On June 27, 2024, Liz Sweeney of Nutshell Associates participated in a panel at FDTA Forum 2024: Defining Success. She shared her views on the impact of the Financial Data Transparency Act (FDTA) on government financial reporting the municipal securities market.
Panel participants included:
Liz Sweeney, President of Nutshell Associates, LLC
John Truzzolino, Director of Business Development at Donnelly Financial Solutions (DFIN)
Ashley Nelle-Davis, Chief of Staff, The Data Foundation
Liz shared the complexities of the municipal market with the audience. These complexities represent both challenges to implementing the FDTA and opportunities for increased market transparency and efficiency through the application of data standards to render information machine readable.
Key characteristics of the municipal securities market that are relevant to the implementation of FDTA include the very large number and variety of municipal bond issuers, estimated at about 40,000, how utilize a large variety of security structures. These include state and local governments, hospitals, charter schools, municipal utilities, higher education, museums, foundations, affordable housing, senior living, transportation enterprises and others. She also discussed the large variety of information submitted to the Municipal Securities Rulemaking Board (MSRB) that fall under the FDTA, including regulatory forms filed by broker-deals and municipal advisors; audited financial statements using several different accounting standards (GASB, FASB, cash, statutory); unaudited quarterly and annual financial information; budgets; operating and demand data; official statements (the municipal market equivalent of a prospectus); material event notices of 16 different types; and others.
Liz outlined her views of what a successful FDTA implementation would look like:
A prioritized rollout of the large volume of potential documents and submissions that could potentially be rendered machine readable under the FDTA, taking into account the difficulty and value-add of transforming each type of filing
Significant involvement of the user community, including municipal bond analysts, in identifying value-add of machine readability for each type of regulatory filing
Significant involvement of the user community in taxonomy development
Embedded data checks ("business rules") to improve the quality of data submitted
A robust suite of inexpensive, easy to use, and highly automated products to help issuers render filings machine readable, or the use of regulator tools to transform filings on issuer's behalf
Data products that leverage the availability of free machine readable data to provide inexpensive and comprehensive product offerings to municipal market participants, enabling faster, less expensive data analytics and a more efficient market
Improved regulatory oversight through the use of data analytics performed on standardized machine readable data
Comments