Adequate disclosure in the municipal securities market remains a major issue for the National Federation of Municipal Analysts (NFMA), an organization of more than 1,000 securities professionals who evaluate credit and other risks related to debt issued by local governments. In 1998, NFMA released a general position paper on the municipal market's implementation of the Securities and Exchange Commission's 1994 Amendments to Rule 15c2-12, which focused on secondary market disclosure by municipal issuers.

In 1999, NFMA began its efforts to make the municipal market disclosure system work. Sector-specific subcommittees on disclosure were established, and, last May, position papers for the Hospital, Land Secured Finance, and Housing sectors - the "Recommended Best Practices in Disclosure" - were released for industry comment. The draft papers are available on the NFMA web site (www.nfma.org), and the revised texts will be posted this month.

Draft paper highlights include: * the observation that some issuers are treating the list of 11 disclosure items in the amendments as an information ceiling beyond which they do not need to disclose, even if undisclosed items would be material to an investor's decision; * the belief that the Nationally Recognized Municipal Securities Information Repositories are not working because of cost and timeliness flaws; * the fact that some local governments are not filing financial and operational information until nine months to a year after the fiscal year end (FYE), making it almost valueless to investors; and * the belief that issuers, including community-owned hospitals, are often less willing to speak to analysts than before the amendments.

The Hospital Paper recommends that hospitals, including community-owned facilities, go beyond the amendments' minimum information recommendation and provide annual and quarterly financial statements and management discussions. The paper strongly recommends that local governments designate an investor relations representative to answer questions about the facility's operations.

The Land Secured Finance Paper generated the majority of NFMA's industry comment. (Land Secured Finance is local, development-based finance.) The paper recommends that local governments track building permits, assessed valuations and tax collections on a project specific basis. The paper also suggests that local governments provide information to investors at least annually and within four months of the FYE. That information should be provided to the market prior to the city's audited financial statements if the audit will not be released within the four months.

Disclosure for local housing agencies is generally more comprehensive and timely than for other sectors examined to date. However, because of legal changes (such as the Universal Cap and the Ten Year Rule), information requests in that sector have changed. The Housing paper focuses on issues that could change the liquidity and pricing of housing bonds and provides agencies receiving requests from analysts with the rationale behind the requests and the preferred delivery format.

Three additional subcommittees have been established in Higher Education, Solid Waste and General Obligation. "Recommended Best Practices in Disclosure" papers are expected from each this year. All subcommittees include analysts, local and state government representatives, financial advisors, bond counsel, bankers and industry groups such as the Government Finance Officers Association.