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Advocating for Investors Saving for Retirement

Commissioner Luis A. Aguilar

The American Retirement Initiative’s Winter 2015 Summit<br/>Washington, D.C.

Feb. 5, 2015

Thank you, Keith [Green], for that kind introduction. I am once again pleased to sponsor The American Retirement Initiative’s (ARI) Winter Summit. We have had many successful ARI summits over the last few years, and I am glad that the ARI has continued its focus on the plight of our nation’s seniors and retirees. Protecting investors—especially those saving for their retirement—is an important mission for me. Before I continue my remarks, however, let me issue the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the U.S. Securities and Exchange Commission (“SEC” or “Commission”), my fellow Commissioners, or members of the staff.

While many Americans have worked hard throughout their lifetimes, a 2014 survey found that 34% of middle-class Americans currently are not making any contribution to a 401(k), an IRA, or other retirement vehicles, with 41% between the ages of 50 and 59 not saving for retirement at all.[1] Almost one-third of those surveyed said that they will not have enough money for retirement, and the number increased to almost 50% for those in their 50s.[2] Indeed, a full 19% did not have any retirement savings.[3] Middle-class Americans now believe that they will need to work until they are at least 80 years old, because they lack retirement savings.[4]

Just last month, a report by the Center for American Progress showed that millions of Americans will not have enough savings to maintain their standard of living in retirement, and this problem will only get worse over time.[5] As a result, retiring Americans will have to rely heavily on their families, charities, and the government to make ends meet.[6]

There are several reasons why many Americans fail to plan for retirement, but one obvious reason relates to their lack of knowledge or being confused about what to do. For example, a recent report found that only 20% of Americans could answer basic questions on retirement literacy.[7] The survey tested knowledge in several areas of retirement income preparedness, such as knowledge of investment products and preserving assets in retirement.[8] This lack of knowledge has important consequences for all Americans planning for retirement, as investment products are becoming increasingly complex and information about them, at times, can be very opaque.

Even those investors diligently saving for retirement may not have the information they need. Indeed, investment knowledge is becoming more important, as employers have moved from defined benefit plans toward defined contribution plans.[9] The growth in the popularity of 401(k) plans requires more Americans to make their own investment decisions for retirement,[10] while at the same time addressing threats to their retirement nest eggs—such as inflation and health care costs. Accordingly, the questions then become—“Are Americans able to make informed investment decisions—do they have the critical information they need?”

As Americans plan for retirement, it’s important that they have adequate and understandable information about their investments. Today, I want to focus on two types of investments that seem to be among the most prevalent investments made by seniors and those planning for retirement.

  • First, I want to focus on target date funds. These funds automatically rebalance their mix of stocks, bonds, and other investments to become more conservative as time passes.[11] Target date funds have become an attractive option for employees who do not want to actively manage their retirement savings themselves.[12]
  • Second, I want to focus on the municipal securities market. According to a 2012 GAO report, retail investors own about 75% of the estimated $3.7 trillion in the U.S. municipal securities market.[13] In addition, the AARP has reported that municipal bonds ranked high on the list of investments recommended by financial planners to seniors and retirees.[14]

Target Date Funds

First, let’s turn to target date funds. Since the mid-1990s, investments in target date funds have grown exponentially.[15] It has been reported that approximately 72% of 401(k) plans offer target date funds.[16] By the end of 2012, target date funds accounted for 15% of all 401(k) assets,[17] and that figure is expected to grow in the coming years.[18]

Investors’ affinity for target date funds is not hard to understand. These funds offer an appealing and reassuring simplicity for those who lack the time or expertise to plan for their own retirement. Moreover, after the Pension Protection Act, target date funds became eligible to be qualified default investment alternatives. Thus, the target date fund may not be an investor’s active choice, but rather the default option within his or her 401(k) plan. Target date funds have even been referred to as “autopilot investing,” as they allow investors to rely entirely on financial experts to make important decisions about migrating from riskier assets to safer ones as investors approach retirement.[19]

