The U.S. Securities and Exchange Commission issued a 150-page report (pdf) yesterday that included several recommendations on how to improve the $3.7 trillion municipal securities market.
The municipal market is a foundational market for several public and private entities, especially hospitals and health systems, to issue bonds and loans. The SEC is looking to improve the market's structure and enhance the disclosures provided to investors, who are the main purchasers of municipal securities. Individual investors hold as much as 75 percent of outstanding municipal securities.
However, the municipal market has not had as much regulation or scrutiny as other U.S. capital markets due to the broad tax exemptions associated with it.
Some of the SEC's recommendations include the following:
• Congress should authorize the SEC to set baseline disclosure standards and require municipal issuers to have audited financial statements.
• The Securities Act and Exchange Act exemptions for conduit borrowers who are not municipal entities should be eliminated.
• The IRS and SEC should be able to share information regarding returns and audits related to municipal bond offerings, especially in instances where securities fraud is suspected.
The municipal market is a foundational market for several public and private entities, especially hospitals and health systems, to issue bonds and loans. The SEC is looking to improve the market's structure and enhance the disclosures provided to investors, who are the main purchasers of municipal securities. Individual investors hold as much as 75 percent of outstanding municipal securities.
However, the municipal market has not had as much regulation or scrutiny as other U.S. capital markets due to the broad tax exemptions associated with it.
Some of the SEC's recommendations include the following:
• Congress should authorize the SEC to set baseline disclosure standards and require municipal issuers to have audited financial statements.
• The Securities Act and Exchange Act exemptions for conduit borrowers who are not municipal entities should be eliminated.
• The IRS and SEC should be able to share information regarding returns and audits related to municipal bond offerings, especially in instances where securities fraud is suspected.
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