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Bond Accountability Commission 2 Recommendations Page 31

Investor Relations Program The municipal securities market has changed substantially in recent years and continues to change rapidly.27 Issuers that seize the initiative to be competitive are the issuers most likely to be more successful in their securities sales. 28 Investor populations are changing due in part to changes in the tax treatment of municipal securities through authorizations for tax credit and taxable bonds.29 CMSD should be aware of and respond                                                             27

In response to new market conditions and changing bond products, new investors are coming into the market. See the discussion beginning at n. 60 and accompanying text. See also Seymour, “Muni Market Witnessing the Changing Face of Ownership—BAB Program Bringing in New Kinds of Bondholders” (Bond Buyer Online Dec. 11, 2009), stating that according to a Federal Reserve report— Foreign investors—one of the primary target audiences for the BAB program—owned $53.5 billion of municipal bonds at the end of the third quarter, a leap of more than a third since the BAB program launched. *** “This should help put to rest the question about whether or not BABs are being purchased by international institutions,” said Phil Fischer, head of municipal strategy at Bank of America Merrill Lynch. “They obviously are doing so at an accelerating rate. … The initial holders of BABs were primarily domestic, but over time we would expect that most of the BAB issuance would migrate to foreign institutions.” Another illustration of the shifting winds in public finance was a new line item in the Fed’s municipal securities table: exchange-traded funds. *** This is not to say the retail investor has vanished from the municipal market. Far from it: households remain the single largest category of muni bond holders. They owned $979.5 billion in municipals at the end of the third quarter, the most households have ever owned. *** The categories showing lower market share than a year ago are broker-dealers, government-sponsored enterprises, and commercial banks.


GFOA states in its Best Practice entitled “Maintaining an Investor Relations Program” that “The municipal marketplace is changing, and the need to provide additional information with greater frequency is significant.”


See “Financing Options under Federal Law” beginning at page 114 herein for a discussion of QSCBs, BABs and other new federally-subsidized forms of taxable or tax credit municipal securities.

BAC2 Recomendations Final 04062010