These funds are particularly attractive to investors who are not financially experienced. Evidence suggests that investors may perceive these funds to be virtually risk-free.[20] This perception is fueled, in part, by marketing materials suggesting that target date funds’ automatic rebalancing feature makes them so safe that investors need not monitor their investments closely.[21] In fact, some target date funds actually encouraged investors to “set it and forget it.”[22] The perception of these funds as being safe is further fueled by most retirement plans utilizing them as their default investment.[23] This “default status” seems to imply that these funds are among the safer options available.[24]

Target date funds, however, do not contain guarantees. Investors in these funds are not assured they will have sufficient retirement income at the target date, and there is no guarantee that investors will not lose some, or even all, of their investment.[25] Recent experience has shown this to be true. For example, in 2008, investors who invested in funds with a 2010 target date found themselves facing average losses of 30%, just two years before their presumed retirement date. Some of these investors faced losses as high as 41%.[26] Unfortunately, these losses only grew in the following year.[27] This experience should have served as a wake-up call that target date funds were not performing as advertised. Yet, as of today, the Commission has not enacted a single new rule dealing with target date fund disclosures.[28]

The need for the Commission to act has taken on an added urgency in recent years, as investors have continued to invest in target date funds in record numbers. In fact, the total amount of assets invested in target date funds and similar investment vehicles has reached almost $1 trillion.[29] The target date fund market is expected to continue growing in the coming years and, by one estimate, could quadruple in size by 2020.[30] Importantly, the vast majority of these funds are held in retirement accounts. It is estimated that within five years, target date funds could capture almost 90% of all new contributions to 401(k) plans.[31]

The relentless growth in target date funds is troubling because studies have shown that investors, and industry professionals alike, do not fully appreciate the risks these funds present. For example, in 2012, the Commission sponsored a study to assess investors’ understanding of target date funds, which yielded several alarming findings. For example:

  • Fewer than one-third of respondents were able to identify the correct meaning of the year in the target date fund’s name;
  • Only 36% of respondents were aware that target date funds do not provide guaranteed income after retirement;
  • More than half of all respondents failed to realize that target date funds with the same year in their names do not necessarily have the same mix of stocks and bonds at the target date; and
  • The principal reason respondents gave for choosing a target date fund was that “it seems like a safe investment for retirement.”[32]

Equally alarming is that in 2010, Pacific Investment Management Company (“PIMCO”) conducted a study that found that many professional consultants who help select options for retirement plans underestimate the degree of risk presented by target date funds. Specifically, this study found that two-thirds of these consultants mistakenly assumed that target date funds are more conservatively invested than was, in fact, the case.[33]

Unfortunately, some believe that the problem has become worse—not only have target date fund assets quadrupled since 2008,[34] but their percentage of allocations to equities has also grown. Since 2005, many target date funds have boosted their allocations to equities, both by extending their glide paths beyond the target date and by increasing equity allocations across the entire glide path.[35] In and of itself, this may not be inappropriate, as the greater exposure to equities may allow for greater returns. The issue, however, is whether investors appreciate the risks involved in having a greater allocation to equities, which generally are presumed riskier than fixed income investments.

Moreover, today’s market also poses challenges for target date funds, even as to their fixed income allocations. For example, many experts are warning of a sharp decline in the bond market in the coming years.[36] The belief is that an improving economy will eventually force the Federal Reserve to raise interest rates, and that this may cause another “taper tantrum,” in which bond prices plummet.[37] This possibility raises a number of questions for target date funds. For example, how to warn investors about this potential market disruption? Another question is: What are these funds doing to prepare for another possible taper tantrum? Are they diversifying into other assets besides bonds? If so, does this present new risks that should be disclosed to investors? Again, the issue is whether investors know about and understand the risks.

