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Government Finance Officers Association (GFOA) Mini-Muni Conference Welcome Remarks

Washington, D.C.

Nov. 14, 2019

Thank you for that kind introduction.  I am pleased to kick off today’s GFOA Mini-Muni Conference.  You have an impressive list of panelists today, including the Commission’s own Rebecca Olsen, Director of our Office of Municipal Securities.  I hope that today’s discussions will be enlightening and productive.

This conference touches on some important issues in the muni space that we at the Commission are also focused on – issuer disclosure and LIBOR transition.  While I’m unfortunately not able to stick around, I look forward to hearing more about your discussion on these issues.

Robust and timely municipal issuer disclosure is a topic I care deeply about.  I know the GFOA has taken a number of steps to promote quality disclosure in the municipal securities market through the development of voluntary guidelines for municipal issuers, including best practices related to continuing disclosure.   

Most recently, the GFOA has formed a disclosure working group that includes a diverse group of municipal market participants to address overall issues with timely disclosure.  

I commend the GFOA and its members for its past and future contributions to improved disclosure practices in the municipal market.

I have said this before, but it bears repeating – it is difficult to overstate the importance of the municipal securities market to both our Main Street investors and to our state and local governments. 

This market serves as a critical source of capital to fund infrastructure as well as day-to-day government needs.

And it is important to recognize that it is a retail market. 

At the end of the second quarter of 2019, Main Street investors held directly and indirectly through managed products over 70% of the market or approximately $2.9 trillion of outstanding municipal securities.

Given the retail nature of this market, we have been focused on how disclosure can be improved for the benefit of Main Street investors.

Initially, we focused on transparency regarding the timing of annual financial reporting. 

But as I have studied this topic, my focus has broadened to include the availability of interim financial reporting by municipal issuers. 

Notably, I’ve observed that some municipal issuers already provide this on a voluntary basis, and that market participants find it very useful and informative when making investment decisions.

As a result, I have been focused on two areas where we think improvements can and should be made: (1) transparency about the timeliness – or lack thereof – of municipal issuer financial reporting, and (2) more timely and consistent availability of municipal issuer financial disclosures.

Timely financial reporting not only aids investors in making informed investment decisions, but is critical to the functioning of an efficient trading market.

Last December, I asked our Office of Municipal Securities to work with the MSRB to explore potential approaches to improve transparency in municipal issuer financial reporting.

Yesterday, the MSRB filed a proposed rule change with the Commission that would amend the information facility for its EMMA system by making the timing of annual financial filings more readily apparent to investors, market professionals, and the general public.

I applaud the work to date that has been done by the MSRB to facilitate greater transparency, and I look forward to future efforts by the MSRB and market participants to improve both the timing and consistency of financial disclosures. 

During today’s conference, I hope you will discuss approaches to making more consistent interim financial disclosures available and in a manner that is readily accessible to investors and market participants.

Last July, I asked our Office of Municipal Securities to put together a staff legal bulletin summarizing the application of the federal securities laws to various disclosure scenarios. 

At the time, I noted that questions had been raised in the market about the application of our federal securities laws and, in particular, about how they apply to information made available by municipal issuers through various channels. 

The staff has been diligently working on the bulletin, and I understand they plan to release it very soon. 

I am sure you all look forward to discussing the planned bulletin and other disclosure-related topics with Rebecca during today’s issuer disclosure panel.

Moving on to LIBOR.

As I have noted for some time now, the pending transition away from LIBOR as a benchmark reference rate presents risks that market participants, including municipal entities, need to address. 

Work done by market participants to date has included identifying SOFR as a potential replacement for LIBOR, as well as efforts to include transition language in loans, bonds and products that use LIBOR as a benchmark. 

I understand GFOA not only participates on the Alternative Reference Rates Committee, but also has undertaken efforts to educate and inform its membership on how to prepare for the transition through the issuance of best practices, as well as through hosting or participating in outreach events such as today’s conference.

That said, much, much more work needs to be done.  I encourage you all to continue working diligently to ensure that this transition goes as smoothly as possible for all affected market participants, including issuers, their counterparties, and investors. 

I know that you have a very full and important agenda today, so let me stop here and conclude by again expressing my gratitude to each of you for taking the time to participate in this conference and consider these important issues.   Thank you.  

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