democrat from Connecticut who sits on the House Financial Services Committee, says he knows through first-hand experience why a short-term federal reinsurance program for municipal bonds is "urgently needed."Himes, who helped draft legislation that would authorize the creation of such a program, said that several municipal issuers in his district and across the country, especially lower rated municipalities and nonprofits, are delaying capital projects because they have been unable to secure credit enhancement on their bonds.

WASHINGTON — As it teeters on the brink of bankruptcy, Jefferson County, Ala., is taking the unprecedented step of asking the Securities and Exchange Commission to play a role in restructuring its $3.2 billion sewer debt portfolio.

WASHINGTON -The Village Center Community Developer District in Florida is not considering an Internal Revenue Service proposal to settle alleged tax-law violations over $64.26 million of 2003 recreational revenue bonds that financed the acquisition of golf courses and other facilities for its retirement community, the CDD's manager said yesterday.

Helen Elizabeth Garrett withdrew as President Obama's nominee for the post of Treasury assistant secretary for tax policy over the weekend, leaving tax experts to complain that the delay in filling the slot will hamper the administration's efforts to make changes in the federal tax code.

The Securities and Exchange Commission yesterday announced the appointment of George Canellos as director of its New York regional office, where he will oversee enforcement and examination operations.

WASHINGTON - The Securities and Exchange Commission plans to repropose rule changes next month that would impose pay-to-play restrictions on investment advisers for states and localities, modelled partly on limits already in place for municipal broker-dealers.

SAN FRANCISCO - California is in a dire fiscal position and lawmakers need to act quickly to fix it, Gov. Arnold Schwarzenegger said yesterday in an address to a joint session of the Legislature.

WASHINGTON - The Internal Revenue Service is urging two community development districts in central Florida to settle tax law violations relating to tax-exempt bonds issued for The Villages retirement community by redeeming $355.35 million of them, paying the federal government at least $2.85 million, and agreeing to refrain from issuing any more tax-free bonds.

The Municipal Securities Rulemaking Board yesterday took a big step toward becoming the all-electronic central repository for both primary and continuing disclosure documents with the launch of two crucial components of its EMMA site.

WASHINGTON - The National Association of Bond Lawyers is urging the Internal Revenue Service to focus most of its attention over the next 12 months on drafting rules for the American Recovery and Reinvestment Act's two-year bond provisions.

The Municipal Securities Rulemaking Board has filed a proposed rule change with the Securities and Exchange Commission that on July 1 would terminate its CDINet system, which accepted and disseminated issuers' material-event notices.

BRADENTON, Fla. — Alabama Gov. Bob Riley asked lawmakers in Washington to consider legislation that would provide debt guarantees for a refinancing that would help Jefferson County avoid a “massive default” on $3.2 billion of sewer debt, an event he warned would reverberate through the municipal bond market.

Since Alabama lawmakers refused to assist Jefferson County by approving a bill that would have helped the county restructure $3.2 billion of troubled sewer debt, a new hearing has been scheduled in the quest by the county’s bond trustee and insurers to have a receiver appointed for the sewer system.

WASHINGTON - As part of the transition to its EMMA system, the Municipal Securities Rulemaking Board yesterday discontinued an electronic submission system known as e-OS, which was used for dealers to submit official statements and advance refunding documents under Rule G-36 on official statements.

DALLAS - Attorneys for Wells Fargo Bank and other creditors are asking a federal court in Amarillo, Tex., to force bankruptcy on the American Housing Foundation, which has acquired low-income apartment complexes in several states with the proceeds of tax-exempt bonds and federal tax-credit financing.

WASHINGTON - South Carolina Gov. Mark Sanford moved from the state Supreme Court to a federal district court a case revolving around the legality of a federal stimulus law provision permitting state legislatures to draw down federal funds for job creation and economic growth if their governors refuse to do so.