Many of these concerns are not new. In April 2013, the SEC’s Investor Advisory Committee (“IAC”) found that individual investors are ill-equipped to identify risk disparities between target date funds bearing the exact same date.[38] The IAC considered the existing problems, and made a number of recommendations to the Commission to enhance the disclosures that should be provided to investors. Specifically, the Committee made the following five recommendations:

  • First, that target date fund prospectuses clearly explain the policies and assumptions used to design and manage the desired level of risk over the life of the fund;
  • Second, that the marketing materials for target date funds include warnings that the funds are not guaranteed and that losses are possible, including at or after the target date;
  • Third, that target date funds provide better information about fees and their likely impact on investors’ final returns;
  • Fourth, that the Commission develop a glide path illustration for target date funds that is based on a standardized measure of fund risk; and
  • Fifth, that the Commission adopt standard methodologies for both the risk-based and asset allocation glide path illustrations.[39]

The Commission sought public comment on the IAC’s recommendations, and that comment period has long since closed.[40] The SEC staff should move quickly to advise the Commission on how best to move forward to help individual investors and plan providers. It is imperative that investors better understand the risks presented by target date funds.

In addition, the SEC staff also should dust-off the Commission’s 2010 target date fund proposal and consider what actions may be appropriate, in light of all the evidence gathered.[41]

In sum, while I recognize that the industry has improved target date fund disclosures in recent years, the current disclosure regime needs further improvement. The stakes are too high to continue to delay. With the end of an historic period of low interest rates rapidly approaching, the consequences of investors continuing to be ill-informed about the inherent risks of target date funds are simply too grave.

Municipal Securities

Now, I want to turn to the municipal bond market and the need for better disclosures there, as well. As the AARP has noted, municipal bonds tend to rank high on the list of investments that financial planners recommend to people who are nearing—or who have reached—retirement.[42] Despite its size and importance, however, the municipal securities market has not been subject to the same level of regulation and transparency as other segments of the U.S. capital markets.[43] Both the disclosures and trading environments for municipal securities differ greatly from equities.[44] Accordingly, I want to focus on certain improvements that should be made to the disclosures that investors receive.

It’s well-recognized that the municipal securities market is an area in need of enhanced disclosure. However, short of a Congressional fix to repeal the Tower Amendment,[45] and give the Commission greater authority to regulate municipal securities offerings,[46] the Commission’s ability to oversee municipal securities and protect investors is generally limited to two areas: first, requiring municipal bond underwriters to ensure that issuers provide investors with certain limited disclosures;[47] and second enforcing the antifraud provisions of the federal securities laws.[48] In fact, the Commission has often had to use its enforcement powers to tackle head-on the entrenched practice among issuers of municipal securities to provide inadequate disclosures. This is reflected by the Commission’s recent Municipalities Continuing Disclosure Cooperation Initiative, which, according to some market participants, has instilled “shock and awe” in issuers and underwriters alike and is, hopefully, prompting efforts toward timely and full disclosure.[49] There are, however, more things that can be done to enhance disclosure practices in the municipal securities market.

The municipal bond market’s breadth and diversity resist broad generalizations, but certain characteristics set this market apart from all others. For example, although it is less than half the size of the corporate bond market in terms of total principal outstanding,[50] the municipal bond market is estimated to have more than 1.5 million different types of bonds, which is 20 times the number of corporate bond types.[51] The wide variety of municipal bond types stems from a number of factors, including the fact that municipal bonds frequently have nonstandard features—such as calls, puts, and sinking funds—and are bundled with derivatives in the majority of cases.[52] These almost endless permutations give rise to a high degree of complexity, which can easily confuse investors.

Investors and other market participants have long criticized the quality, consistency, and timeliness of disclosures in the municipal bond market.[53] With respect to the so-called initial disclosures that are made when bonds are first issued, there are concerns over the absence of detailed information about the particular issuer’s outstanding debt, such as liens and collateral pledges.[54] There is also widespread concern that issuers are not disclosing bank loans, which issuers have been pursuing in greater numbers in recent years.[55] Like issuers in other markets, municipal bond issuers also have an obligation to provide continuing disclosure. But here, too, there are pervasive problems. Industry participants have complained that many issuers struggle to meet their obligation to provide complete and timely disclosures to the secondary market.[56]

