Third, FINRA and the MSRB should consider developing a disclosure standard that would not limit the time period for reference transactions to the same day as the transaction being executed for the customer. Each of these proposals presents hard questions, but given the significant challenges facing the municipal securities market, the Commission cannot stand idly by.
For example, a primary gauge of liquidity is the frequency with which securities trade. Andrew Ang and Richard C. For example, last year the MSRB implemented municipal advisor supervision and compliance requirements. Andrew Ang and Richard C. In fact, by one estimate, only 38 states require local governmental entities to comply with GAAP in preparing financial reports.
Prior to the crisis, the availability of credit enhancements such as municipal bond insurance allowed investors, in many instances, to discount liquidity and default risks in pricing municipal bonds. Dealers have traditionally served as the principal source of liquidity in the municipal securities market, but that is now changing.
The legal opinion cites the appropriate laws.
The authority to borrow, demonstrating that it is legal for this entity to borrow money via municipal bonds under state and federal laws. General Obligation Bond Underwriting Process Notification of Potential Bidders The issuer publishes an ad in the Bond Buyer the principal source of information in the municipal bond primary market The ad is known as a notice of sale.
This potential risk makes it all the more important that long-standing problems in the municipal securities market be addressed without delay. If you make a change to a signed contract, it needs to be documented.
Each of these bonds trades as a separate security. How to Make the Municipal Securities Market Fairer, More Transparent, More Liquid, and More Efficient Although the regulatory regime for municipal securities markets has witnessed some improvements in recent years, more work needs to be done.
I also believe the Commission staff can devise ways to ensure that unrealistic bids are not published as the best bid when there is little demand for a particular security. Generally speaking, anyone can draft a simple addendum without legal counsel. Municipal securities provide financing to build and maintain schools, hospitals, and utilities, as well as the roads and other basic infrastructure that enable our economy to flourish.
Each of these bonds trades as a separate security. For example, these recommendations could lead dealers to refrain from using ATSs, which could potentially impair liquidity.
Alternatively, Congress could leave these exemptions in place, but give the Commission broad authority to establish improved disclosure practices in the municipal securities market.
The cumulative effect of these structural changes in the municipal securities market remains to be seen.
These actions have not been limited to smaller issuers, but have included state governments that are frequent participants in the municipal securities markets, as well.
To date, the Commission has not implemented these changes, which include the following: Unfortunately, despite its size and importance, the municipal securities market has been subjected to a far lesser degree of regulation and transparency than other segments of the U.
Also known as Western — once the syndicate member has sold the bonds for which it accepted a liability, there is no further liability for any unsold bonds. The proceeds of sales from these orders are placed in the syndicate bank account and distributed to members of the syndicate according to their participation upon completion of the underwriting.
The MSRB should also promptly seek Commission approval of its proposals to extend to municipal advisors its rules governing pay-to-play practices.
In addition, varying approaches to disclosure have developed over the years. Other members of the Commission have gone further, and have called for the development of electronic exchanges for municipal securities, much like the exchanges that currently exist for equities.
Interest rates are widely expected to rise this year, and this has led many industry participants to warn that investors who have built up sizeable positions in municipal securities may find the exit crowded when the year bull market in bonds finally comes to an end.
In fact, one study found that one-third of all municipal bonds trade only once after the initial distribution period, with the bulk of the remaining bonds trading only two or three times throughout their lifetimes.
There are several key areas where additional reforms are needed, if the municipal securities market is to become as transparent, liquid, efficient, and fair as possible. Warning The addendum becomes effective on the date the parties sign it.
These should contain a blank space for each party to sign his name and space below that where each party should print his name and business title, for example "Head of Human Resources.
Such systems, if required to publish their best bids and offers, could also help improve price transparency and liquidity.The amendment proposed to amend the constitution. The amendment proposed that the city of Jackson be permitted to issue bonds with an aggregate amount not exceeding $, for the purpose of purchasing, constructing, enlarging or improving water works, including pipe lines and pump stations.
Congress in added the amendment, which was sponsored by the late Sen. John Tower, a Texas Republican, to the Securities Exchange Act of As a result, the commission places disclosure requirements and burdens on the underwriters of municipal bonds, rather than issuers.
A revenue bond is a type of municipal bond, distinct from general obligation bonds, that is supported by (and is generally used to finance) a specific public works project, such as a toll bridge, school system project or public infrastructure facility.
The amendment barred the “MSRB from requiring any issuer of municipal securities, either directly or indirectly, to make any filings with the Commission or the MSRB prior to the sale of securities,” Walter said in her speech.
In the court of law, oral agreements are extremely difficult to prove and rarely enforceable. Once signed, a written contract is binding.
If you make a change to a signed contract, it needs to be documented. This change is referred to as an amendment.
It only takes a few minutes to write an amendment. WASHINGTON — The Securities and Exchange Commission has released a final set of more narrowly tailored amendments to its Rule 15c, which will create new disclosure obligations for issuers who incur debt outside of the municipal bond market.Download