U.S. muni regulators propose underwriter disclosures

Thu May 31, 2012 5:45pm EDT

May 31 (Reuters) - Underwriters and municipal advisers selling debt in the $3.7 trillion U.S. municipal bond market may be required to publicly disclose any financial incentives tied to deal making, regulators said on Thu rsday.

Pointing to scandals such as the one that helped drive Alabama's Jefferson County into a $4.23 billion bankruptcy, the Municipal Securities Rulemaking Board said it was seeking comment on a proposal to require market professionals to publish deal-related incentives on its EMMMA website.

"In the wake of Jefferson County, Alabama, and other situations involving undisclosed financial relationships, concerns have arisen regarding potential conflicts of interest that can impair the ability of municipal market professionals to act fairly and objectively," the MSRB said in a news release.

The proposal, if enacted as drafted, would require underwriters and advisers to disclose payments given or received in connection with new issues of tax-free debt, including ones made to attract business.

"This comes at a time when the MSRB is focused on our expanded mandate under the Dodd-Frank Wall Street Reform and Consumer Protection Act to protect state and local government issuers," MSRB Executive Director Lynnette Kelly said in a statement.

Home to Birmingham, Alabama's biggest city, Jefferson County last November filed the largest U.S. municipal bankruptcy largely because of massive expenses connected to its county sewer system and its soured financing.

Dozens of local officials and business leaders were prosecuted on charges related to corruption and JPMorgan Chase in 2009 struck a settlement requiring payments of $720 million over an unlawful payment scheme in Jefferson County's sewer financing.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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