Fortunately, industry efforts have yielded improvements in recent years,[57] and the availability of disclosures has advanced considerably since the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system, or EMMA, began serving as a central repository for municipal issuers’ disclosures in 2009.[58] Nevertheless, serious problems remain. This is evidenced by the numerous enforcement actions the Commission has brought in recent years against municipal issuers—both small and large—for failing to make disclosures or for making disclosures that ran afoul of the antifraud provisions of the federal securities laws.[59]

The disconcerting fact is that these problems are neither new nor hidden. A 2012 Commission report analyzed the state of the municipal securities market, and offered several recommendations for addressing those problems.[60] Among other things, the report recommends that the Commission use its existing—albeit limited—authority to amend its rules to do the following:

  • Require fuller, and more specific types of disclosures in the initial offering documents, including the final terms of the offering and the price to be paid for the municipal securities in the initial issuance;

  • Mandate more specific types of ongoing disclosures, including disclosures concerning the issuance of new debt;

  • Provide a method to address noncompliance with continuing disclosure requirements; and

  • Make disclosures easier to understand. Here, the report essentially called for issuers to use plain English and to provide executive summaries.[61]

Unfortunately, to date, the Commission has not pursued these measures, which has left the individual investors who comprise the vast majority of municipal bond holders, vulnerable. I urge the Commission to carefully consider these and other proposals set forth in the 2012 report that are designed to make the municipal securities market more transparent and fair for investors. As you know, the Commission’s chief mandate is to protect investors. Enhancing disclosures in the municipal securities market will do much to achieve that goal.


To conclude, as investment products and the capital market structure become exponentially more complicated, investors find an even greater need for enhanced transparency in the marketplace. As regulators, the SEC must work harder to ensure that investors have timely access to accurate, useful, and high-quality disclosure materials in order to make informed investment decisions.[62] This is true as to many products, but it is particularly needed for those products on which Americans are increasingly relying for financial security in their retirement years.

I would also like to remind everyone that the SEC maintains a website that contains helpful information on, among other things, researching and managing investments, information on boosting retirement savings, investing on your own, and publications on topics such as “Questions You Should Ask About Your Investments.”[63] This is a very useful tool, and I would encourage you to mention it to others who might not know about it.

In closing, I would like to thank the SEC staff, especially Maya Samms and Dennis Truskey from the SEC University, for working with Keith and me over the last few months to put together this event. I would also like to thank today’s panelists of experts from inside and outside the SEC for taking the time to contribute their knowledge and expertise to today’s program. This event helps support, protect, and empower our nation’s investors as they make important investment decisions for their future. I encourage the audience to participate in the discussions.

Thank you and enjoy the event.


[1] Wells Fargo News Release, Wells Fargo Survey Finds Saving for Retirement Not Happening for a Third of Middle Class (Oct. 22, 2014), available at

[2] Id.

[3] Id. The median savings was only $20,000, down from $25,000 just in 2013. Id. Moreover, as of 2013, Americans who are closest to retirement—those between the age of 55 to 64—the median retirement account balance was only $14,500. Miller, Madland, & Weller, Center for American Progress, The Reality of the Retirement Crisis (Jan. 26, 2015), available at (last visited Feb. 2, 2015).

[4] Id.

[5] Miller, Madland, & Weller, supra note 3.

[6] Miller, Madland, & Weller, supra note 3.

[7] The American College, The American College RICP® Retirement Income Literacy Survey, p. 20 (Sept. 2014), available at

[8] Id., p. 7 (Sept. 2014).

[9] “A defined benefit plan promises a specified monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement. Or, more commonly, it may calculate a benefit through a plan formula that considers such factors as salary and service — for example, 1 percent of average salary for the last 5 years of employment for every year of service with an employer.” U.S. Department of Labor Website, Retirement Plans, Benefits & Savings: Types of Retirement Plans, available at (last visited Jan. 15, 2015). On the other hand, a defined contribution plan “does not promise a specific amount of benefits at retirement. In these plans, the employee or the employer (or both) contribute to the employee’s individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee’s behalf. The employee will ultimately receive the balance in their account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans.” Id.

