May 1, 2017
To whom it may concern,
I am submitting comments on behalf of the Texas Higher Education Coordinating Board on the proposed amendment to the Municipal Securities Disclosure Rule (Rule 15c2-12), File No. S7-01-17.
The proposed amendment increases the disclosure requirements for issuers by including all obligations that are incurred, if material. The definition of what is an obligation and what is material, are vague in this amendment. What constitutes an obligation is subject to interpretation in this proposal and can deviate from accounting standards. What constitutes materiality can vary by entity based on the size of the overall balance sheet, the size of existing obligations or the size of the overall bond portfolio. These issues will make underwriters push for everything to be disclosed rather than run the risk of being in noncompliance with the materiality provision. For disclosures to be meaningful to the reader, they need to be clear and concise. We believe that this proposed amendment will lead to too much information being published and that could lead to disinformation for the reader (investor/analyst). The amendment can create large deviations in the amount and type of information being published by issuers. Due to these factors, the amendment as written will likely lead to a large undue burden on issuers by having to publish this additional information and will lead to additional work required by financial advisors and bond counsel. As a result, issuers will incur additional costs in support of new bond issues and in support of existing bond portfolios.
If the proposed amendment is left as written, the interpretation of what constitutes an obligation and what constitutes materiality is subject to interpretation. This can also lead to needless penalties imposed by the SEC on issuers and advisors due to the potential for different interpretations of this proposed change. This can also lead to inconsistent application of this rule due to the potential for varying rule interpretations within the SEC.
We recommend that if the SEC desires to increase the disclosure requirements, then they be very specific on what is to be disclosed and what dollar threshold. The current rule is clear as to the required disclosures and any amendments needs to provide the same clarity in order to not negatively increase costs and potentially lead to inconsistent penalties to issuers.
Assistant Commissioner Financial Services/CFO
Texas Higher Education Coordinating Board
1200 E. Anderson Ln
Austin, TX 78752