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Enough Transparency in the Municipal Bond Market?

The municipal bond market, already under a dark cloud due to rising risk levels, apparently has a pattern of lax financial reporting practices that could further elevate concerns about the market.

A new study from DPC Data Inc. found that bond-issuing municipalities in general are delaying or ignoring their annual financial disclosure reporting requirements.

In a sample analysis of 17,056 muni bonds, DPC found that 40% failed to meet self-reporting of financial disclosure requirements in 2009, the most recent fiscal year studied.

That is up from 36% in 2008 and 33% during the period from 2005 through 2007.

Of those municipalities that are submitting financial reports to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system, many are filing more than 180 days late.

In fact, nearly three quarters of the studied bond offers either did not file required financial statements or filed so late that they were useless for credit analysis, according to DPC chief executive Peter Schmitt.