July 2, 2010
Fitch Launches Website For All Things BAB
A Fitch Ratings website aims to create a "one-stop shop" for investors unfamiliar with the municipal market in general and Build America Bonds in particular. The complementary site, fitchratings.com/BABs, already has about 500 pieces of research, including credit reports, specific-sector studies, and info comparing U.S. states with sovereign debt.
"We're providing comprehensive information on a sector-by-sector basis, in addition to over-arching commentaries in BABs," said Dan Champeau, Fitch group head of business development for U.S. public finance.
BABs are now a $116.6 billion market, according to Bloomberg LP.
The key incentive for issuers is that the federal government pays 35% of the interest cost, allowing municipalities to issue taxable debt with yields that are attractive to a much broader class of investors. The traditional municipal market was and remains more limited to domestic investors and wealthy individual investors aiming to earn interest income that on most muni debt is exempt from state and federal income taxes.
Supremes Uphold Sarbox In Free Enterprise Case
The Supreme Court ruled Monday to uphold the tenets of the Public Company Accounting Oversight Board (PCAOB) and Sarbanes-Oxley rule in the Sarbanes Oxley Act of 2002 (SOX), Free Enterprise Fund v. Public Company Accounting Oversight Board. However, the Free Enterprise Fund and others could stage a shareholder campaign to remove board members, the high court said.
Commenting on the case, Cindy Fornelli, executive director of The Center for Audit Quality and former deputy director of the Division of Investment Management of the U.S. Securities and Exchange Commission told MME: "CAQ is pleased that the U.S. Supreme Court's decision will allow the continued operation of the PCAOB. This narrow decision clearly severs the PCAOB board member-removal process from the rest of SOX and reaffirms all provisions of the law except for the power to remove the board members."
From the perspective of the fund management industry, Fornelli said, "This should further instill confidence in the market, for investors and the capital markets" and the Supreme Court's upholding of Sarbanes-Oxley is a positive development since "investors value SOX and PCAOB's oversight function."
Arguing the case for the Free Enterprise Fund, an anti-big government and taxes '40 Act fund, were Sam Kazman and Hans Bader, attorneys with the Competitive Enterprise Institute. CEI argues that the way in which PCAOB board members are appointed violates the appointments clause of the U.S. Constitution.
Funds Nearly All Clear on Fin'l Reform Regulation
While some financial companies worry about the ramifications of the sweeping financial reform that is set to pass, asset managers appear safe, according to Keefe Bruyette & Woods.
KBW said it doesn't expect many changes for asset managers, although its report said that the 2,000-page bill could carry some unpredictable results.
Quote of the Week
“Since 2008, investors have lost $600 billion in bank products. Meanwhile,
financial companies have put in $6 billion to support money market funds’
$1 NAV, and investors have made $1 trillion more from MMFs than at the bank.”
— Robert L. Reynolds