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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Opening Statement Before the Commission Open Meeting


Chairman Mary L. Schapiro

U.S. Securities and Exchange Commission

Washington, D.C.
July 15, 2009

Good Morning. This is an open meeting of the U.S. Securities and Exchange Commission on July 15, 2009. Today, we are considering a recommendation from the Division of Trading and Markets that the Commission propose rules to improve the availability of timely and important information to municipal securities investors and other market participants.

Since becoming Chairman of the SEC, I have focused on the disparity between the level of information available to investors in municipal securities versus information available to investors in corporate securities. This disparity is all the more concerning because of the significant retail participation in the municipal securities markets. At the end of 2008, individual investors held approximately 36 percent of outstanding municipal securities directly and up to another 36 percent indirectly through mutual funds and closed end funds.

Today, the Commission is considering amendments to enhance and expand the applicability of rule 15c2-12 under the Securities Exchange Act of 1934. This rule is designed to foster transparency in the municipal securities market. The rule generally prohibits brokers, dealers and municipal securities dealers from purchasing or selling certain municipal securities unless they reasonably have determined that certain key information about these securities will be available to investors — on an ongoing basis. Such information is available through the MSRB's new on-line EMMA disclosure system. These ongoing disclosures about municipal securities are intended to enable investors to better monitor their investments, avoid manipulation and detect potential frauds.

Today's proposals would expand the reach of rule 15c2-12 to include a type of municipal security known as variable rate demand obligations. In 2008 these instruments accounted for approximately 38% of the trading volume for all municipal securities.

In addition, the proposals would expand the categories of events disclosed about municipal securities to include, for example, the bankruptcy or insolvency of an entity obligated to make payment pursuant to the terms of the securities. The proposals also would clarify that certain events, when they occur, are so important to investors and the markets that information about them should always be made available to investors, regardless of whether the municipal issuer deems them to be "material." These events include ratings changes and delinquencies in payment of principal or interest, among others. In addition, the proposals would establish a timeliness standard of no more than 10 business days for disclosure of certain material events related to municipal securities.

In sum, the proposals we are considering today would help investors make more knowledgeable investment decisions about municipal securities, while at the same time enabling broker-dealers to satisfy their obligations.

These proposals represent an important Commission effort to do what we can, within our statutory authority, to address the disclosure disparity that exists for municipal securities. However, more needs to be done to put disclosure about municipal securities on par with disclosure about corporates. As a result, I also plan on working with Congress to request enhanced SEC authority with respect to municipal securities disclosure so that investors in munis have timely access to the full complement of information they deserve to know about their municipal securities investments.

For now, I'll turn the meeting over to Jamie Brigagliano of the Division of Trading and Markets, to hear more about the Division's recommendation. Before I do that, I would like to thank our staff who have collectively prepared this recommendation before us today: Jamie Brigagliano, David Shillman, Martha Haines, Nancy Sanow, Mary Simpkins, David Michehl, Rahman Harrison, Cyndi Rodriguez and Steven Varholik from the Division of Trading and Markets; Chuck Dale and Ayla Kayhan from the Office of Economic Analysis; and Meridith Mitchell, Jeff Singdahlsen, Janice Mitnick and Raymond Lombardo from the Office of the General Counsel.


Modified: 07/15/2009