SEC Recommends Legislation to Improve Muni Securities Market

The SEC issued a report with recommendations to help improve the structure of the $3.7 trillion municipal securities market and enhance the disclosures provided to investors.( Download SEC.munireport073112[1] ) The recommendations address concerns raised by market participants and others in public field hearings and meetings as well as the public comment process during the agency’s review of the municipal securities market.

At the start of 2012, there were more than one million different municipal bonds outstanding totaling $3.7 trillion, with 75 percent held by individual “retail” investors.  Despite its size and importance, the municipal securities market has not been subject to the same level of regulation as other sectors of the U.S. capital markets due to broad exemptions under federal securities laws for municipal securities.

The SEC’s report discusses potential legislative changes that could help improve disclosures to investors. The SEC’s report discusses several disclosure issues including the timing and content of financial information, disclosures relating to pension and other post-employment benefit plans, derivatives use by issuers and obligated persons, and conflicts of interest including pay-to-play practices. The report also reviews the current structure of the municipal securities market and discusses potential initiatives to improve pre-trade and post-trade price transparency and support existing dealer pricing obligations.