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2 PHiS 85 I 14 Review July 8 1985 Comments on the proposed disclosure rules and on the project to con- sider the need for additional guidance should be submitted to the SEC by August 30. In a related development, the Governmental Accounting Standards Board has issued an exposure draft that would require state and local govern- mental entities to disclose information about their deposits and investments with financial institdtions, including repurchase agreements. The deadline for comments on the GASB proposal is September 4. The Washington Scene New voluntary capital rules for government securities dealers The Federal Reserve Bank of New York recently issued voluntary stan- dards of capital adequacy for those dealers in U.S. government securities not currently supervised by Federal authorities. The guidelines: · Recommend that the ratio'of liquid capital to measured risk (asde- fined) always exceed 120% · Give the dealers the choice of calculating their capital rat io accord lng to either the Federal Reserve method or the SEC's Net Capital Rule · Do not require submission of reports to any government entity or examination of unregulated dealers by any government agency. The New York Fed urges that customers of these dealers ask for three forms of certification: (1) a statement from the dealer that it will adhere to the capital adequacy standard on a continuous basis, (2) audited financial statements confirming the dealer was in compliance with the standard as of the audit date, and (3) a copy of a letter from the firm's auditor stating that it found no material weaknesses in the dealer's internal controls incident to its adherence to the standard. Capital standards for the 36 "primary" government securities dealers (i.e., those entitled to deal directly with the Federal Reserve) are already monitored by the Federal Reserve Bank of New York. In addition, many other dealers are subject to regulation by the SEC if they engage in diversi- fied securities broker-dealer activities or by Federal banking authorities if they are affiliated with a bank. On another front, a House Commerce subcommittee conducted hear- ings last week on a legislative proposal that would provide for direct regu- lation of the government securities market by Federal authorities. A wide range of views were expressed at the hearings and the outcome of the pro- posal is not known at this time.