In a comment letter filed with the Securities and Exchange Commission, the Securities Industry and Financial Markets Association (SIFMA) expressed its support for the goal of increased transparency as outlined in recent changes proposed by the Municipal Securities Rulemaking Board (MSRB). The new measures would increase the amount of information currently collected and made transparent by the MSRB on municipal auction rate securities (ARS) and variable rate demand obligations (VRDOs). SIFMA also believes that disclosure documents should be available in one place, notably the MSRB’s Electronic Municipal Market Access (EMMA) dataport.
“As we have done in the past, SIFMA fully supports the MSRB’s initiatives to promote greater disclosure and increased transparency, and we believe EMMA is beneficial to achieving improved market efficiency, protecting investors and assisting market participants with their compliance obligations,” said Leslie Norwood, managing director and associate general counsel at SIFMA. “We are working to support the short-term markets not only with respect to disclosure but also in terms of working on standardized documents, and welcome proposals from the MSRB that will further benefit the municipal markets.”
While supportive of transparency, SIFMA does, however, have a few concerns with the MSRB’s proposal. SIFMA feels strongly that broker dealers are not the appropriate parties to provide the new disclosure information to EMMA, as they are not a party to the requested documents. Dealers are being asked to disclose information which may not be within their knowledge, and the requirements of the proposals will be extremely burdensome for them to fulfill. SIFMA further notes that the new rule proposals are particularly problematic for legacy transactions.
In addition, SIFMA suggests that requiring dealers to provide the current versions of the ARS and VRDO documents within five business day of receipt is a reasonable timeframe, as opposed to the one business day requirement proposed by the MSRB. SIFMA has also requested the SEC and MSRB conduct a cost/benefit analysis of the proposed requirements to gauge the potential impact on market efficiency and increased liability for broker-dealers.
The full comment letter is available at the following link: http://www.sifma.org/assets/0/232/234/124802/adfa305f-0c19-4d4a-a424-08151c6b7af0.pdf