* Relevant information not available as worries mount
* Disclosure was better before the 2007 recession
By Lisa Lambert
WASHINGTON, Feb 3 Information about debt sold
in the $2.8 trillion U.S. municipal bond market is frequently
not made available to investors, or is posted well after it
could have any meaning for those buying bonds, according to a
study released on Thursday by a leading municipal data
Using a large sampling of issuers, the study by DPC Data,
Inc. found that the time it took to file financial statements
had lengthened as concerns about states and local governments'
fiscal health grew. That means that when investors are
demanding more information, less is becoming available.
"Clearly, there is a pervasive laxness in filing that
obstructs the dependable and timely flow of meaningful
financial information to investors and those that serve their
interests," the study found.
While concerns about disclosure are not new, they are
growing as states and local governments struggle to recover
from the economic recession that began in 2007 and caused a
collapse in their revenues.
"The dangers for investors is implicit when disclosure
behavior worsens while underlying economic and financial
stresses mount, as is the case now," DPC said.
The survey found that prior to the economic recession, in
the years 2005 to 2007, one-third of issuers required to make
disclosures failed to do so. But during the recession years of
2008 and 2009, that proportion rose to 36 percent and 40
DPC surveyed 18,913 new municipal issues during 2008, 2009
and 2010 and found that each year issuers had increased the
window of time they pledged to make their financial statements
available in their disclosure covenants.
On a positive note, DPC could not find a correlation
between disclosure and default, meaning that those who were
most negligent in posting information had no greater risk of
default than those who submitted information in a timely way.
Still, it said, investors who are told about the threat of
default have "the best defense against surprises."
Spooked by the possibility of defaults and pervasive fiscal
problems, municipal bond investors have fled the market in
"Because of this economic climate and the fragile financial
circumstances it has wrought for many entities, access to
disclosure documents has never been more important," DPC said.
For those who did file financial statements, 5 percent of
issuers took more than one year after the close of their fiscal
year to make the financial statements available, and DPC said
the trend for most issuers is to file statements more than 180
days after the end of their fiscal years.
For many years, state and local government debt issuers
sent their disclosures to DPC and other companies, which then
provided the information for a fee.
Following concerns from federal regulators and municipal
bond buyers about transparency, the Municipal Securities
Rulemaking Board began to provide information for free in 2008
on its website. The board, which writes the rules for the
market that the Securities Exchange Commission enforces, also
began requiring issuers to file more comprehensive data in a
DPC said it used its expertise to study the MSRB's data.
(Editing by Leslie Adler)