a corporation or other entity subject to the supervision of the insurance department or commissioner, bank commissioner or any other agency or officer performing like functions, of any state or territory of the United States or of the District of Columbia' immediately after 'or any renewal thereof the maturity of which is likewise limited.'" In the alternative, Section 2(e) of S.2969 could be amended to include the following language as a new subparagraph (d). "The provisions of Section (a) and (b) I appreciate the opportunity to express my views on this important legislation. Please feel free to contact me if you have any questions or if I may be of any assistance. Respectfully, John R Butter John R. Butler JRB: srl MUNICIPAL SECURITIES Rulemaking BOARD 20006 March 10, 1976 Senator Harrison A. Williams Chairman Subcommittee on Securities Committee on Banking, Housing and Urban Affairs United States Senate Washington, D.C. 20510 Dear Senator Williams: I am pleased to enclose herewith the position paper of the Municipal Securities Rulemaking Board on the disclosure issue, which reflects the Board's deliberations at its meeting of February 26-27, 1976 on S.2969. The paper covers three subjects the need for Federal legislation; suggestions of the Board relating to the development of disclosure guidelines; and suggestions relating to statutory provisions governing the responsibilities and liabilities of issuers, underwriters and others engaged in the distribution of municipal securities. We regard the prompt resolution of the issue of disclosure as critical to the protection of investors and the proper functioning of the municipal securities industry, and hope that our views will be useful to the Subcommittee in connection with its study of this matter. The Board will be glad to furnish to you, should you deem it appropriate, suggested statutory provisions illustrating the recommendations set forth in the enclosed paper, as well as a discussion of pertinent constitutional issues. Members of the Board and its staff will also make themselves available for any conferences or discussions with members of the Subcommittee and its staff, and will assist you in any other way we can. Sincerely yours, Tommill C. #taman Roswell C. Dikeman Chairman RCD: ker CC: Hon. Roderick M. Hills this appreciates and Urban Affairs Securities Fulemaking Board (the "Board") opportunity to present its views to tne Subcommittee un Securities of the Senate Committee on Banking, Housing and Urban Affairs concerning S. 2574 and S. 2969. The board's membership consists of five persons representing municipal securities brokers and dealers other than bank dealers, five persons representing bank dealers, and five persons who are public members, including two issuer representatives and one investor representative. A list of the Current business affiliations is attached to this statement as Appendix . Board 1embers and their Section 15B(d) of the Securities Exchange Act of 1934 (the "19:4 Act") precludes the Board from promulgating rules which would, directly or indirectly, require issuers of municipal securities to furnish information to investors concerning their securities. Nevertheless, because of the Board's composition as well as its central role in regulation of the municipal securities marketplace, the subject of disclosure in connection with the new issue of municipal securities and the related Subject of the respective participants in the process responsibilities and liabilities of - issuers, underwriters and others -- have been and continue to be of substantial concern to the Board. Investor confidence in the municipal securities Barkets and the fair and efficient functioning of those markets are principal goals of the Board's mandate under the Securities Acts Anendaents of 1975. Need for Federal Legislation The Foard concurs with the sponsors of S. 2574 and S. 2969 on the need for federal legislation concerning disclosure in connection with new issues of municipal securities. However, to resulve the current dislocations in the municipal securities markets, it is essential that such legislation address two fundamental issues: 1. What information 2. should issuers reasonably be required to Bake available tu prospective investors to enable then to make an investment decision concerning municipal securities? What re the respective responsibilities and liabilities of issuers, underwriters and others involved in the process of distributing municipal securities to the public with respect to the disclosure (or lack thereof) of such information? Subcommittee is aware, these questions have not received legislative or judicial answers, nor has the Securities and As the Exchange Commission (the "Commission") proposed administrative solutions to the uncertainties currently surrounding these issues. Information on which to base an investment decision often is unavailable With re spect to municipal securities. Indeed, substantial uncertainty exists concerning the nature and scope of such information and the appropriate form of its presentation. In order to bring their securities to market in recent months, many issuers of municipal securities have undergone protracted and negotiations with underwriters for increasingly costly comprehensive a nd possibly non-material items ot disclosure. Underwriters, for their part, are asked to assess their potential ilabilities without guidance as to what information ay or may not be material. The Eoa rd recognizes the constructive efforts of the Municipal Finance Cfficers Association to develop appropriate disclosure guidelines for new issues of municipal securities. Nevertheless, we believe that without national guidelines having the confusion presently in evidence in the will continue, at least for an undesirably official standing, municipal markets be able to raise extended period of time. If state and local governments are to funds at a reasonable cost through the privat e must establish the mechanism for defining the sector, Congress ье note the lack of recognized standards on disclosure, we also have grave concern about the deficien ci es in the present statutory framework witn respect to the liabilities of issuers, underwriters and responsibilities a nd others e nga ged in the distribution process. We think it clear |