SEC votes to approve rule change for enhanced municipals disclosure

By Jennifer Chiou

New York, May 26 - The Securities and Exchange Commission announced the unanimous decision to approve the requested rule change from Municipal Securities Rulemaking Board to expand the information it collects and distributes on municipal auction-rate securities and variable-rate demand obligations.

The changes are meant to approve the quality and timeliness of municipals securities disclosure, a news release stated.

The compliance date of the new rules is Dec. 1, 2010.

"These rule changes will enable investors to make more knowledgeable decisions about municipal securities by requiring more timely and relevant information on an ongoing basis," SEC chairman Mary L. Schapiro said in the release.

"Although I believe that the SEC's regulatory authority over the municipal securities market should be expanded in order to better protect investors and issuers alike, these measures represent an important improvement within our present statutory authority."

The MSRB said in a March 10 notice that it filed the proposed rule change.

The specific list of auction-rate securities bidding information that has to be reported includes:

• The interest rate(s) and total par amount(s) of orders to sell at a specific interest rate and the total par amount of those orders that were executed;

• The total par amount of orders to sell at any interest rate and the total par amount of those orders that were executed;

• The interest rate(s) and total par amount(s) of orders to hold at a specific interest rate and the total par amount of those orders that were successfully held;

• The interest rate(s) and total par amount(s) of orders to buy and the total par amount of those orders that were executed;

• The interest rate(s), total par amount(s) and type of order - either buy, sell or hold - by a dealer for its own account and the total par amounts of those orders, by type, that were executed; and

• The interest rate(s), total par amount(s) and type of order - either buy, sell or hold - by an issuer or conduit borrower for that auction-rate security and the total par amounts of those orders, by type, that were executed.

The additional VRDO information that has to be reported by a remarketing agent includes:

• The effective date that the interest rate reset is applicable;

• The identity of the tender agent;

• The identity of the liquidity provider(s), including a indication of those VRDOs for which an issuer provides "self liquidity" and the identity of the party providing that self liquidity;

• The information available to the VRDO remarketing agent as of the time of the interest rate reset of the par amount of the VRDO, if any, held as a bank bond; and

• The information available to the VRDO remarketing agent as of the time of the interest rate reset of the total par amount of the VRDO, if any, held by parties other than a liquidity provider, which includes the par amounts held by a VRDO remarketing agent and by investors.

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