Turning the Magic Eight Ball: FDTA’s proposed joint rules tell muni industry to ask again later

The Financial Data Transparency Act of 2022 is changing the game for how financial information is collected and presented by federal agencies. The goal is to make this data more organized, easy to read, and readily available to the public. Specifically, the SEC is tasked with creating new data reporting standards for municipal securities issuers filing with the Municipal Securities Rulemaking Board (MSRB). This means that while the format of financial disclosures will change, there are no new disclosure requirements added by the Act. The focus is on presenting financial information in a structured, machine-readable format using the new data standards.

So, how will the FDTA be rolled out? It will happen in two stages. First, there will be joint rulemaking by the designated federal agencies, where they will establish uniform data standards for financial disclosures. This stage has already begun, with the SEC and other agencies proposing joint data standards for public comment, which ended on October 21. The final rules establishing these data standards are expected to be published collectively by the agencies in December. The second stage will involve agency-specific rulemaking by the SEC to adapt the uniform data standards to the municipal securities industry, with a current target date for the rules to become effective in 2027.

The Proposed Joint Rules provide a framework for data standards to collect financial information. Key points include the use of Legal Entity Identifiers (LEI) and other common identifiers like Unique Product Identifier (UPI), Classification of Financial Instruments (CFI) codes, and Financial Instrument Global Identifier (FIGI). The Proposed Joint Rules also address data transmission and schema and taxonomy format standards, without specifying specific formats but outlining required properties. Examples of acceptable formats include XML and JSON, with HTML and PDF formats acceptable under certain conditions. The rules also leave room for public comment on establishing accounting and reporting taxonomies.

Overall, the FDTA and the Proposed Joint Rules aim to make financial information more accessible and organized for everyone involved. Stay tuned for further developments as the new rules are implemented in the coming years.