DALLAS — Municipal bond issuers in Texas have posted updated disclosure statements to correct past omissions under the Securities and Exchange Commission's initiative known as Municipalities Continuing Disclosure Cooperation, or MCDC.
The program, which accepted submissions through Dec. 1, allowed both issuers and underwriters to get favorable settlement terms if they voluntarily reported any instance in which they misled investors over the past five years in the process of continuing disclosure.
So far, postings on the Municipal Security Rulemaking Board's EMMA website and the Texas Municipal Advisory Council's Web site appear to represent fairly minor oversights.
Bexar County, which includes San Antonio, posted a notice on EMMA saying that it failed to include several tables showing rental car fee revenue, hotel occupancy tax figures and other convention and tourism-related data in previous statements.
"The County's filings of annual financial information and operating data for fiscal years ending September 30, 2009 through 2013 were all made on a timely basis," according to the document that bore the name of bond counsel Glenn Opel of Bracewell & Giuliani.
The Houston Community College System also updated a table regarding contractual obligations and filed another notice fixing CUSIP links to filings on Emma.
The El Paso Independent School District posted a notice that its underlying rating by Fitch Ratings dropped to AA-minus from AA on April 30, 2010 due to Fitch's recalibration of its ratings system.
The city of Carrizo Springs in South Texas notified bondholders that it had delayed filing its annual financial operating information as well as its audited financial statements for the fiscal year ended June 30, 2011 due to an administrative delay in its audit.
The city of Carthage in East Texas also notified investors that it was late in filing financial statements for the fiscal years 2008 and 2010.
According to a National Association of Bond Lawyers report, there are two distinct materiality questions that an issuer must address under MCDC. One is whether it made a misstatement if it said in its official statement that it has complied in all material respects with its continuing disclosure obligations when there has been some noncompliance. The second is whether the misstatement would be material to investors.
LeeAnn Gaunt, chief of the SEC enforcement division's municipal securities and public pensions unit, told the Government Finance Officers Association's winter meeting this month that enforcement actions would provide guidance on the SEC's view on the significance of disclosure lapses.
The SEC may never reveal how many issuers and underwriters took advantage of the MCDC program, Gaunt said. She has declined to tell issuers what violations would be material from the SEC's point of view.
