Muni market considers how AI can aid FDTA

Both regulators and the wide swath of municipal issuers, around 40,000 in total across these United States, will likely have to decide in the coming months and years how much or how little a role artificial intelligence will play in the development of standards mandated by the Federal Data Transparency Act. The FDTA was passed in December 2022 with the intent of creating uniform standards for how municipal issuers submit machine readable information to the Municipal Securities Rulemaking Board’s EMMA system and the Securities and Exchange Commission is tasked with developing standards and rulemaking related to the Act. Joint standards developed alongside other Financial Stability Oversight Committee members such as Treasury, the Federal Reserve and other banking regulators are expected by December 2024 and specific rulemaking will be developed by December 2026. Regulators have so far been quick to dismiss any of the fears about its implementation, as there are no disclosure requirements, standards or timelines on the horizon, and the Commission is still gathering information from industry stakeholders on how this should work. But the SEC and Internal Revenue Service have already boasted about their use of AI to aid in enforcement, and many market participants are already beginning to consider how AI can help to make some of the challenges with implementation easier.