U.S. Securities & Exchange Commission
SEC Seal
Home | Previous Page
U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Statement at Open Meeting on Municipal Securities Disclosure


Chairman Christopher Cox

U.S. Securities and Exchange Commission

Washington, D.C.
July 30, 2008

The next item on our agenda is a recommendation from the Division of Trading and Markets to improve municipal securities disclosure.

There's no part of our capital market more important to retail investors than the municipal market. Individual investors own two-thirds of the securities in this $2.6 trillion market, both directly and through their ownership of funds. Better disclosure in the municipal securities market is vitally important to those millions of investors, as well as every other market participant. It used to be that municipals were a "buy and hold" market. But today, trading volume is substantial - over $6.6 trillion of long and short-term municipal securities traded in 2007 in more than 9 million transactions. And it's a big market, not only in terms of dollar amount and volume, but also number of issuers. There are more than 50,000 state and local issuers of municipal securities, and two million separate bonds outstanding.

For all of these reasons, it's important that investors in this market can make informed investment decisions based on accurate and full information. But compared to what's available for corporate issuers, disclosure in the municipal securities market is substantially less readily available, and that's particularly so for individual investors. One of the most glaring deficiencies in the municipal market is that while investors and other market participants have access in an immediate free way to corporate filings, there is no such similar online system for municipal securities disclosure.

Today, we are proposing a major change to fix that for the benefit of every investor. Specifically, we are proposing to tap the power of the Internet to make ongoing disclosures by municipal issuers more easily accessible to investors. The staff of the Division of Trading and Markets are recommending that the Commission take two actions: first, to propose amendments to Rule 15c2-12 under the Exchange Act, and second, to publish for comment a related proposed rule by the Municipal Securities Rulemaking Board that would allow investors to readily access information about municipal securities for free over the Internet. The SEC's proposed rule amendments would designate the MSRB as the central repository for ongoing disclosures by municipal issuers; the MSRB's proposed rule change would establish an Internet-based system for the MSRB to disseminate the information to investors.

This Internet-based centralized filing venue will be called the "Electronic Municipal Market Access" system - or EMMA, for short. Earlier this year in March, we approved the MSRB's filing to establish EMMA as a pilot system. And that pilot has been a success. Now, if it's fully developed as it's proposed by the MSRB, it would provide free, real-time public access to all primary and secondary market disclosures and to trade price data for municipal securities submitted to the MSRB.

Some changes to Rule 15c2-12 are needed in order for the MSRB to make EMMA a centralized repository for secondary market disclosures, because existing SEC Rule 15c2-12 requires underwriters to get commitments from issuers that the issuers will provide continuing disclosure documents to multiple Nationally Recognized Municipal Securities Repositories, or NRMSIRs, as well as certain state information depositories. Today's proposed amendments would simplify this by requiring underwriters to obtain commitments from issuers to provide the information directly to the MSRB. In addition, the amendments would require that continuing disclosures be provided in an electronic format and accompanied by identifying information as prescribed by the MSRB, which would facilitate the indexing of the information.

These proposals are designed to provide investors with more information about municipal securities for free over the Internet to help them make better investment decisions. The recent turmoil in the credit markets, including the liquidity problems of municipal auction-rate securities and rating downgrades of municipal bond insurers, only highlights the importance of disclosure and transparency in these markets. The greater availability of information as a result of the proposed amendments could bolster investor confidence in the municipal securities market, encourage improvement in the completeness and timeliness of investment disclosures, and foster increased interest in municipal securities by retail and institutional customers.


Modified: 12/02/2008