[10] U.S. Department of Labor Website, Fact Sheet: Target Date Retirement Funds — Tips for ERISA Plan Fiduciaries (Feb. 2013), available at

[11] Id.; SEC Website, Investor Bulletin: Target Date Retirement Funds (May 1, 2010), available at (last visited Jan. 11, 2015).

[12] U.S. Department of Labor Website, Fact Sheet: Target Date Retirement Funds — Tips for ERISA Plan Fiduciaries (Feb. 2013), available at

[13] GAO Report to Congressional Committees, Municipal Securities: Overview of Market Structure, Pricing, and Regulation, Cover Page (Jan. 2012), available at; U.S. Securities and Exchange Commission, Report on the Municipal Securities Market, p. v (July 31, 2012), available at

[14] Conrad de Aenlle, Should You Invest in Municipal Bonds?, AARP (Apr. 18, 2012), available at

[15] Investment Company Institute 2014 Investment Company Fact Book, Ch. 7 Retirement and Education Savings, available at

[16] Id.

[17] Employee Benefit Research Institute Issue Brief No. 394, 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2012 (Dec. 2013), available at

[18] Karen Damato, Target-Date Funds Gained in 2014: They’re More Popular, Even as Experts Debate Their Design, The Wall Street Journal (Jan. 3, 2015), available at

[19] Ed Dempsey, The Trouble With Target Date Mutual Funds, Forbes (Nov. 11, 2013), available at

[20] John Wasik, Despite risks, retirement savers plow into target-date funds, Reuters (May 8, 2013), available at; see also, Siegel & Gale LLC, Investor Testing of Target Date Retirement Fund (TDF) Comprehension and Communications, p. 26-28 (Feb. 15, 2012), available at

[21] Robert Boslego, Why target date funds fail in the one area they're supposed to succeed -- downside protection, RIABiz (July 21, 2013), available at; see also Testimony of Joe Nagengast, Target Date Analytics, U.S. Securities and Exchange Commission and U.S. Department of Labor Public Hearing on Target Date Funds and Other Similar Investment Options, p. 90 (June 18, 2009), available at

[22] Goldberg & Kelly, SEC Proposes Tougher Disclosure Rules for Target Date Funds, K&L Gates (June 2010), available at

[23] Ron Surz, Target Date Funds — Statistics That Matter, Huffington Post (Aug. 4, 2014), available at

[24] Towers Watson, Most U.S. Employers See Retirement Readiness as a Significant Issue for Employees, Towers Watson Survey Finds (Nov. 19, 2014), available at (last visited Jan. 11, 2015). These issues are only going to get more serious, as 86% of U.S. employers now use target date funds as their default option on their retirement plans. Department of Labor rules designate target date retirement funds as one of four Qualified Default Investment Alternatives, to which employers can direct contributions made on behalf of employees who failed to specify an investment option when they were enrolled in a 401(k) plan. See U.S. Department of Labor Website, Regulation Relating To Qualified Default Investment Alternatives In Participant-Directed Individual Account Plans, available at

[25] SEC Website, Investor Bulletin: Target Date Retirement Funds (May 1, 2010), available at (last visited Jan. 11, 2015).

[26] Morningstar, Target-Date Series Research Paper: 2009 Industry Survey (Sept. 9, 2009), available at

[27] Robert Boslego, Why target date funds fail in the one area they're supposed to succeed -- downside protection, RIABiz (July 21, 2013), available at

[28] The SEC and its staff have spoken often about the need to act. For example, former Chairman Schapiro stated that the very names of target date funds can “confuse investors, or lull them into a false sense of security.” Fawn Johnson, SEC to Examine Marketing of 'Target Date' Funds, The Wall Street Journal (Feb. 6, 2010), available at Chairman Schapiro, however, failed to promulgate a single new rule regarding target date funds during her tenure.

