May 15, 2017
The City of Houston supports providing information related to private placements and other borrowings that are currently not required to be reported on the MSRBs EMMA website. The City has a practice of filing necessary and relevant details of direct purchase or private placement transactions in the interest of providing financial transparency. However, the City's primary concern with the proposed SEC rule change is the very real potential for problems in implementation.
The determination of what is a material financial obligation can vary based on the rules as proposed, and may create the opportunity for disagreement about what is considered material. This would require constant monitoring on the issuer's part, since the definition potentially can include so many different items outside the scope of a bank loan or private placement. Being a large issuer, monitoring when a monetary obligation might arise out of a judicial, administrative or arbitration procedure could be particularly hard to manage. While many such events might not reach materiality, each would need to be considered against that standard in order to comply with the proposed rules. Administration under the proposed rules will present a significant burden on limited staff time and resources.
The City requests that the proposed rules be modified to focus more on incurrence of debt obligations through bank loans and private placements, which we believe is the impetus for the proposed changes.