For the first time, the Government Finance Officers Association is putting together a working group to address overall issues with timely disclosure in the municipal market after increased scrutiny from the Securities and Exchange Commission and other muni market groups.
The working group of about 10 to 15 industry professionals will be announced next week and Emily Brock, director of GFOA’s federal liaison center, said that the group would have a variety of muni market participants from bond lawyers to municipal advisors.
The announcement came after GFOA met with SEC Chair Jay Clayton and other commissioners in June to follow up on Clayton's call for the SEC's Office of Municipal Securities to work with the Municipal Securities Rulemaking Board to improve transparency and increase timeliness of issuer financial information. Brock said the SEC then encouraged GFOA to work with the MSRB and other industry groups to reach the market’s goals of timely disclosure.
Hence the GFOA working group is now being formed, and may produce a white paper or other publication to try to communicate best practices.
“We’ve got to bring the band back together to really craft industry wide best practices in these disclosure matters,” Brock said. “This is the perfect opportunity really to get together and put pen to paper,” Brock later said.
GFOA would like to be able to use the working group to allow issuers to make their case, Brock said. Some participants have said the disclosures for audited financial statements take too long.
At GFOA’s annual conference in May in Los Angeles,
In the letter, NFMA said lapses in issuer financial disclosures in the secondary market are unacceptable and inconsistent with more timely and robust disclosures investors are accustomed to in equity and corporate bond markets.
“I don’t think that there’s a lack of sympathy out in the market,” Brock said. “I just think there’s a lack of understanding of how many hands have to be on that (audited financial statement).”
A mutual objective could be improving MSRB’s EMMA site through filing information and categorizing the time, input and expiration of information. It wouldn’t necessarily mean a ticker, Brock said, but an easier way for issuers to represent data and thinking of ways to ensure stakeholders know what the data is and its status.
The working group is a good idea, in that it allows for the issuer groups to take on the role of leading the conversation,said Lisa Washburn managing director at Municipal Market Analytics.
“There are tens of thousands of issuers in the 50 states that each have different reporting regimes so really understanding the current rules, what would need to get done, and how they might go about addressing and improving timeliness does really need to come from the issuer community,” Washburn said. “So that’s a positive development.”
Washburn noted that governments prepare various reports for internal management that are given to city councils and other officials, which could be provided to investors. That would then provide good information on how a community is managing during the fiscal year, Washburn said.
“If there are things that the issuer community can provide during the disclosure period gap and is comfortable providing, that could be very helpful,” Washburn said. “It’s not all about the audit timeliness, it’s about having information about what’s going on at the credit level.”
The working group needs to discuss the definition of timeliness and what it means to local governments, said Sandy MacLennan, a partner at Squire Patton Boggs and National Association of Bond Lawyers past president. With the SEC and other secondary market stakeholders asking for more timely disclosure, it needs to be addressed, MacLennan said.
“If a local government produces an audit report as fast as it can, should somebody say it’s not timely?” MacLennan said.
The SEC’s Fixed Income Market Structure Advisory Committee is set to discuss the content and timeliness of municipal issuer disclosures at its meeting Monday.
