The Financial Data Transparency Act (FDTA) signed into law on Dec. 23, 2022, has brought about significant implications for the municipal securities market. With the requirement for converting municipal securities disclosures into a machine-readable format, market participants have been struggling to adapt to the new data standards proposed by federal agencies like the Federal Deposit Insurance Agency (FDIC) and the Securities and Exchange Commission (SEC).
The upcoming vote by the FDIC on a notice of proposed rulemaking marks a crucial step in the joint rulemaking process involving seven federal agencies. While the FDTA sets a deadline for implementing the new data standards by the end of 2024, delays in the release of the joint Notice for Comment have raised concerns about meeting the timeline.
Each agency participating in the rulemaking process will have its own approval procedures, leading to a lack of clear sequence or calendar for agency votes. This uncertainty adds to the challenges faced by market participants in preparing for the implementation of the FDTA. The possibility of agencies having to revisit the notice for a fresh vote in case of significant alterations further complicates the timeline for finalizing the rulemaking.
In light of the delays in the rulemaking process, lawmakers including Rep. Patrick Henry have called for the timely implementation of the FDTA. The bipartisan and bicameral support for the FDTA underscores the importance of adhering to the schedule set by the legislation. With the SEC expected to issue its final rule for municipal market standards by the end of 2026, the effective dates of the new data standards are likely to be in 2027 or later.
As the FDIC and other federal agencies move towards finalizing the guidelines for the FDTA, market participants are facing challenges in adapting to the new data standards. The complexities of the rulemaking process, coupled with uncertainties in the approval procedures, highlight the need for a coordinated effort to ensure timely implementation of the FDTA. Lawmakers continue to emphasize the importance of meeting the deadlines set by the legislation to enhance transparency and efficiency in the municipal securities market.