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