2.13.  Municipal Bonds

Municipal bonds are issued by states, cities, and counties to raise money for their day-to-day operations. They are also issued by school districts, highway departments, and other public authorities to finance specific projects, such as public education, highway construction, football stadiums, and mass transit systems.

Municipal bonds are different from corporate and other government bonds because they are generally exempt from federal government oversight. They are exempt from registration, and issuers do not have to publish a prospectus, which is a detailed disclosure document required by most issuers of securities. Instead, they offer a less detailed disclosure document called an official statement. This document contains information about the bonds and the financial condition of the issuer, as well as a legal opinion verifying the municipality’s authority to issue the bonds. Firms that sell municipal securities are required to give their customers copies of the official statement by the confirmation of the transaction or a notice advising them how to obtain the official statement. Firms must also provide customers with a copy of the official statement upon request.

Underwriters of municipal bonds must provide the final official statement to the MSRB no later than one busines