NFMA’s Annual Conference Prompts Plenty of Questions, But Few Answers

June 4, 2018

BondLink was thrilled to be in attendance at NFMA’s 35th Annual Conference, and was blown away by the quality of the speakers and panels.

Given our mission of driving improved disclosure in the muni market, the Municipal Industry Roundtable was something we were particularly excited about. Unfortunately, we came away slightly downtrodden as clear answers from this esteemed panel on disclosure, materiality and investor outreach were simply elusive.

Moderated by NFMA Chair Mary Francoeur, the panelists made numerous attempts to answer attendee questions about materiality and selective disclosure, but instead they left the crowd more confused than before. GFOA representative Jonas Biery said he didn’t believe, and suggested there is no evidence, that better disclosure leads to better pricing – or whether issuers should even need to do more than the bare minimum to comply. His contention was that disclosure is expensive, and every dollar spent on disclosure is a dollar not spent on infrastructure, public safety or other governmental priorities. But if we’ve learned anything since BondLink was launched, it’s that Issuers who truly care about disclosure and their investors realize that the ROI for proper disclosure and investor outreach is worth every penny.

MSRB Executive Director Lynette Kelly explained that it’s her organization’s responsibility to investors, as the sole repository and source of all municipal disclosures, to make its sites usable. She discussed all of the changes they have made to EMMA and how voluntary disclosure is slowly rising, though she didn’t touch on what specifically was being voluntarily disclosed.

A survey during the conference showed that nearly 60 percent of responders felt that recent upgrades to EMMA did little or nothing to make it better. MSRB wishes they had more money to spend on developing EMMA but they didn’t, she said. In my opinion, the information provided to EMMA by issuers is vital to an efficient municipal marketplace, but it is the bare minimum and they should not spend time or money developing tools that investors don’t want or need. Let the market develop the tools.

With BondLink now on my NFMA name badge, I was absolutely tickled when Kelly acknowledged that some issuers are using outside services to make sure they have better disclosure and investor communications.

Dee Wisor, a partner at Butler Snow who was representing the NABL, tried to define selective disclosure by issuers and the best way to avoid it. He was unable, however, to provide a clear path. He did mention that NABL is currently working on a white paper on investor communication that will update their 2000 report. Kelly used Puerto Rico, Chicago and Philadelphia investor meetings as examples of selective disclosure but also did not provide guidelines on whether investors should avoid these types of meetings. She did say that the market should follow “best practices.”

Rebecca Olsen, Director of the SEC Office on Municipal Securities, provided great examples of how the SEC regulates disclosure of corporations via Reg-FD. She also explained that the SEC does not regulate munis and that there are simply too many different types of municipal issuers, which is why a one-size-fits-all approach probably won’t work. She noted that the SEC’s proposal to change 15c2-12 (disclosure rule) to be more robust.

This is annually one of the most-anticipated panels of the conference, and this year certainly lived up to the billing – based on the interest and involvement of the attendees. It was unfortunate though that none of the panelists could actually give clear guidance on the definition of “materiality.” Even after 30 years in munis as both a trader and analyst, I keep asking: Why do municipal investors continue accept these answers?

Still, I think that if the ultimate goal is a better and more efficient municipal bond market, then discussion will be the path get there. Perhaps more than any event I get to attend, NFMA is a paradigm of participation. We’re all committed to this industry and continually seeking out ways to make it better.

I’m looking forward to participating in our next Advance Seminar on ESG and Impact Investing.

Buy-Side Investor

BondLink Perspective - Former Muni Buy-Side Investor