Vanderbilt Law Review

First Page



Recent abuses occurring in the municipal bond markets have threatened investor confidence and caused Congress to reevaluate its original decision to exempt these securities from the Securities Act of 1933 and the Securities Exchange Act of 1934. This Note will analyze in some depth the securities regulation aspects of the municipal securities markets. First, because an understanding of the unique nature of municipal securities and their markets is essential, a description will be made of the characteristics of municipal bonds and municipal bond purchasers, the participants in the municipal securities industry, and the new issue and trading markets for municipal bonds. The discussion will emphasize the facets of the securities markets unique to the municipal sector. Next, the current method of regulating the municipal securities industry will be discussed. In this section, the system of municipal securities regulation will be distinguished from securities regulation in general, and an analysis of the pertinent legislative history will be undertaken. The widespread market abuses that have recently occurred will then be discussed in the context of the relevant case law, administrative proceedings and litigation releases. Throughout this section the role of the current regulatory framework in facilitating the abuses will be examined. Finally, after a discussion of the current legislative proposals for reform, some conclusions will be drawn about the optimal method of achieving the goals of securities regulation in the municipal securities industry.