BDA opposes “machine-readable” disclosure documents for muni issuers

In a column published in today’s Bond Buyer and in a group letter to congressional leaders, BDA opposed a proposal pending in Congress to require municipal issuers to file financial disclosure documents such as annual financial statements in “machine-readable” format. BDA said “implementation of a machine-readable standard for municipal disclosures would be full of problems” and would be “expensive and likely unsuccessful.” In our column we ask stakeholders to urge their senators “to abandon the machine readability provision applicable to municipal issuers.”

The machine-readable proposal is a provision of H.R. 7900, the National Defense Authorization Act. The proposal would effectively require the MSRB to establish formatting standards for issuer disclosure documents. Disclosures would have to be readable by software. This would involve developing a “taxonomy,” a collection of data tags and definitions that would correspond to data items commonly found in issuer disclosure documents. Presumably, the system the MSRB developed would be compliant with eXtensible Markup Language (XML), the general standard for machine-readable documents on the Internet.

In our letter—signed by BDA and seven other municipal advocacy organizations—and column we argue that the proposal would raise serious compliance issues for unsophisticated issuers, would be expensive to implement, would be unnecessary due to advancements in machine-learning technology, and would primarily benefit data and technology vendors, not market participants. We also argue that the MSRB is the wrong organization for this role. With the MSRB as the standards-setter for machine-readable municipal disclosures, the cost of this initiative would be borne almost entirely by dealers.

H.R. 7900 was passed by the House of Representatives in July. Senate leaders have said they intend to take up the bill after the November elections.

BDA’s Bond Buyer column is available here. Our group letter to Congress is available here. We will continue to keep you apprised of developments on this issue. Please call or write if you have any questions.

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