Enacts the "New York state credit risk transparency and investor protection act" requiring issuers of state-backed bonds to issue quarterly risk statements.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8769A
SPONSOR: Tapia TITLE OF BILL:
An act to amend the economic development law, in relation to enacting
"the New York state credit risk transparency and investor protection
act"
PURPOSE OR GENERAL IDEA OF BILL:
To close a major transparency gap in the municipal bond market by
requiring ongoing credit risk disclosures from issuers of New York
State-backed bonds. The bill establishes clear standards for risk
reporting, investor protections, and enforcement tools to ensure the
integrity of the state's bond markets.
SUMMARY OF PROVISIONS:
Section 1 names the act the "New York State Credit Risk Transparency and
Investor Protection Act,"
Section 2 adds a new Section 103-a to the Economic Development Law,
defining key terms including "credit risk decay," "material credit
event," "yield to maturity drift", "fixed point scale", "arbitrary
action", "intentional action", material deviation", "risk reconciliation
statement, and "investor right of action for value destruction".
Requires all issuers of state-backed bonds to:
*File quarterly Risk Reconciliation Statements detailing current credit
risk, yield-to-maturity drift, material events, and updated ratings.
*Disclose material credit events within 30 days to both the Department
of Economic Development and bondholders.
*Participate in a publicly searchable disclosure database maintained by
the Department.
*Creates a statutory right of action for investors harmed by non-disclo-
sure of deteriorating credit risk.
*Authorizes the Attorney General to pursue legal action against entities
that intentionally or arbitrarily cause material harm to the value of
state-backed bonds.
Section 3 includes a severability clause.
Section 4 provides for the act to take effect 180 days after enactment,
with rulemaking authorized prior to that date.
JUSTIFICATION:
New York relies on bond financing to fund nearly every core public
service, from bridges and subways to schools and affordable housing.
When an investor buys a state bond, they are lending the public their
money, trusting that the project's mission and financial assumptions
will remain sound.
Unlike equity markets, which have mandatory and timely disclosures, New
York's state-backed bonds can go years without updated risk information.
This lack of transparency leaves both institutional and retail investors
in the dark. Without real-time or even periodic updates, investors
remain unaware of changes that could affect a bond's creditworthiness,
such as federal funding cuts, economic downturns, or policy reversal's.
This structural gap has serious consequences. It jeopardizes investor
trust, inflates borrowing costs through higher risk premiums, increases
fiscal vulnerability for taxpayers, and leads to sudden market
corrections and hidden losses.
A8769 addresses this problem by creating a framework for regular, accu-
rate, and actionable credit risk disclosures through quarterly Risk
Reconciliation Statements. These statements will include updated credit
ratings, identification of material credit events such as federal policy
changes or major funding disruptions, yield-to7maturity drift to show
whether real-world performance matches original projections, and a
fixed-point scale flagging deviations from initial risk benchmarks. This
approach minors practices already standard in other market sectors such
as derivatives, commodities, and equities, and adapts them for public
bonds to build investor confidence.
The bill builds in accountability by requiring public agencies to report
significant changes in risk and provides investors a clear statutory
right of action. This safeguard applies only to willful or negligent
nondisclosure; investors must prove both actual harm and a material
deviation from disclosed risk. The bill also empowers the Attorney
General to protect New York's credit reputation from arbitrary or inten-
tional third-party actions that could unjustifiably harm state debt
obligations.
The bill also reflects the principle of credit risk decay. As debt amor-
tizes and payments are made, a bond's risk often decreases. Disclosing
these improvements benefits responsible issuers with lower borrowing
costs and greater market interest.
The need for this legislation is urgent. Economic policy can shift
rapidly, making it vital for states to have proactive tools to track and
disclose the impact of those changes on public debt.
Without this law, investors will continue to misprice risk, the state
will pay more to borrow, and New Yorkers will bear the cost of opaque
markets and preventable financial shocks.
