C ALIFORNIA
ISSUE BRIEF
D EBT AND
I NVESTMENT
A DVISORY
California Debt and Investment Advisory Commission
C OMMISSION
FEBRUARY 2002
ELECTRONIC DISCLOSURE
By facilitating rapid and widespread information dissemination, the Internet has had a
significant impact on capital-raising techniques and, more broadly, on the structure of the
securities industry. SEC Interpretation: Use of Electronic Media, April 28, 2000
Frank Moore
CDIAC Policy Research Unit
INTRODUCTION
Background
To the municipal issuer, disclosure should
be an important part of its investor relations
program. Fundamentally, it protects the
interests of the bondholder and the issuer.
In theory, if potential bond investors have
unfettered access to financial data, they will
have more information on which to base
their purchase decisions and will choose
investments appropriate for their portfolios.
The business reasons for the issuer to
disclose are many. Theoretically, the more
information readily available to the market,
the more efficiently bonds will be priced. At
a minimum, a poorly disclosing issuer’s
future bond issues may subsequently be
viewed as “risky” to potential buyers and
underwriters, leading ultimately to higher
costs to sell the bonds because of the
potential for “surprises.” Therefore, good
disclosure is crucial for municipal issuers.
Issuers of municipal securities are beginning
to use the Internet to provide disclosure
information about the entity and their
outstanding bonds, as well as new offerings
of their securities. The trend toward
increased availability of information through
the Internet has the promise to help to
promote
transparency,
liquidity,
and
efficiency in capital markets. At the same
time, this trend opens up new questions
regarding what, how, and when information
needs to be disseminated electronically.
Overview
This Issue Brief begins with a summary of
Securities and Exchange Commission (SEC)
disclosure requirements and discusses ways
the bond community util