On Tuesday, the Federal Deposit Insurance Agency board is set to vote on a notice of proposed rulemaking at an open meeting regarding the Financial Data Transparency Act. This act, signed into law on Dec. 23, 2022, mandates that municipal securities disclosures be converted into a machine-readable format. The FDIC, along with six other federal agencies and the Securities and Exchange Commission, will be involved in the joint rulemaking process to establish final guidelines for the act.
Since the enactment of the FDTA, there have been uncertainties surrounding how the conversion to machine-readable format will be executed. The lack of a clear sequence or calendar of agency votes has added to the complexity of the process. While the FDTA rules are anticipated to be in place by the end of 2024, delays are possible as the joint Notice for Comment, originally scheduled for release by June 28, is yet to be issued.
In response to the delays and uncertainties surrounding the implementation of the FDTA, a group of senior House and Senate lawmakers, including Rep. Patrick Henry, have urged the agencies and SEC to adhere to the schedule outlined by the act. The importance of finalizing the rulemakings in a timely manner has been emphasized, considering the bipartisan and bicameral support for the FDTA.
By the end of 2026, the Securities and Exchange Commission is expected to issue its final rule for municipal market standards, with effective dates likely to be set for 2027 or later. The significance of these standards in enhancing financial data transparency cannot be understated, and the agencies involved must work diligently to ensure a smooth transition to the new guidelines.
The implementation of the Financial Data Transparency Act presents various challenges and uncertainties for municipal issuers and regulatory agencies. It is imperative that all stakeholders involved in the rulemaking process work collaboratively to address these challenges and ensure a successful transition to the new data standards. The ultimate goal of the FDTA is to enhance transparency and accessibility of financial data in the municipal securities market, and it is essential that the rulemaking process reflects this objective in a timely and effective manner.