Retiring House Financial Services Chair: no FDTA ‘carveouts’ for issuers

A Congressman who sponsored the Financial Data Transparency Act unpopular among many municipal bond issuers said cities worried about meeting stricter federal data standards deserve no special exemptions from the looming law.

Rep. Patrick McHenry, R-N.C., made the remark at a conference hosted by nonprofit digital reporting consortium XBRL and KPMG LLP last month in Washington, D.C. The event focused on the FDTA, a law that cities, states and other tax-exempt bond issuers contend represents a costly and unnecessary burden for the municipal bond market. Enacted in December 2022, the FDTA requires that municipal securities disclosures be converted into a machine-readable format. 

McHenry panned the idea of exemptions for cities and states in response to a question from Marc Joffe, a Cato Institute policy analyst and FDTA proponent.

“There’s no interest like self-interest, but the importance here is for the [regulatory] agencies to have the best data possible with the fewest carveouts possible, and there’s no reason to justify that carveout,” McHenry said. “There’s no public policy or public good that would necessitate what they’re requesting.”

Joffe told The Bond Buyer his question was prompted by “negative comments” to the Securities and Exchange Commission from muni advocates like the Government Finance Officers Association and others.

The comments, which were filed as part of the formal public feedback process to the proposed rule, expressed issuers’ concerns that the FDTA represents regulatory overreach that will especially burden small issuers.

During his talk, McHenry cautioned that the turnover of presidential administrations and nine federal agencies in charge of crafting the rules “could potentially complicate [implementation] in a significant way.”

“The implementation is key, and now with the changeover of administrations, collaboration with the private sector, appropriate feedback and an appropriate handoff with agency heads is going to be vital,” he said. “Avoiding delays is going to be a very tricky thing.”

President-elect Donald Trump’s potential decisions for financial regulators is not yet clear, he added.

Turnover in Congress could present another uncertainty. Two of four lawmakers who led the FDTA legislation — McHenry and Rep. Carolyn Maloney, D-N.Y. — will not be part of the 119th Congress. But the law’s chief Senate sponsors, Sen. Mike Crapo, R-Idaho, and Sen. Mark Warner, D-Va., are “still in significant places in the Senate,” McHenry noted. Crapo will take the helm of the Senate Finance Committee next year.

House Financial Chair Committee Ranking Member Maxine Waters, D-Calif., “has had a keen interest here and there’s a keen interest among House Republicans and the new leadership that will come on in the Financial Services committee,” he said. “So I believe there will be continued interest at a high level on important committees to ensure that regulators hear the feedback from the Hill and that they take the best feedback that you all have provided to the agencies.”

Warner, who spoke at the conference via a pre-recorded video, said he plans to continue working with Crapo “to make sure we get the implementation right.”

The current timeline calls for final rulemaking to be released in December, although that may be pushed back as the Trump administration takes office. The SEC is expected to propose muni market-specific standards in 2026, followed by the Municipal Securities Rulemaking Board’s proposal and call for comments. By the end of 2026, the SEC is expected to issue its final rule for municipal market standards with the effective dates coming in 2027 or after.