June 19, 2000
By Overnight Mail and Electronically
Mr. Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-0609
Re: Use of Electronic Media (File No. S7-11-00)
Dear Mr. Katz:
We welcome this opportunity to comment on the Commission's Release Nos. 33-7856, 34-42728 and IC-24426 (collectively, the "Release"). As you may know, the National Federation of Municipal Analysts ("NFMA") is an organization composed primarily of research analysts who evaluate credit and other associated risks of securities in the municipal market. Established in 1983, the NFMA has roughly 1,000 members who represent, among others, broker/dealers, mutual funds, rating agencies, bond insurers, and insurance companies.
The NFMA welcomes all efforts by the SEC which increase the ability of investors and potential investors to gain access to information in a timely and inexpensive manner. Electronic media have the potential to be excellent tools to promote this goal in the municipal market. An increased ability to access both current and historic information on-line would be helpful to analysts and investors reviewing both primary market and secondary market offerings. In addition to generally encouraging the use of such media, the Commission's guidance with respect to the ability of investors to consent to electronic delivery telephonically and on a global "multi-issuer basis," and its guidance encouraging the use of a variety of technologies in providing electronic disclosure, as outlined in the Release, should assist in furthering the use of electronic media.
We do, however, have two primary concerns with the Release. The first is with the theory of "republication." We feel strongly that the act of accessing a web site should not constitute a "republication" of such information by the information provider. The NFMA finds that one problem plaguing the municipal market is a lack of disclosure, particularly in the secondary market. It is our belief that endorsement by the Commission of a "republication" standard would exacerbate this problem. The adoption of a "republication" standard would, we feel, promptly curtail the use of the internet by municipal issuers and their intermediaries as a medium for making information available to investors and potential investors. We do not believe this would be in the best interest of the municipal market.
The second area of concern is with the exclusive use of electronic media as the means of providing primary or secondary market disclosure. We agree with the Commission that the time has not yet come for electronic media to be the exclusive source of information in the markets. At this time we believe that investors and potential investors should always have the right to receive primary and secondary market disclosure information in either electronic or hard copy forms, or both.
In addition to the above concerns, we would like to take this opportunity to express a few other thoughts. First, we believe that the Commission should stress in its final release that information provided electronically is to meet the same standards for accuracy and timeliness as that provided in hard copy. The NFMA, in its Recommended Best Practices in Disclosure, can provide guidance in that area. Second, we encourage any efforts by the Commission aimed at making web sites easier to use. For example, it would be helpful if information that is intended for investors were segregated from other information on an issuer's web site. Third, we would like to thank the SEC for bringing the issue of hyperlinked information to the forefront. We agree with the Commission that hyperlinked information in an official statement should be considered adopted by the issuer. As to other hyperlinked information, however, we believe more discussion is needed.
In closing, we would like to once again thank the Commission for its efforts in improving equitable, inexpensive, and timely disclosure for all investors and potential investors. The NFMA appreciates your attention to our concerns.
Very truly yours,
Chairman of NFMA
Chairman of NFMA's Industry
Practices and Procedures Committee
cc: Chairman Arthur Levitt Jr.
Paul Maco, Esquire