A8769 is a practical; balanced reform that modernizes how we manage,
disclose, and protect state-backed bonds. By safeguarding against preda-
tory attacks and modernizing our bond markets, New York can tap into new
investments to meet its commitments to residents.
LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
TBD
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
becomes law.
STATE OF NEW YORK
________________________________________________________________________
8769--A
2025-2026 Regular Sessions
IN ASSEMBLY
June 2, 2025
___________
Introduced by M. of A. TAPIA -- read once and referred to the Committee
on Economic Development -- committee discharged, bill amended, ordered
reprinted as amended and recommitted to said committee
AN ACT to amend the economic development law, in relation to enacting
"the New York state credit risk transparency and investor protection
act"
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. This act shall be known and may be cited as the "New York
2 state credit risk transparency and investor protection act".
3 § 2. The economic development law is amended by adding a new section
4 103-a to read as follows:
5 § 103-a. State bond security. 1. For the purposes of this section,
6 the following terms shall have the following meanings:
7 (a) "credit risk decay" shall mean the natural reduction in the like-
8 lihood of bond default over time, resulting from the bond's amorti-
9 zation, improved issuer performance, or external economic factors that
10 reduce default risk;
11 (b) "material credit event" shall mean any event that significantly
12 impacts the issuer's ability to meet its obligations, including but not
13 limited to:
14 (i) changes in federal funding, including but not limited to Medicaid
15 cuts or infrastructure funding reductions;
16 (ii) tariffs, trade policy changes, or other external economic factors
17 that may alter the bond issuer's financial position; or
18 (iii) any significant modification of legal obligations that affects a
19 bond's performance;
20 (c) "risk reconciliation statement" shall mean a quarterly report
21 filed by an issuer of bonds, which provides an update on the bond's
22 credit risk, including but not limited to:
23 (i) changes in credit ratings;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD13079-03-5
A. 8769--A 2
1 (ii) material credit events affecting bond performance; and
2 (iii) yield-to-maturity drift and other relevant credit performance
3 metrics;
4 (d) "yield-to-maturity drift" or "YTM drift" shall mean the change in
5 the yield of a bond over time due to shifts in the credit quality of the
6 issuer, and the collateral or external credit factors, that impact such
7 bond's risk profile and valuation;
8 (e) "fixed point scale" shall mean a standardized method used to
9 assess the bond's current performance by comparing its original credit
10 risk rating to the bond's current risk profile, including, but not
11 limited to, yield-to-maturity drift and credit rating shifts;
12 (f) "investor right of action for value destruction" shall mean the
13 legal right of an investor to seek damages if the bond issuer fails to
14 disclose material credit events or if a bond's credit risk deteriorates
15 without proper disclosure, resulting in financial harm to the investor;
16 and
17 (g) "material deviation" shall mean a significant change in a bond's
18 creditworthiness that differs from the issuer's original projections or
19 credit ratings, including, but not limited to, a drop in credit rating
20 or significant change in market price or arm's-length valuation due to a
21 material credit event.
22 (h) "intentional action" shall mean any deliberate act or policy deci-
23 sion by any public, private, or governmental entity that is reasonably
24 foreseeable to materially and disproportionately impair the creditwor-
25 thiness, repayment, or market value of state-backed bonds.
26 (i) "arbitrary action" shall mean any action or policy decision lack-
27 ing a rational or reasonable basis that results in the material and
28 disproportionate devaluation of state-backed bonds, including actions
29 taken without due consideration of predictable fiscal impacts on the
30 state's debt obligations.
31 2. It shall be unlawful for any broker, dealer, or municipal securi-
32 ties dealer to issue state or municipal bonds unless such broker or
33 dealer is in compliance with the requirements of this section.
