Mandatory Disclosure for Municipal Securities: Issues in Implementation

The term "municipal securities" refers to the debt obligations of both states and local governments.Local governments include municipalities, counties, towns, school districts, and special districts.In 1986 there were 6516 new issues of long term bonds, consisting of 106 state issues and 5656 local government issues, with a total new issue volume of $136.98 billion.The Bond Buyer, Jan. 2, 1987, at 1; id. at 17.At the end of 1986, total municipal debt outstanding was $722.92 billion, of which individual investors owned 35.08%.The other major investors are: mutual funds (18.907o), commercial banks (29.207o), and insurance companies (12.5%).The Bond Buyer, Mar. 9, 1987, at 1; id. at 7.3. In March 1975, with $600 million in short-term notes due, New York City found itself unable to market any more of its securities to refund the notes.In an effort to avoid default and bankruptcy, the state legislature enacted a moratorium on the enforcement of $1.5 billion of the City's short term notes.The moratorium was held unconstitutional by the New York Court of Appeals in Flushing Nat.Bank v. Municipal Assistance Corp., 40 N.Y.2d 731, 739, 358 N.E2d 848, 852 (1976), but judicial remedies for the benefit of bondholders were denied in order to give the City and the State time to make other refunding arrangements.Payments ultimately were made on the notes.See Shalala & Bellamy, A State Saves a City: The New York Case, 1976 DUKE L.J. 1119, 1127-32 (describing the various funding mechanisms used to save the City from default).4. See infra notes 50-59 and accompanying text.