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By Jesse Westbrook
Dec. 7 (Bloomberg) -- U.S. regulators plan to improve transparency in the $2.66 trillion municipal bond market by requiring electronic disclosure of financial statements on a Web site that investors can access for free.
The Securities and Exchange Commission approved rules last week that make documents available in an online format to be overseen by the Municipal Securities Rulemaking Board, Martha Haines, head of municipal finance at the SEC, said in a Dec. 5 interview. The reports, to be unveiled tomorrow, will be available by July 1 in a system that resembles the SEC’s Edgar database for corporate filings.
“Currently, individual investors generally aren’t aware how to find this information and if they do find the source for it they discover they have to pay a fee for each document,” Haines said. “We hope this will boost investor confidence in the municipal securities market.”
The rules won’t require additional disclosures because Congress in the 1970s exempted state and local governments from having to release the same types of financial information that corporations must report. Still, the so-called electronic municipal market access system, or Emma, will be the first central database for the municipal bond market. Investors have had to seek information from repositories.
The Alexandria, Virginia-based rulemaking board started Emma in March in a test phase, providing official statements and other information on new debt issues. In 1995, the SEC mandated that underwriters of municipal bonds disclose financial information and so-called material events to investors.
Calls for more transparency follow the SEC’s sanctioning of the City of San Diego in 2007 for making inadequate disclosures to those who bought its debt. The collapse of the auction-rate securities market this year has fueled calls for reform.
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