34 3. All issuers of state and municipal state-backed bonds within the
35 state shall file a quarterly risk reconciliation statement with the
36 department in accordance with a filing schedule to be promulgated by the
37 department. Such statements shall include, but not be limited to, the
38 following:
39 (a) the name and address of the issuing authority;
40 (b) the name and purpose of the project or projects the fund is to be
41 used for;
42 (c) the offering price, interest rate, selling compensation, aggregate
43 principal amount, principal amount per maturity, and delivery dates of
44 each bond;
45 (d) up-to-date credit risk projections and bond ratings where applica-
46 ble;
47 (e) yield-to-maturity drift and its implications on bond valuation;
48 (f) any material credit events which have occurred or have impacted
49 the issuer's credit risk during the relevant quarter; and
50 (g) any other disclosures required by state or federal law.
51 4. Notwithstanding any laws to the contrary, the department of econom-
52 ic development shall create a searchable database, or modify an existing
53 one, displaying the quarterly risk reconciliation statements of each
54 state-backed bond issuer within the state.
55 5. Where an issuer, dealer, or broker of state or municipal state-
56 backed bonds fails to disclose a material credit event or to update such
A. 8769--A 3
1 issuer, dealer, or broker's risk assessments on its quarterly risk
2 reconciliation statement, as required by this section, an investor or
3 bond-holder injured by such violation of this section may bring suit in
4 such investor or bond-holder's own name. Judgment may be entered in the
5 amount of actual damages reflecting the difference between the actual
6 amount paid for the bond and the fair market value of such bond, for
7 rescission of the bond purchase, upon which the issuer shall refund the
8 investor's original investment, or both such actions.
9 6. (a) The department shall have the authority to enforce the require-
10 ments of this section. The department shall, from time to time, conduct
11 audits of risk reconciliation statements filed by issuers.
12 (b) If an issuer is found to be in repeated violation of this section,
13 the department may, in its discretion, refer such issuer for investi-
14 gation by the state attorney general for the purposes of determining
15 compensation of damages to all investors.
16 7. (a) The attorney general may initiate investigations and
17 proceedings against any entity, public, private, or governmental, which
18 causes, by its actions, material devaluation of state-backed bonds which
19 disproportionally harm state-backed debt obligations. The attorney
20 general may consider, but is not limited to, the following factors:
21 (i) the foreseeability of the impact on the state's bonded debt;
22 (ii) whether reasonable alternatives were available;
23 (iii) the proportionality of the impact relative to the stated purpose
24 of the action; and
25 (iv) the degree of transparency or concealment surrounding the action.
26 (b) Upon a finding that a public or governmental entity has engaged in
27 an intentional action or arbitrary action that materially devalues
28 state-backed bonds, the attorney general may:
29 (i) initiate legal proceedings to enjoin such actions;
30 (ii) pursue claims for compensatory or equitable relief on behalf of
31 the state or its bondholders; and
32 (iii) recover damages to offset increased borrowing costs or other
33 financial harm incurred by the state as a result of the material devalu-
34 ation.
35 (c) The attorney general shall have standing to bring claims in any
36 court of competent jurisdiction, whether the responsible party is within
37 or outside the state, to protect New York's credit reputation and the
38 value of its public debt obligations.
39 (d) Nothing in this section shall be construed to limit any other
40 cause of action or remedy available to the state under law.
41 § 3. Severability clause. If any clause, sentence, paragraph, subdivi-
42 sion, section or part of this act shall be adjudged by any court of
43 competent jurisdiction to be invalid, such judgment shall not affect,
44 impair, or invalidate the remainder thereof, but shall be confined in
45 its operation to the clause, sentence, paragraph, subdivision, section
46 or part thereof directly involved in the controversy in which such judg-
47 ment shall have been rendered. It is hereby declared to be the intent of
48 the legislature that this act would have been enacted even if such
49 invalid provisions had not been included herein.
50 § 4. This act shall take effect on the one hundred eightieth day after
51 it shall have become a law. Effective immediately, the addition, amend-
52 ment and/or repeal of any rule or regulation necessary for the implemen-
53 tation of this act on its effective date are authorized to be made and
54 completed on or before such effective date.
