Resolution Opposing Amendment or Repeal of the Tower Amendment
NOTE: This resolution has expired.
WHEREAS, The regulatory structure of the municipal market is unique. Underwriters, brokers and dealers in municipal securities are regulated by the Municipal Securities Rulemaking Board (MSRB); and
WHEREAS, Under a provision of the federal securities laws known as the “Tower Amendment,” the United States Securities and Exchange Commission (SEC) and the MSRB are prohibited from requiring state and local government issuers of municipal securities, either directly or indirectly through their underwriters, to file any document prior to the sale of securities; and
WHEREAS, The MSRB is prohibited from directly or indirectly requiring any document or information to be furnished by an issuer to prospective purchasers after the securities have been sold; and
WHEREAS, State and local government issuers of municipal services are subject to the antifraud provisions of the federal securities laws; and
WHEREAS, State and local government issuers are subject to state securities law pertaining to the issuance of municipal securities. Each state’s securities laws specify whether municipal securities issuers must disclose any information at all, and if so, what type of information must be provided; and
WHEREAS, The Tower Amendment recognized the constitutional prerogatives of state and local governments, and was crafted to balance those prerogatives with the perceived need for additional market regulation. The legislative history of the Amendment makes it clear that Congress sought to limit federal oversight of state and local municipal issuers. A Senate report on the legislation states that “nothing in the legislation contemplates direct regulation of issuers or the registration of their securities….” Further, the report states that the SEC’s rulemaking authority with respect to transactions in municipal securities is limited to control of fraudulent, manipulative, and deceptive practices; and
WHEREAS, The SEC has presented recommendations to Congress regarding federal oversight of municipal securities that would require the Tower Amendment to be altered or repealed; and
WHEREAS, Repeal or amendment of the Tower Amendment could result in the federal government dictating to issuers the timing, form, and content of official statements and annual financial reports; requiring federal review and approval of bond issues; dictating state and local accounting standards and practices; and preempting state oversight of the debt issuance process; and
WHEREAS, Repeal or amendment of the Tower Amendment could lead to substantial increases in the issuance costs for state and local governments.
NOW, THEREFORE BE IT RESOLVED, that The Council of State Governments opposes preemption of state and local finance authority and state oversight of the debt issuance process through revision or repeal of the Tower Amendment or enactment of legislation to subject state and local government issuers to federal disclosure laws.
BE IT FURTHER RESOLVED, that The Council of State Governments supports the self-regulatory structure of the municipal market, and the commitment of all issuers of municipal securities with federal and state laws and Securities and Exchange Commission rules.
Adopted this 31st Day of May, 2008 at the CSG 75th Anniversary Celebration and Spring Meeting in Lexington, Kentucky.