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SEC seeks better muni disclosure, record-keeping
March 19, 2012 / 8:01 PM / 6 years ago

SEC seeks better muni disclosure, record-keeping

WASHINGTON (Reuters) - The Securities and Exchange Commission said on Monday that recent financial struggles of states and cities are creating the need for better disclosures and record-keeping in the $3.7 trillion municipal bond market.

The U.S. Securities and Exchange Commission is outfitting a workspace for investigators with their new Office of Market Intelligence, where they will be able to watch market traffic on computer terminals at SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

The regulator pressed brokers, dealers and underwriters to make more information available, out of concerns investors are in the dark about risks involving bonds sold by state and local governments.

It sent out a “risk alert” that many broker-dealers in the market have not maintained “adequate written evidence” that they have complied with laws intended to combat fraud or have ensured that their employees are following regulations.

“To protect investors, it is important that broker-dealers perform adequate due diligence to assess the financial and operational condition of states and municipalities before selling their securities to the public,” the agency’s compliance director, Carlo di Florio, said in a statement.

The SEC, which is poised to release a sweeping report on market conditions, also posted a bulletin describing the investment risks of municipal bonds and the places where bond buyers can find information

For the last few years, the federal government has ramped up investor protections in the municipal bond market, an effort that accelerated with the passage of the financial regulatory overhaul known as the Dodd-Frank Act.

The SEC said on Monday that recent financial struggles of states and cities are creating the need for better disclosures and record-keeping.

For most of its history, the municipal bond market was shrouded in mystery. Up until four years ago, disclosures such as annual financial statements were stored at a handful of repositories that would send investors paper copies of the information, for a fee.

Now, investors can download many statements for free from a centralized website run by the rulemaking board known as EMMA, for Electronic Municipal Market Access.


EMMA website:


Predictions of widespread municipal defaults, bankruptcy filings, and statehouse budget battles have left investors and political leaders eager for more information posted in a timely manner. So, too, have concerns that institutional investors, which employ analysts and pay for reports from rating agencies, have an unfair advantage over individual buyers.

Reporting By Lisa Lambert; Editing by Neil Stempleman

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