[29] Andrew Bary, Target-Date Funds Take Over, Barron’s (July 5, 2014), available at This $1 trillion figure includes not only traditional target date funds, which have approximately $670.7 billion in total assets, but also “[s]imilarly structured collective trusts that are designed mainly for retirement plans at large companies,” which hold an estimated $300 billion. Id.

[30] Ron Surz, Target Date Funds — Statistics That Matter, Huffington Post (Aug. 4, 2014), available at

[31] Karen Damato, Target-Date Funds Gained in 2014: They’re More Popular, Even as Experts Debate Their Design, The Wall Street Journal (Jan. 3, 2015), available at

[32] Siegel & Gale LLC, Investor Testing of Target Date Retirement Fund (TDF) Comprehension and Communications, pp. 26-28 (Feb. 15, 2012), available at

[33] See Recommendation of the Investor Advisory Committee: Target Date Mutual Funds (Apr. 11, 2013),

[34] Christopher Carosa, Exclusive Interview: Ron Surz Says Regulators Can’t Solve Target Date Fund Problems, Fiduciary News (June 17, 2014), available at

[35] Target Date Analytics, A Brief History of Target Date Funds (Jan. 2011), available at

[36] John Wasik, Despite risks, retirement savers plow into target-date funds, Reuters (May 8, 2013), available at In 2013, bond markets suffered a sharp decline.

[37] In May 2013, Ben Bernanke, then Chairman of the Federal Reserve Board, announced that the Federal Reserve may start scaling back its asset purchase program—in which the Federal Reserve purchased approximately $85 million worth of bonds and mortgage-back securities each month—sooner than investors expected. This caused interest rates on fixed income products to spike, and bond prices to fall dramatically. This market dislocation came to be known as the Taper Tantrum. See Condon & Kearns, Fed Worried About Triggering Another ‘Taper Tantrum,’ Bloomberg Business (Oct. 8, 2014), available at Academic research suggests another taper tantrum is likely when the Federal Reserve inevitably ends its quantitative easing program. See, e.g., Feroli, Kashyap, Schoenholtz, & Shin, Market Tantrums and Monetary Policy, The Chicago Booth School of Business (Feb. 28, 2014) (“when investors infer that monetary policy will tighten, the instability seen in summer of 2013 is likely to reappear”), available at

[38] Recommendation of the Investor Advisory Committee, Target Date Mutual Funds (Apr. 11, 2013), available at

[39] Id.

[40] The Commission reopened the comment period on its target date fund proposals in April 2014, but that additional comment period closed on June 9, 2014. See SEC Release No. 33-9570, Investment Company Advertising: Target Date Retirement Fund Names and Marketing (Apr. 3, 2014) (S7-12-10), available at

[41] SEC Release No. 33-9126, Investment Company Advertising: Target Date Retirement Fund Names and Marketing, (June 16, 2010) (S7-12-10), available at

[42] Conrad de Aenlle, Should You Invest in Municipal Bonds?, AARP (Apr. 18, 2012), available at

[43] U.S. Securities and Exchange Commission, Report on the Municipal Securities Market, p. ii (July 31, 2012), available at

[44] For example, municipal securities are priced in an opaque market that tends to favor institutional investors, who trade at more favorable prices than retail investors. Broker-dealers also receive larger spreads when trading smaller blocks of municipal securities involving retail investors. GAO Report to Congressional Committees, Municipal Securities: Overview of Market Structure, Pricing, and Regulation, p. 11 (Jan. 2012), available at The high transaction costs paid by retail investors have been attributed to the municipal securities market’s illiquidity, opacity, and fragmentation. U.S. Securities and Exchange Commission, Report on the Municipal Securities Market, p. vi (July 31, 2012), available at

[45] The Tower Amendment, named after the late Republican Senator John Tower of Texas, prohibits the Commission and the MSRB from requiring municipal securities issuers to make filings with the Commission or the MSRB prior to the sale of securities. 15 U.S.C. § 78o-4(d)(1) (“Neither the Commission nor the Board is authorized under this chapter, by rule or regulation, to require any issuer of municipal securities, directly or indirectly through a purchaser or prospective purchaser of securities from the issuer, to file with the Commission or the Board prior to the sale of such securities by the issuer any application, report, or document in connection with the issuance, sale, or distribution of such securities.”).

