The U.S. Securities and Exchange Commission wants investors to know more about bonds issued by cities, states and other entities.
In a 150-page report issued Tuesday the SEC recommended a host of legal, regulatory and industry changes that would shed more light on the $3.7-million market used to finance roads and schools as well as hospitals and private development projects.
Municipalities often fail to continue disclosing their financial conditions after issuing bonds to finance projects. The SEC report recommends asking Congress for the authority to enforce disclosure and require, for example, municipal issuers to provide audited financial statements.
The muni bond market has not been subject to the same securities regulations as the rest of U.S. capital markets. The SEC’s enforcement efforts in the muni market have therefore been limited, the report said.
“The municipal securities market is the bedrock for funding of local government projects throughout our country,” SEC Chairman Mary Schapiro said in a statement. “It is essential that the market work well and that investors have confidence in it.”
The report comes after a two-year review by the SEC that included public hearings held in San Francisco, Washington and Birmingham, Ala. The effort was headed by SEC Commissioner Elisse Walter.