Proposed rules would be cumbersome and costly with little benefit to municipal investors, the letter said.
Hospitals and health systems that issue tax-exempt bonds may be subject to the rules, which define asset-backed securities more broadly than prior regulation, says Leslie Norwood, co-head of municipal securities for the Securities Industry and Financial Markets Association.
The proposed rules are a result of the effort to overhaul financial regulation under what is widely known as the Dodd-Frank Act. Regulators must adopt the rules by mid-January.
Municipal bonds aren't the same as asset-backed securities and Congress did not intend them to be treated the same, said the municipal and finance groups. Meanwhile, proposed rules would partially repeal an existing law that limits SEC oversight of municipal bonds and would jump ahead of a municipal market study by the Government Accountability Office, also included in the Dodd-Frank Act. Meanwhile, the SEC began a series of hearings on the municipal market in September. With inquiries into the municipal market under way, the SEC should wait for results, the groups argue.
Investors also rejected the proposed plan. The Investment Company Institute urged regulators to wait for results of SEC and GAO reviews of the market in a letter to the SEC. “We are concerned that a piecemeal approach to municipal securities disclosure would have the unintended effect of creating confusion for investors and issuers alike because different classes of municipal securities would be subject to different disclosure requirement,” the trade group said in a letter.