Will Edgar Get a Muni Brother?

In the $2.5 trillion muni bond market, where states, localities and nonprofits sell debt to finance everything from sewers to spaceports, the Securities and Exchange Commission sets the rules for what the government issuers must disclose to investors. Generally, the standards are much lower than those for corporations because federal securities law gives the SEC less authority over state and local governments than over companies.

That may change. Following a handful of high-profile disclosure failures in the past decade or so, SEC Chairman Christopher Cox, without waiting for a new law from the U.S. Congress that would give the SEC more oversight over muni bonds, has instructed his staff to start drafting regulations to create a muni EDGAR system. EDGAR is not an overworked librarian, but rather the automated Electronic Data Gathering, Analysis and Retrieval system that collects, indexes, validates and forwards the disclosure submissions of companies that issue bonds. State and local issuers are concerned about federal interference and worried about the costs of meeting a new mandate.

While municipalities are resisting, there is support in the financial community for a centralized data system that would be accessible online and store offering documents and other information. Regulators and economists argue that more information leads to more efficient markets.