NEW YORK - Dozens of towns, school districts and other US municipal bond issuers have admitted they had failed to properly file financial information.
The public disclosures, made before a regulatory grace period expired on Monday, reveal minor bookkeeping errors or filings late by a few days, as well as serious breaches.
Issuers had until Monday to report disclosure violations to the Securities and Exchange Commission. An SEC spokeswoman declined to comment on how many had reported; however, a number of disclosures were filed with the Municipal Securities Rulemaking Board.
"From a legal point of view, they're going to the confessional and asking for forgiveness before it becomes a penalty," said Paul Mansour, head of municipal research at asset management firm Conning.
One financial industry source estimated at least 1,000 reports to the SEC and said that issuers large and small were expected to come forward. "It's all over the map (regarding what is being disclosed),"the source said.
Shelbyville, Indiana, a city of 19,000 people southeast of Indianapolis, notified bondholders on Nov. 26 that it failed to file some annual information on time for four years, from 2008 through 2011, affecting 11 different series of bonds sold by seven different local issuers.
A call to the mayor's office was directed to the city clerk, who did not reply to a message seeking comment.
The village of Great Neck, on New York's Long Island, revealed that it did not file its 2008 audited financial statements and operating data until Nov. 24 of this year.
The village also failed to file notice of a downgrade by Moody's Investors Service in 2010, and it "on occasion has failed to provide material event notices relating to bond insurance rating changes by Moody's... with respect to its insured serial bonds." Great Neck's mayor did not immediately return a request for comment.
For retail investors and smaller retail firms, increased disclosures are a good thing, said Mansour. Large institutional investors have greater resources to do due diligence.
"If we don't have the information, we'll try to get it, and if we don't get it, we won't buy the bonds," Mansour said.