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U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
Opening Remarks Regarding Amendments to Municipal Securities Disclosure


Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Open Meeting
Washington, D.C.
May 26, 2010

Thank you, Chairman Schapiro. I would like to thank the individuals in the Division of Trading and Market's Office of Market Supervision for their hard work in preparing for today's open meeting. I would also like to thank the staff in the other divisions and offices who worked on the adopting release, including the Office of General Counsel, Division of Corporation Finance, and Division of Risk, Strategy, and Financial Innovation.

I am very happy to support your recommendation.

As I confessed in a speech earlier this month, the municipal securities market is one particular area that keeps me up at night. I have had a really hard time trying to understand the relative lack of attention being given to this market, even though it is enormous and operates with increasing participation by retail investors.

Last year, I spoke in depth on this topic, and since then, have consistently called for immediate action to provide investors in the muni market with more protections—those that are customary in other sectors of the U.S. capital markets. Achieving that result would include improving the quality and timeliness of information available to those who buy the municipal securities that are critical to state and local funding initiatives. Complete, timely, and accurate disclosure is essential for the proper functioning of the municipal securities markets, in particular for efficient pricing. And I believe that the amendments to Rule 15c2-12 that we are considering to adopt today will move us forward in accomplishing just that.

I am particularly supportive of amending the Rule to provide more specificity and certainty to the timing in which event notices must be submitted by issuers pursuant to their continuing disclosure agreements. I agree with the staff that the ten business day time-frame properly balances the potential burdens on issuers and obligated persons to meet this deadline with the substantial benefits to investors of more timely disclosure. The timely availability of event notices will substantially assist investors in making better informed investment decisions, help to reduce fraud, promote greater transparency, and further enhance investor confidence in the municipal securities market as a whole.

I am also pleased to see the modification to the current exemption for demand securities so that the continuing disclosure requirements of paragraphs (b)(5) and (c) of the Rule would apply to a primary offering of demand securities occurring on or after the compliance date of the amendments. It no longer makes sense to exempt these securities from ongoing disclosure requirements given the size, volatility, and complexity of the market for demand securities and its increased number of investors. More complete disclosure about these securities will enable investors to make more knowledgeable investment decisions and allow them to more effectively monitor and manage these investments.

As I have stated many times before, I also believe that we should further leverage our current antifraud authority to try to improve the quality of and timeliness of disclosures. I am, therefore, pleased that the staff is actively at work on updating the 1994 Interpretative Guidance on the antifraud provisions, and look forward to considering their recommendation. I believe the adoption of the amendments to 15c2-12 under consideration today, along with an update to the Interpretative Guidance, could send a stronger signal to the municipal issuer community regarding their obligations to provide full and fair disclosure.

In addition, I am pleased to see our continuing close work with the MSRB to promote the usefulness of the EMMA system with respect to the electronic collection and availability of information in the secondary market. In particular, I support the staff's action to simultaneously approve today a proposal by the MSRB to enhance its EMMA system to, among other things: (1) permit issuers and their designated agents to make voluntary submissions of official statements, preliminary official statements and related pre-sale documents, and advance refunding documents and (2) facilitate the recognition of municipal issuers that have voluntarily agreed to file annual financial information within 120 calendar days after the end of the fiscal year and prepare audited financial statements in accordance with generally accepted accounting principles. With these actions, EMMA will be an even better source for information regarding municipal issuers and their financials.

Furthermore, I continue to hold out hope for Congressional action to provide more complete reform to the regulation of the municipal securities market. As I have stated in prior speeches, these could include: (1) changes to the MSRB to ensure that it has a majority independent board and reconsidering the current separation of the regulatory and examination-enforcement functions; (2) applying the same registration and disclosure standards to non-governmental conduit borrowers that would apply if they issued their securities directly; and (3) providing the Commission with regulatory authority over all financial intermediaries in the municipal securities market.

In the meantime, I look forward to commencing our muni field hearings, which will gather opinions and analyses from a wide array of municipal market participants. I believe these hearings will help us come up with specific recommendations and best practices to better protect municipal securities investors. I am especially honored that Chairman Schapiro has requested that I lead this effort and hope to begin these hearings as soon as possible with the able help and guidance of Kayla Gillan.
Once again, my thanks go to all the individuals of the staff involved in this adopting release. I am very happy to support your recommendation.


Modified: 05/26/2010