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                Municipal Bond Risks:
                Lack of Disclosure May Affect Liquidity

                Concerns about the municipal market have continued to increase since the turbulence of 2008, with the market currently focusing on the availability and quality of the public disclosures available to investors. Investors need up-to-date information publicly available to be able to evaluate specific municipal bonds. As a result, the Municipal Securities Rulemaking Board created the Electronic Municipal Market Access (EMMA) system (www.emma.msrb.org), which the public may access.

                Many municipal issuers and obligors maintain their current public information on EMMA; however, some are falling behind.

                Regarding this lack of disclosure, there are three specific areas of concern for the market:

                1. Issues without an associated original issuance disclosure document (generally called an “official statement”);
                2. Issues without current financial information (the most recent annual financial statements are more than one year old); and
                3. Issues with late material event filings.

                In light of market turbulence due to continued economic pressures on municipalities, some dealers in the municipal market have begun to consider these deficiencies to be serious, and may no longer offer to purchase (or allow their customers to purchase) municipal bonds where the issuer or obligor has these deficiencies. For the small group of deficient issuers and obligors, this may result in a decrease in a holder’s ability to sell the related municipal bond.

                Prior to making municipal bond purchases, it is important to review official statements, continuing disclosure and material event information with your Financial Advisor. Now is also a good time to review your current municipal bond holdings and consider reducing positions of the issuers and obligors that are delinquent in their public disclosure obligations, especially if you may have a relatively short need for liquidity.

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