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(The news featured
below is a selection from the news covered in Federal Securities Law Reporter,
which is distributed to subscribers of Federal
Securities Law Reporter.)
Cox Seeks Accounting, Disclosure Improvements for Municipal Securities
Chairman Christopher Cox delivered an SEC staff white paper
to Congress that calls for improvements in accounting and disclosure in the
municipal securities market. The white paper underscores the Chairman's belief
that investors in municipal securities deserve the level of timely, high-quality
disclosure and protection enjoyed by investors in other areas of the U.S.
capital markets. "I hope this staff analysis will contribute to the
Congress's ongoing examination of the needs of the municipal securities market
and investors in those markets," said Chairman Cox.
The white paper discusses the size and importance of the
municipal securities market, the significant ways in which it has changed over
time, recent enforcement actions, and areas of possible legislative reform.
Chairman Cox delivered the white paper to the leaders of the SEC's authorizing
committees, Sens. Christopher Dodd and Richard Shelby and Reps. Barney Frank and
Spencer Bachus.
According to the SEC, there now are more than $2.4 trillion
of municipal securities outstanding, and annual trading now tops $6 trillion.
Individual investors own as much as two-thirds of these securities directly or
indirectly through money market funds, mutual funds, and closed end funds.
Recent Commission enforcement actions have raised concerns about the need for
disclosure and accounting practices to be substantially improved in this sizable
market affecting millions of individual investors, stated the Commission paper.
The white paper states that the model of full registration, Commission review,
and other regulation applicable to non-municipal issuers is not necessary or
appropriate for state and local governments. Instead, the white paper proposes a
limited regulatory regime designed expressly for the needs of the municipal
securities market. Possible steps include 1) requiring that offering documents
and periodic reports provided to investors contain information similar to what
is required for all other securities offerings, 2) making information on
municipal securities available on a more timely basis, such as through the
Internet, to provide an easily accessible, free source for the display of that
information, similar to the SEC's interactive data systems for corporations and
mutual funds, 3) mandating municipal issuer use of generally accepted
governmental accounting standards, 4) providing for an independent funding
mechanism and SEC oversight of the independent accounting standards board in
this area, the Government Accounting Standards Board, 5) ensuring that private
companies who access the municipal market indirectly by using municipal issuers
as conduits meet the same requirements that corporate issuers must meet, 6)
requiring large, complex, and frequent issuers of municipal securities to have
policies and procedures for disclosure and 7) clarifying the legal
responsibilities of issuer officials, underwriters, bond counsels and other
participants.
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