[46] Municipal securities are exempted from the Securities Act’s registration requirements, as well as from the Exchange Act’s periodic reporting regime. See 15 U.S.C. § 77c(a)(2) and 15 U.S.C. § 78c(a)(29); see also SEC Release No. 33-7049, Statement of the Commission Regarding Disclosure Obligations of Municipal Securities Issuers and Others (Mar. 9, 1994), available at The Commission is thus prohibited from imposing mandatory disclosure obligations on municipal issuers, or requiring them to follow a uniform accounting standard.

[47] 17 CFR 240.15c2-12.

[48] See, e.g., 15 U.S.C. § 77q; 15 U.S.C. § 78j; U.S. Securities and Exchange Commission, Report on the Municipal Securities Market, p. iii (July 31, 2012), available at

[49] Under the program, the SEC’s Division of Enforcement will recommend favorable settlement terms to municipal issuers and their underwriters if they self-report violations of the continuing disclosure obligations specified in Exchange Act Rule 15c2-12. Rule 15c2-12 requires continuing disclosures regarding the security and issuer, including information about the issuer’s financial condition and operating data, as well as any failure by the issuer to comply with a commitment to provide such disclosures. SEC Website, Municipalities Continuing Disclosure Cooperation Initiative (Nov. 13, 2014), available at

[50] According to the Securities Industry and Financial Markets Association, as of the end of the third quarter of 2014, the total amount of municipal bonds outstanding was $3.63 trillion, while the total amount of corporate bonds outstanding was $7.73 trillion. Securities Industry and Financial Markets Association, Statistics, US Bond Market Issuance and Outstanding, available at This is down from the peak of $3.77 trillion outstanding in 2010.

[51] U.S. Securities Exchange Commission, Report on the Municipal Securities Market, p. 5 (July 31, 2012), available at

[52] Ang & Green, Lowering Borrowing Costs for States and Municipalities Through CommonMuni, The Hamilton Project Discussion Paper 2011-01, p. 10 (Feb. 2011), available at

[53] Id., p. 65.

[54] U.S. Securities Exchange Commission, Report on the Municipal Securities Market, p. 65 (July 31, 2012), available at

[55] Liz Farmer, Are Muni Bonds Being Replaced by Direct Loans?, Governing (Nov. 26, 2014), available at

[56] U.S. Securities Exchange Commission, Report on the Municipal Securities Market, p. 67 (July 31, 2012), available at In fact, the MSRB recently issued a market advisory encouraging municipal issuers voluntarily to disclose bank loans. See MSRB Regulatory Notice 2015-03, Bank Loan Disclosure Market Advisory (Jan. 29, 2015), available at

[57] U.S. Securities Exchange Commission, Report on the Municipal Securities Market, p. 63 (July 31, 2012), available at

[58] See SEC Release No. 34-34961, Municipal Securities Disclosure (Nov 10, 1994), available at

[59] See, e.g., In the Matter of the State of Kansas, Securities Act Release No. 9626 (Aug. 11, 2014), available at; In the Matter of the State of Illinois, Securities Act Release No. 9389 (Mar. 11, 2013), available at; In the Matter of the State of New Jersey, Securities Act Release No. 9135 (Aug. 18, 2010), available at; In the Matter of Kings Canyon Joint Unified School District, Securities Act Release No. 9610 (July 8, 2014), available at

[60] U.S. Securities Exchange Commission, Report on the Municipal Securities Market (July 31, 2012), available at

[61] Id., pp. 139-40.

[62] U.S. Securities and Exchange Commission, Strategic Plan: Fiscal Years 2014-2018, pp. 6, 37, available at (last visited Jan. 11, 2015).

[63] SEC’s Website, Publications and Research Studies, available at (last visited Jan. 11, 2015).

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