Noting the timeliness of the SEC report on the municipal securities market, House Financial Services Chair Spencer Bachus (R-ALA), said that he plans to hold hearings on the report in the Fall. Chairman Bachus looks forward to examining the report's recommendations with SEC officials and market participants. Observing that the report calls for better disclosure standards in the municipal securities market, he said it is timely because of the challenging environment facing municipalities due to the state of the economy.
The SEC report suggested legislation for Congress to consider to provide the Commission with authority to establish improved disclosures and practices in the municipal securities market. The legislation would authorize the Commission to require that municipal issuers prepare and disseminate official statements and disclosure during the outstanding term of the securities, including timeframes, frequency for such dissemination and minimum disclosure requirements, including financial statements and other financial and operating information, and provide enforcement tools. The report also proposes legislation to amend the municipal securities exemptions in the 1933 and 1934 Acts to eliminate the availability of such exemptions to conduit borrowers who are not municipal entities under Section 3(a)(2) of the Securities Act.
The proposed legislation would also permit the Internal Revenue Service to share with the SEC information that it obtains from returns, audits, and examinations related to municipal securities offerings in appropriate instances and with the necessary associated safeguards, particularly in instances of suspected securities fraud. Section 6103 of the Code does not permit the IRS to disclose return information to the SEC and Commission staff in connection with civil enforcement of the securities laws.
The proposed legislation would also authorize the Commission to establish the form and content of financial statements for municipal issuers who issue municipal securities, including the authority to designate and oversee a private-sector body as the GAAP standard setter for municipal issuer financial statements.
Congress is also asked to authorize the Commission as it deems appropriate, to require municipal securities issuers to have their financial statements audited by an independent auditor or a state auditor. The legislation should also provide a safe harbor from private liability for forward-looking statements of repeat municipal issuers who are subject to and current in their ongoing disclosure obligations that satisfy certain conditions, including appropriate risk disclosure relating to such forward-looking statements, and if projections are provided disclosure of significant assumptions underlying such projections.