Bloomberg News

SEC Seeks Improved Disclosure for Municipal-Bond Market

July 31, 2012

The U.S. Securities and Exchange Commission said it plans to seek power to force better disclosures from states and cities participating in the $3.7 trillion municipal-bond market.

In a report released today following a two-year review, the SEC said Congress should let it set standards for what information municipalities must disclose to investors and require issuers to have audited financial statements. It also recommends seeking better ways to ensure that borrowers comply with disclosure rules and eliminating exemptions for nongovernmental entities that tap the market.

“The municipal securities market is the bedrock for funding of local government projects throughout our country,” SEC Chairwoman Mary Schapiro said in a statement. “It is essential that the market work well and that investors have confidence in it.”

The municipal market has drawn heightened scrutiny as local governments have struggled with diminished tax collections and rising pension obligations in the aftermath of the longest recession since the 1930s.

Borrowers in the market, which finances public works as well as projects such as hospitals, real-estate developments and retirement homes, have long faced looser disclosure rules than those faced by corporations that raise money from investors. Governments aren’t required to file documents with regulators, as corporations do, and annual financial reports are frequently filed well after the year ends.

The SEC’s release marks the latest effort by regulators to overhaul the market, which was roiled during the 2008 credit- market crisis, when the unraveling of derivative-laden financings cost governments billions. An investigation by the Justice Department has also revealed how bankers rigged bidding on investment contracts sold to states and cities, boosting their profits at taxpayer expense.

To contact the reporters on this story: William Selway in Washington at wselway@bloomberg.net;

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net;


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