April 9, 1997

The Honorable Arthur Levitt, Jr.		Mr. Paul Maco
Chairman		Director
Securities and Exchange Commission		Office of Municipal Securities
450 Fifth St., N.W.		Securities and Exchange Commission
Mail Stop 6-1		450 Fifth St., N.W.
Washington, D.C. 20549		Mail Stop 10-1
		Washington, D.C. 20549

Dear Messrs. Levitt and Maco,

Members of the National Federation of Municipal Analysts, representing buyers, broker/dealers, rating agencies, insurers and other market participants, are the primary users of the financial and operating information provided by municipal issuers. As such, we have been actively involved in promoting improved disclosure of this involved in promoting improved disclosure of this information for more than a decade. We appreciate the opportunity we had to participate in the development of the of the amendments to SEC Rule 15c2-12 which took effect in 1995. We also value the continuing relationship we have with the Office of Municipal Securities, and the opportunity to work closely with the staff in dealing with disclosure-related issues as they arise in marketplace.

In general, we are finding that many issuers are providing adequate financial and operating information in accordance with Rule 15c2-12, and are exhibiting responsible market behavior. This is particularly true of larger, more frequent issuers. However, we are seeing a few trends develop which concern us, as they violate the spirit, if not the letter of the Rule.

First, we are seeing instances where issuers who had previously sent financial and other information directly to analysts are now telling them that the only information that will be provided is that which outlined in the official statement, and that it must be obtained from a NRMSIR (for a fee). To the best of our knowledge, this would make the municipal industry the only one where financial data relating to securities would not consistently be available directly from the issuer. When asked why they were making this change, some of these issuers have said that they are discontinuing sending out information on advice from their bond counsel or financial advisor, who cite potential insider trading concerns.

A related matter is that of issuers who are refusing to talk to analysts about the information that is provided to the market, again on the advice of bond counsel, and again using fear of insider trading as a reason.

The result is that in cases like these, analysts are receiving less information, are paying for it (eventually passing on this cost to the investor), and are not able to discuss it with the issuers. The adoption of the amendments to Rule 15c2-12 and the use of the NRMSIRs become a way for these issuers to provide a minimum amount of information to the market, and to avoid contact with analysts and investors altogether. Bond counsel, in recom-mending this behavior, becomes the determiner of what is provided and how to provide it.

Municipal issuers who are providing less information to analysts in the past are certainly a minority. However, we are seeing enough instances of an unwillingness to speak to analysts, and to provide data directly, to cause us concern. The actions of some bond counsel in advising their clients to reduce the amount of information they provide and their contact with analysts is troubling as well. It is not confined to any one sector, but we are seeing it most often with hospitals and below investment grade issuers. We are concerned that this practice, if it continues unchecked, could become more widespread.

The amendments to Rule 15c2-12 provide a good framework to provide a basic level of information to interested market participants. We are not advocating any changes to the Rule, but ask your help in encouraging all issuers to honor the goal of improved disclosure in the municipal market, and not to use the Rule as an excuse to provide less.

We look forward to our meeting on May 20th with the staff of the Office of Municipal Securities, when we can discuss these issues in more detail.

Sincerely,

Jeffrey M. Baker		Rafael Costas		Mary Metastasio
Chairman		Chairman		Chairman
National Federation of		Industry Practices and		Disclosure Committee
Municipal Analysts		Procedures Committee

We met with Paul Maco and Mark Zehner of the SEC’s Office of Municipal Securities, and representatives of the Division of Market Regulation on May 20. Chris Valtin of SMFS was also present. In this meeting, we discussed issues raised in the preceding letter. We shared examples of primary and secondary market disclosure practices which we felt violated the intentions of Rule 15c2-12, as well as examples which showed good disclosure practices. We also discussed ways we could work with other market participants to improve disclosure in general throughout the industry, working more closely with issuers, underwriters and attorneys. Our next step will be to work with issuer groups to educate them on our informational needs, as well as the impor-tance of maintaining open lines of communication with their bondholders.

Rafael CostasMary Metastasio