The municipal bond market will face more scrutiny, and oversight will increase for credit analysts and municipal advisers under the financial overhaul bill that cleared Congress. The legislation, which cleared the Senate 60-39 after winning House approval on a 237-192 vote in late June, creates an office of municipal securities within the Securities and Exchange Commission and an SEC office of credit ratings. Under the legislation, the SEC will create new conflict-of-interest and disclosure rules for credit-rating agencies, and municipal advisers will be required to register with the SEC.
Richard Gundling, vice president of healthcare financial practices for the Healthcare Financial Management Association, said the new rules for credit ratings agencies could affect healthcare borrowers. “Obviously, the more transparency the better,” he said. New registration for municipal advisers may benefit healthcare borrowers, he said.
He also cited one provision that requires analysts to include in credit ratings information from a source independent of borrower
The legislation requires two studies of the municipal market by the Government Accountability Office. The GAO will compare disclosure in municipal and corporate markets; evaluate additional disclosure and make recommendations, including on whether to scrap or keep laws that limit SEC oversight of municipal issuers. The GAO will also make recommendations to improve the transparency, efficiency, fairness and liquidity of municipal markets.
“So many of our hospitals are in the municipal markets,” said Gundling. “Any changes in that market impacts hospitals.” The HFMA will monitor the study results and recommendations, Gundling said.
The bill calls for credit rating agencies to report on internal controls annually and requires the SEC to study and issue rules on conflicts of interest within the industry. Under the legislation, the GAO will conduct a study of alternative financing models for credit agencies.