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.