WASHINGTON — Utah Treasurer Richard Ellis is making a push to educate his state's issuers about the Securities and Exchange Commission's Municipalities Continuing Disclosure Cooperation initiative, which many public officials remain uninformed about.
Ellis, who is also a member of the Municipal Securities Rulemaking Board and current president of the National Association of State Treasurers, hosted the Utah Municipal Issuers' Seminar July 9 with assistance from Ballard Spahr LLP.
The event drew more than 150 issuers and included a panel discussion about the MCDC, which allows issuers and underwriters to get favorable settlement terms if they voluntarily report, by Sept. 10, any time in the last five years they offered bonds without disclosing failures to meet their continuing disclosure agreements set up under the SEC's Rule 15c2-12.
"We're trying to reach out as best we can," Ellis told The Bond Buyer. "Just trying to make them aware of what the MCDC is."
Regulators have urged Treasurers to lead in helping municipalities comply with their continuing disclosure obligations. Many smaller, infrequent issuers have difficulty with continuing disclosure because of staff turnover and a lack of securities law expertise. Reaching them is not easy. The Government Finance Officers Association put out an alert about the MCDC earlier this month, but many issuer officials are not active in industry groups.
"These things don't necessarily come to their attention," said Brad Patterson, a partner in Ballard Spahr's Salt Lake City office. "They were really not aware of the MCDC program."
Under the MCDC, an issuer can be exposed to SEC enforcement action if a deal done under a misleading official statement is voluntarily reported by the underwriter of the bonds. Issuers who do not participate in the initiative could face heavier penalties if the SEC investigates, including civil penalties that would not apply to them if they voluntarily disclose the problem under the MCDC. Ellis said issuers who assume they are in compliance could be surprised by the results of a thorough review of the last several years' worth of deals.
"The awareness, I think, is the big issue," Ellis said.
Patterson said the panel discussion, which included a public official, municipal advisor, and underwriter, provided the attendees with an overview of the MCDC and an explanation of how to determine whether participating in it might be a good idea for them. The panel also discussed underwriter-issuer cooperation, an issue securities lawyers have said could be key because most underwriting firms are likely to jump at the chance to cheaply settle their violations under the initiative.
While the firm has no current plans to coordinate similar events elsewhere, Patterson said other states could use the seminar as a model for how to get the word out.
"Hopefully it can be something other people can look to do as well," he said.
