MSRB Files Amendment to Proposal on Transparency of Variable Rate Securities

Date: July 9, 2010

Contact:             Jennifer A. Galloway, Chief Communications Officer
                         (703) 797-6600
                         jgalloway@msrb.org


MUNICIPAL SECURITIES RULEMAKING BOARD FILES AMENDMENT TO PROPOSAL ON
TRANSPARENCY OF VARIABLE RATE SECURITIES 

Alexandria, VA ­– The Municipal Securities Rulemaking Board (MSRB) today filed a proposal with the Securities and Exchange Commission (SEC) that amends an earlier filing to expand information that is publicly available about variable rate demand obligations and auction rate securities.  If approved, the MSRB would collect and disseminate on its Electronic Municipal Market Access (EMMA) website critical information about the current status of these securities and documents that provide descriptive information, including bank liquidity agreements for variable rate demand obligations and bidding information for auction rate securities.  The additional disclosures would allow more transparency for investors to evaluate critical information about the level of dealer support and underlying liquidity of the auction.

Under the amended proposal, the MSRB would collect from municipal securities dealers liquidity facility documents for variable rate demand obligations (VRDOs) such as Letters of Credit and Stand-by Purchase Agreements along with identifying information related to the tender agent for the securities and the bank or other provider of the liquidity facility available at the time of the interest rate. The proposed amendments would ensure the data collected by the MSRB includes the most recent updated information.

“We are moving forward with our plan to put this information into the hands of investors,” said MSRB Executive Director Lynnette Kelly Hotchkiss. “Making bidding information available for auction rate securities allows investors to better understand liquidity and depth of the market. Liquidity facility documents provide key information about the support available for variable rate securities. Together this data will provide unparalleled transparency to the municipal market.”

Dealers would also be required to report to EMMA in a consistent fashion, auction rate securities (ARS) bidding information – including data on whether an auction succeeds through market bids or through dealer support – as well as documents defining interest rate setting mechanisms and auction procedures.  All information provided by dealers would be made available on the EMMA website, which already provides free public access to interest rate information for VRDOs and ARS.

If approved, the MSRB will provide at least 60 days’ notice prior to the effective date.


The MSRB protects investors, state and local governments and other municipal entities, and the public interest by promoting a fair and efficient municipal securities market. The MSRB fulfills this mission by regulating the municipal securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB provides market transparency through its Electronic Municipal Market Access (EMMA®) website, the official repository for information on all municipal bonds. The MSRB also serves as an objective resource on the municipal market, conducts extensive education and outreach to market stakeholders, and provides market leadership on key issues. The MSRB is a Congressionally-chartered, self-regulatory organization governed by a 21-member board of directors that has a majority of public members, in addition to representatives of regulated entities. The MSRB is subject to oversight by the Securities and Exchange Commission.