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HomeMy WebLinkAboutR-1994-089 Securities and Exchange CommissionRESOLUTION NO. R-94- 89 A RESOLUTION of the City of Yakima, Washington commenting on proposed Securities and Exchange Commission (SEC) Rule 15c2-12. WHEREAS, the City of Yakima, Washington, is a small (population 58,000), fiscally sound city in the State of Washington, and WHEREAS, The Securities and Exchange Commission (SEC) has proposed amendments to its Rule 15c2-12, and WHEREAS, the City of Yakima wishes to express its appreciation to the SEC for proposing its changes to Rule 15c2-12 in a format that encourages public comment, and further, wishes to comment on those changes, and WHEREAS, the City of Yakima favors the clear disclosure of information relative to the condition of any bond issue but strongly recommends that such disclosure be voluntary, and WHEREAS, if compulsory disclosure is necessary, disclosure should be tailored to municipal issues, and the types of proposed municipal offerings contemplated in these rules. High risk offerings, such as conduit financing and other sophisticated vehicles clearly require exceptional disclosure; however, all municipal offerings should not be penalized, and WHEREAS, the requirement for secondary market disclosure information not required at the time the securities were issued creates another unfunded Federal mandate, and WHEREAS, the City of Yakima wishes to formally protest the requirements as set forth in 15c2-12 and the accompanying interpretive release. ID -15 JH.18 1 -- June 30, 1994 NOW, THEREFORE, be itresolved by the City Council of the City of Yakima that the Director of Finance and Budget is hereby authorized and directed to formally comment on the negative impact on the City of the requirements of proposed SEC Rule 15c2-12 and the interpretive release. ADOPTED BY THE CITY COUNCIL this 5th day of 1994. ATTEST: DEPUTY CITY CLERK 7D-15 JIH.18 2 -- June 30. 1994 MAYOR DAME! .b GRIMM State Treasurer 10: FROM: Daniel K Grimm, State 'Treasurer RE: State of Washington Office of the Treasurer MEMORANDUM June 22, 1994 Public Fund Treasurers and Finance Officers ANN DALEY Ascivant Treasurer Proposed Securities and Exchange Commission Disclosure Rules — Notice of Hearing The federal Securities and Exchange Commission (the "SEC") has proposed amendments (the "Proposed Rules") to Rule 15c2-12 under the Securities Exchange Act of 1934. The Proposed Rules would make it unlawful to act as an underwriter of municipal bonds without having reasonably determined that the issuer or its designated agent has entered into a written agreement for the benefit of bondholders to provide continuing disclosure to the secondary market. The Proposed Rules would also require brokers and dealers of municipal bonds to review the information that the issuer has committed to provide before recommending a secondary market trade of the issuer's bonds. If adopted, the Proposed Rules will have the effect of requiring most issuers of municipal bonds to provide continuing disclosure to the municipal secondary markets by filing the follow- ing with a nationally recognized municipal securities information repository ("NRMSIR"): • At least annually, audited financial statements and "pertinent operating information" concerning itselfrald any entity who is the source of at least 20 percent or more of the cash flow servicing the debt service on the bonds (a 'significant obligor"); and, • • Timely, as necessary, other information pertaining to "material events" affecting the issuer and any significant obligor. Only certain infrequent issuers and/or issuers of small bond issues would be exempted from the effects of the Proposed Rules. Municipal issuers, underwriters, financial advisors and bond counsel around the nation who have reviewed the Proposed Rules have.expressed the following concerns, among others: • Annual disclosure of audited financial statements will be burdensome and expensive for smaller issuers who obtain audits only every two years; W1emlo¢rtam Legislative Building. MS: 0200 • Olympia. Washington 95504-0200 • Telephone- 206) 753-7130 Public Fund Treasurers and Finance Officers Page 2 June 22, 1994 • Deadlines on financial disclosure will increase compliance costs even for issuers who already obtain annual audits; • Issuers may not have the ability to obtain financial and operating data and material event information regarding "significant obligors"; • Information regarding 'significant obligors' may not be 'material" to the secondary market for tax supported general obligation bonds; • There is insufficient guidance regarding the scope of the other "perti- nent operating information" to be disclosed annually; • Adoption of .the Proposed Rules will result in a two-tiered municipal market, with issuers whose bonds are subject to the Proposed Rules paying higher interest costs due to a market perception that they will be less easily transferred; • The new continuing disclosure requirements are a significant "unfunded mandate" upon the operations of state and local governments who al- ready make much of the same information public tinder the public records laws; and„ • The setup and operational costs of the NRMSIRs wiill be paid by under- writers who will pass those costs on to issuers in their underwriting spreads, increasing the costs of borrowing. The Proposed Rules were published for comment on March 17, 1994,, together with an accompanying SEC release interpreting the continuing disclosure responsibilities of municipal market participants under current federal law, and comments are due by July 15, 1994. A "Q & A" memorandum has been prepared by a State technical group which summarizes the Proposed Rules in greater detail and attempts to analyze some of their expected effects. Copies of the Proposed Rules and the 'Q & A' memorandum are available upon request. I intend to hold an informal hearing regarding the effects of the Proposed Rules on the issuance of municipal bonds in Washington State for the purpose of formulating a comprehen- sive set of comments on the Proposed Rules. The hearing will begin at 9:30 a.m. on Wednes- day, June 29, 1994, at Hearing Room A, John L. O'Brien House Office Building, Capital Campus, Olympia, Washington. Testimony on particular changes to the Proposed Rules designed to minimize the financial and administrative impact of the Proposed Rules on Wash- ington municipal bond issuers is specifically requested. Please RSVP to Vicki Cox (206) 586-4646 if you plan to attend. TK:jbk