A Little Help From Our Friends: Moving Beyond Enforcement to Improve State and Local Government Compliance with Federal Securities Laws

State and local government borrowing affects Americans’ daily lives. Most of this borrowing is in the form of bonds sold to investors. These bonds are used to finance schools, roads, airports, power transmission systems, hospitals, and other infrastructure that we use regularly. The U.S. Securities and Exchange Commission (the “SEC”) has an important role in protecting investors that buy and sell these bonds, including by ensuring that investors have accurate and complete information about the securities they are buying. The SEC is in a position to see what state and local governments are doing throughout the country, and its actions impact these governments nationwide. This article discusses several aspects of the internal policies and practices of state and local governments that have been identified by the SEC as leading to inadequate disclosure, how the SEC has responded to these factors, and whether there are better ways for the SEC, for states, or for other entities to address them in the future. The article concludes that although recent SEC enforcement of securities laws has caused state and local government issuers to make positive changes, there is little to be gained by additional aggressive enforcement. Instead, interpretive guidance from the SEC and support and guidance from state governments and others could more effectively guide issuers towards improved disclosure, and towards better debt management in general.