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To: John Mansfield who wrote (8901)	11/20/1998 10:31:00 PM
From: MACA	Respond to of 10786

SEC Seeks Yield-Burn Settlement That Keeps Munis Tax-Exempt New York, Nov. 20 (Bloomberg) -- The best settlement of charges of yield-burning is one that would preserve the tax- exemption of municipal bonds, said Mark Zehner of the SEC's municipal enforcement division. The Securities and Exchange Commission, however, is not alone in its three-year inquiry into yield burning, or securities firms' alleged overcharging municipalities for Treasury securities used in debt refinancings. Also conducting inquiries are Justice Department, Internal Revenue Service and the Treasury Department. ''We would like to have a global settlement where all involved settle in one fell swoop,'' said Zehner, an attorney fellow for the SEC's office of municipal securities. ''Our job is to protect investors. The preferred way to settle this is without taxing bondholders.'' Coordinating a settlement that doesn't harm investors who bought bonds on the expectation of tax-exempt income for the life of the investment is the challenge facing the SEC. Government officials have threatened that yield burning violations could mean the loss of tax exemptions for the issuer's bonds. He defended threatening the loss of tax-exemption as the way to force Wall Street firms to the bargaining table. ''If it's the only hammer you have, then you have to wave it around,'' Zehner said. Case law has shown that the IRS has the ability to retroactively tax a municipality's bonds, he said. He declined to comment on reports earlier this week that securities firms were considering a settlement offer from government officials that would establish a standard for determining yield-burning. The practice is named for overcharges that reduce or ''burn'' down yields on securities so they don't exceed rules banning arbitrage profits in municipal bond refundings. Tax laws requires that any money earned beyond the amount needed to retire the old debt be given to the U.S. Treasury. Corestates Financial Corp. reached the first settlement of yield-burning in April, paying $3.7 million to settle yield- burning charges with the SEC, IRS and Justice Department. Insider Trading? Zehner, speaking before a luncheon sponsored by the Municipal Analysts Group of New York, also used the SEC's recent enforcement actions to warn against future infractions. Among others, he stressed that insider trading is not limited to the stock market and also includes trading in municipal securities. ''There is such a thing in this industry, and we have brought enforcement actions,'' said Zehner. ''I don't want anyone to think it doesn't happen,'' Zehner echoed comments by SEC Chairman Arthur Levitt yesterday, who called selective disclosure of material information a ''stain on our markets.'' Analysts at the lunch asked how they could be held responsible for information that they gleaned from research, such as calling the chief financial officer of a hospital with municipal bonds outstanding. ''In what form and fashion did they get that information?'' Zehner said. ''It may be that no other bondholder would get that information.'' Y2K Zehner also cautioned states, cities and public agencies from relying on underwriters, bond counsels and financial advisers when it comes to disclosure. Hiding behind hired hands courts trouble, he said. ''If they want to be in the hot seat, that's one way of getting there,'' Zehner said. ''Put their heads in the sand.'' Zehner also emphasized that states, cities and public agencies need to let investors know about problems they may face from the so-called Year 2000 problem. Some fear that municipalities will be among the last to confront a problem from computers' inability to distinguish between 2000 and 1900 because they were originally programmed to read only the last two digits of dates. ''They may have significant problems, and they may be material ones that have to be disclosed,'' Zehner said. He cautioned against ''boilerplate'' disclosure of Year 2000 problems without elaborating precisely what problems loom. Still, he said the SEC can't do anything besides warn issuers until the millennium. ''We'd much rather educate people then slap them in February'' 2000 when problems emerge, he said. Zehner also echoed comments made at a conference on disclosure last week hosted by the Municipal Securities Rulemaking Board. Investors complained that SEC Rule 15C2-12 -- which requires disclosure of material information to investors -- has been used as an excuse to give less information, not more. ''Those that think 15C2-12 is a ceiling have it wrong,'' said Zehner. ''It's a floor.'' Whether investors and underwriters like it or not, the SEC is going to remain very involved in the $1.4 trillion muni market, he said. 18:38:14 11/20/1998 Any redistribution of Bloomberg content, including by framing or similar means, is expressly prohibited without the prior written consent of Bloomberg L.P. Any reference to the material must be properly attributed to Bloomberg News. The information herein was obtained from sources which Bloomberg L.P. and its suppliers believe reliable, but they do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any securities or commodities.(C) Copyright 1998 Bloomberg L.P. BLOOMBERG, Bloomberg News, Bloomberg Financial Markets, Bloomberg Television, Bloomberg News Radio are trademarks, tradenames and service marks of Bloomberg L.P.

To: John Mansfield who wrote (8901)	11/21/1998 5:11:00 PM
From: sibe	Read Replies (1) \| Respond to of 10786

Your post, which I've printed below, should provide Alydaar with an excellent opportunity to promote themselves. Alydaar has boasted in the past that it has one of the lowest error rates in the Y2k business. Mr. Gruder, Ogilvy, are you reading this? Reports of 3rd party testing verification coming out - not good asked in the TimeBomb 2000 (Y2000) Q&A Forum Flaws found in Y2K conversions By CHRISTOPHER PRICE and AVI MACHLIS The Financial Times Checks by some of the biggest corporations in the United States and Europe have revealed serious flaws in work already undertaken to tackle the millennium computer bomb. Unisys, the U.S. computer systems and services group, said a testing facility in Britain had uncovered problems with more than 20 of Britain's top 100 listed companies. ''Some of the issues we found would have taken their systems down,'' said David Palmester, Year 2000 program manager for Unisys. ''The quality of testing they have undertaken is very worrying.'' The millennium computer bomb problem has come about because of the inability of older systems to recognize the change of date from 1999 to 2000. The fear is that many of these systems will malfunction as a result. Crystal Systems Solutions, an Israeli information technology group, said Ford, Pratt & Whitney and a large German car manufacturer were among 20 U.S. and European companies to commission verification services this year for conversions done by other companies. ''More and more companies that classified their systems as compliant or converted are asking for verifications,'' said Ben Levy, Crystal's vice president of marketing and sales. ''In several cases we found date issues were either missed, not converted or converted wrongly. The problem is that one mistake in one program can cause a major problem to a business.'' Palmester said most of the problems being thrown up in the latest checks were for companies which had attempted to solve the problem in-house. He said this often involved the company employing contractors to address the issue who perhaps were not completely familiar with the systems they were dealing with or the diagnostic tools they were using. David Marshall, managing director of Greenwich Mean Time, a British IT diagnostics company specializing in Y2K solutions, confirmed similar findings. ''Too many companies have attempted to tackle the millennium bomb through a piecemeal approach to their systems.'' Crystal said a verification job for a midsized company with 10 million to 20 million lines of computer code could cost several million dollars and take more than three months to do properly. The emergence of evidence that much Y2K compliance work already undertaken may not have solved the problems will add further concern to governments attempting to contain the situation. It follows a report last week from Cap Gemini, Europe's biggest software and services company, warning that it was too late for governments, organizations and companies in the United States and Europe to solve the millennium bomb problem. It advised the tackling of the problem in essential services as a matter of urgency.