MSRB Seeks Comment on Potential Rulemaking to Improve Transparency of Direct Purchases and Bank Loans

Date: March 28, 2016

Contact: Jennifer A. Galloway, Chief Communications Officer


Washington, DC – The Municipal Securities Rulemaking Board (MSRB) is seeking public comment on a potential approach to enhance investor and public access to information about the direct purchase and bank loan transactions of municipal securities issuers. In concept, the MSRB is considering whether to require municipal advisors to disclose information about the bank loans and direct purchases of their municipal entity clients to the MSRB’s Electronic Municipal Market Access (EMMA®) website.

Direct purchases and bank loan agreements may contain key terms that impair the rights of existing bondholders. For example, in some instances, these financings may have provisions that make creditors senior to bondholders or that provide creditors with more favorable remedies than bondholders in the event of default. Bondholders may not learn of the existence and amounts of these types of financings until the release of the issuer’s audited financial statements, and the key terms typically would not appear in such financial statements.

“The lack of transparency around the full picture of an issuer’s indebtedness has long concerned the MSRB,” said MSRB Executive Director Lynnette Kelly. “For a number of years, the MSRB has been encouraging state and local governments to voluntarily disclose bank loan financings and other similar obligations on EMMA, yet only a small number have done so. We are now considering whether rulemaking is necessary to ensure investors have the information they need with respect to these financings to make informed investment decisions.”

The MSRB’s concept proposal is intended to gather input on ways to improve the availability and timeliness of information about direct purchases and bank loan financings for the benefit of investors and the public generally. Specifically, the MSRB seeks comment on the benefits, costs and potential alternatives to requiring municipal advisors to disclose this information to the EMMA website.

Comments should be submitted no later than May 27, 2016.

Read more about the MSRB’s advocacy of greater disclosure of bank loans and other debt-like obligations of municipal securities issuers

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 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 overseen by the Securities and Exchange Commission and Congress.