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Understanding the New Disclosure Regime: Using EMMA

Understanding the New Disclosure Regime: Using EMMA. NASACT Annual Conference – Dearborn, MI Lynnette Kelly Hotchkiss, Executive Director August 18, 2009. MSRB in a Nutshell. Self Regulatory Organization for broker-dealers and bank dealers in the municipal market

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Understanding the New Disclosure Regime: Using EMMA

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  1. Understanding the New Disclosure Regime:Using EMMA NASACT Annual Conference – Dearborn, MI Lynnette Kelly Hotchkiss, Executive Director August 18, 2009

  2. MSRB in a Nutshell Self Regulatory Organization for broker-dealers and bank dealers in the municipal market no rulemaking authority over issuers, intermediaries or other market participants no non-securities rulemaking authority (e.g., derivatives) MSRB coordinates with SEC, FINRA, bank regulators on enforcement Coordinating efforts with IRS, Treasury, others on market issues Congressionally mandated mission: protect investors and the public interest promote fair and efficient municipal bond market MSRB furthers mission through rulemaking, information services/systems, outreach andeducation and market leadership

  3. MSRB’s Recent Investor Protection and Fair Practice Initiatives auction rate securities – MSRB Notice 2008-09 (Feb 19, 2008) Focus on customer protection obligations – fair dealing, disclosure of material facts, suitability of recommendations bond insurer downgrades – MSRB Notice 2008-04 (Jan 22, 2008) Focus on customer protection obligations – fair dealing, disclosure of material facts, suitability of recommendations, fair pricing bank tying arrangements – MSRB Notice 2008-34 (Aug 14, 2008) Focus on promoting compliance with federal banking laws when structuring transactions with liquidity facilities political contributions – MSRB Notice 2008-38 (Sept 11, 2008) Reminder of applicability of political contribution rule when issuer officials run for federal office

  4. MSRB’s Recent Investor Protection and Fair Practice Initiatives Build America Bonds – MSRB Notice 2009-15 (April 24, 2009) Focus on customer protection obligations – fair dealing, disclosure of material facts, suitability of recommendations California IOUs – MSRB Notice 2009-41 (July 10, 2009) Focus on customer protection obligations – fair dealing, disclosure of material facts, suitability of recommendations, fair pricing VRDOs – MSRB Notice 2009-42 (July 14, 2009) Focus on customer protection obligations – fair dealing, disclosure of material facts, suitability of recommendations, fair pricing MSRB/FINRA Notice – MSRB Notice 2009-38 (June 30, 2009) Joint reminder on investing in municipal bonds in light of current market conditions

  5. MSRB’s Recent Transparency and Market Efficiency Initiatives NIIDS – New Issue Information Dissemination System MSRB requirements effective Sept 30, 2008 Dissemination of key new issue bond data to market through DTCC Assures rapid and consistent disclosure to the market Promotes efficient trade processing and reporting Currently analyzing NIIDs data Auction Rate and VRDO Transparency Collect and disseminate rate resets, related data and key documents for each ARS auction and VRDO remarketing Research and Market Statistics EMMA: Electronic Municipal Market Access System

  6. MSRB Recent Market Leadership Initiatives Resource to Congressional leaders Congressional Committees Individual Senators and Representatives Resource to other Federal and State regulators MSRB Statement for House Financial Services Committee Hearing on “Municipal Bond Turmoil: Impact on Cities, Towns, and States” on March 12, 2008 MSRB Statement for House Financial Services Committee Hearing on “Auction Rate Securities Market: A Review of Problems and Potential Resolutions,” on September 18, 2008 MSRB Testimony for Senate Banking Committee Hearing on “Enhancing Investor Protection and the Regulation of the Securities Markets,” on March 26, 2009

  7. MSRB Recent Market Leadership Initiatives MSRB Statement Regarding Regulation of the Municipal Market on January 9, 2009 Focus attention on unregulated municipal market participants Uses pay-to-play as an example MSRB Letter to Congress with Specific Recommendations on Regulating Financial Intermediaries on February 11, 2009 Focus on regulation of intermediaries Suggests Muni Czar or industry coordinating committee Calls for better coordination of federal and state enforcement activities Muni derivatives to be subject to same regulatory framework developed for other derivative markets Articulates role for market-specific SROs to complement anti-fraud authority of federal securities laws MSRB Report on Unregulated Market Intermediaries

  8. EMMA: Electronic Municipal Market Access (www.emma.msrb.org) Components of EMMA: official statements – current & historical from 1990 advance refunding documents – current & historical from 1990 trade prices – real-time & historical from 2005 market statistics SHORT – transparency for ARS and VRDOs municipal bond educational resources Continuing disclosures

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  27. Key Terms • MSRB Gateway: The secure access point for all MSRB applications, including the Continuing Disclosure Service of EMMA. Users register in MSRB Gateway. • EMMA Dataport: The location for submitting documents to the Continuing Disclosure Service of EMMA. • Primary Market Agent: An individual or organization that submits official statements and other disclosure documents, and indexing information on behalf of an underwriter of newly issued municipal securities. • Secondary Market Agent: An individual or organization that submits continuing disclosure documents and indexing information and on behalf of an existing issuer and/or obligated persons on existing municipal securities. • Registered User: A user that has an account with the MSRB. 32

  28. Key Terms • Registered Dealer Firm: A municipal securities dealer firm that has registered with the MSRB pursuant to MSRB Rule A-12. • Confirmed User: A Registered User whose identity has been verified by an appropriate party. Verification may be by another confirmed user or by the MSRB based on documentation submitted by the user seeking to be confirmed. (Any user associated with Registered Dealer is automatically Confirmed User). • Unconfirmed User: A Registered User in MSRB Gateway whose identity has not been confirmed by an appropriate party. 33

  29. Key Terms • Inviter: A Registered User that has extended an invitation via MSRB Gateway to a new user to submit continuing disclosure documents. • Invitee: An user who has received an invitation from an inviter to register with the MSRB to submit continuing disclosure documents. • Controlled CUSIPS: CUSIP numbers that Confirmed Users have identified as belonging to them and under their control, allowing issuers to restrict submission of continuing disclosure documents associated with securities. EMMA sends an e-mail to an issuer when any user makes a continuing disclosure submission against its controlled CUSIPs. 34

  30. Continuing Disclosure Registration • All new users to MSRB Gateway must register to make continuing disclosure submissions. • Municipal securities issuers, obligated persons and secondary agents must: • Create and account in MSRB Gateway • Select submission role(s) • Accept the terms and conditions for making continuing disclosure submissions.

  31. Continuing Disclosure Registration • Issuers DO NOT need to register if: • Continuing disclosure submissions are being handled by an existing designated agent • The issuer does not elect to control their securities and agent designations through EMMA.

  32. EMMA’s Control and Openness Features • An issuer has a choice regarding securities: • Can elect control over its securities (CUSIP-9s), in which case no disclosure agent can make a continuing disclosure submission involving those securities unless designated by the issuer as its agent; or • Can refrain from electing control, in which case a disclosure agent can make submissions without prior designation by the issuer.

  33. Steps in Making a Continuing Disclosure Submission • Register and log on • Specify type of disclosure • “Associate” issues or securities to the disclosure • Add contacts • Upload document file • Publish disclosure information • Save groups of issues/securities for re-use • Receive e-mail record of submission

  34. Select type of disclosure Click “Next” to proceed

  35. Click “Back” to return to previous screen

  36. Event Filing: Also Under Rule 15c-212 or as Additional/Voluntary Filing

  37. As soon as you enter a CUSIP-6, EMMA displays issuer name and its issues

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