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Introductory Remarks: Municipal Securities Disclosure Conference

June 16, 2020

I am looking forward to today’s discussions about secondary market disclosure and appreciate the participation of experts from across the country. Municipal market dynamics in recent months have unsettled municipal issuers, municipal investors, and market observers. Although primary and secondary municipal markets have begun to regain their footing, the same COVID uncertainty that plagues the rest of society continues to hover over municipal issuers—many of which face increased costs and decreasing revenues—and the markets in which their securities trade. That uncertainty is relevant to the secondary market disclosure issues we are discussing today, but is only a small piece of the discussion. As today’s agenda acknowledges, we cannot look at concerns around COVID disclosure without thinking about the bigger picture.

Municipal issuers differ from one another in size, sophistication, purpose, revenue source, and type. Many conduit issuers look a lot like corporate issuers, but state and local government issuers look quite different from corporate issuers. I worry a lot about one-size-fits-all directives for corporate issuers, but that concern is even more pronounced in the municipal setting, where the consequences of such rules fall especially unevenly. Of course, further complicating any assessment of the consequences of such obligations is the indirect method by which municipal issuers become subject to them. How can we ensure that we properly account for the diversity of the issuer pool as we think about secondary market disclosure practices?

Antifraud rules, in contrast to specific disclosure obligations, apply directly to municipal issuers. In February, the Commission staff released Staff Legal Bulletin 21 regarding the application of the antifraud provisions of the securities laws to statements made by municipal issuers that are “reasonably expected to reach investors and the trading markets.”[1] That document amplified a more than twenty-five-year-old Commission interpretive release on the same topic.[2] The staff guidance raised a number of questions for me.

First, how well do standards designed for corporate issuers carry over to municipal issuers? Certainly, in broad strokes, the same principles apply; issuers of all kinds may not make any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. The application of those principles to municipal issuers is difficult. A municipal issuer official may make statements that make their way to the ears of investors, even though their intended audience is constituents. At what point is it appropriate for us to bring an antifraud action, and how do we balance the need to protect investors with the political implications of fact-checking government officials’ public statements?

With respect to other parts of the Commission’s agenda, I have been adamant that our job is to foster the provision of information to investors. Our statutory mandate is not to meet every transparency goal of every interest group. Government transparency is important for citizens, but the securities laws are not the right mechanism for meeting citizens’ needs for insight into their local governments’ finances and operations. Indeed, any attempt to take on that role would conflict with our limited statutory authority over state and local issuers and raise federalism concerns.

Disclosures prepared for other constituencies may well be useful for investors, and allowing issuers to point investors to those documents can benefit both issuers and investors. How can we recognize this fact without forcing all communications by municipal issuers—including websites, public reports, speeches, media interviews, social media posts—to be scrutinized by securities lawyers? How can we affirm the importance of antifraud protections for investors without allowing them to hobble well-intentioned municipal issuer officials trying to do their jobs?

Earlier this month, the Fixed Income Market Structure Advisory Committee recommended to us “that the Commission determine whether there are effective actions that can be taken by the Commission, MSRB or others to provide additional transparency for this vast market to the investing public.”[3] How can we respect the limits of our statutory mandate, while also working directly and with the MSRB to improve the functioning of the municipal securities markets, a key piece of which turns on there being adequate and accurate disclosure?

Demand for disclosure by issuers is particularly high at an uncertain time like the present. Last month, following a similar statement directed at corporate issuers, Chairman Clayton and OMS Director Rebecca Olsen released a statement to encourage municipal issuers to talk to their investors about how COVID is affecting, and is expected to affect, those issuers. As I think we will hear today, many municipal issuers are talking about COVID. Others, however, counseled by wary legal advisors, may deem the liability risk of making such disclosures too daunting. What, if anything, should we at the Commission do to provide more comfort to issuers that are dissuaded by potential legal liability from making statements that would be useful to investors? Is the Commission inadvertently sending mixed signals that chill the kind of disclosure called for by the Chairman and Director Olsen? How can we avoid adding legal uncertainty to the many other areas in which municipalities face uncertainty?

This series of questions ultimately brings me back to where I began. The dislocations in our municipal markets over the past several months underscore the importance of disclosure. Problems were widespread across the financial markets and prices at times appeared unmoored from credit quality. These factors only increased investors’ need for transparency about pricing and underlying fundamentals. Carefully crafted, consistently supplied disclosure can give investors the comfort they need to make rational decisions with respect to an issuer’s securities even during volatile markets. So, while I have many questions about the SEC’s role in shaping municipal market disclosure, I reaffirm the importance of good disclosure practices by municipal issuers, which serve to protect investors and facilitate capital formation by municipal issuers in both normal and stressed markets. I hope the conference is enjoyable and informative.

[1] See OMS Staff Legal Bulletin No. 21, Application of Antifraud Provisions to Public Statements of Issuers and Obligated Persons of Municipal Securities in the Secondary Market (Feb. 7, 2020), available at

[2] See Exchange Act Release No. 33741 (effective Mar. 9, 1994), 59 FR 12748, 12755-56 (published Mar. 17, 1994).

[3] See Fixed Income Market Structure Advisory Committee, Recommendation Concerning Pre-Trade Transparency in the Municipal Securities Market, available at

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