The Municipal Securities Rulemaking Board has released a continuing disclosure guide providing issuers with a road map of their obligations under the Securities and Exchange Commission's Rule 15c2-12, citing a slew of recent federal enforcement actions in which issuers sometimes failed to file the required information.
The guide provides issuers and their advisors with a detailed breakdown of the steps they should follow to submit bond documents, annual financial statements, and other necessary disclosures to the MSRB's central transparency website, EMMA.
The guide was issued in response to recent Securities and Exchange Commission enforcement actions against Harrisburg, Pa. and West Clark Community Schools in Clark County, Ind. In both cases, the SEC investigation found that the issuers were not complying with their continuing disclosure agreements.
"State and local governments, and their advisors, now have a detailed set of documents that thoroughly explain their continuing disclosure obligations relating to financial disclosures and how best to comply with those obligations through EMMA," said MSRB executive director Lynnette Kelly. "The MSRB is providing this information to help issuers assure themselves that they are taking appropriate steps to comply with their obligations."
The guide shows which information must be submitted to EMMA, as well as when disclosure is not necessary. It also includes a chart that puts the information in a visual context, with arrows pointing from step to step depending on whether the disclosure is necessary. It may not be necessary to file continuing disclosure documents for all bond issuances, such as bonds issued prior to July 1995, small issues with a principal amount of less than $1 million, bonds in minimum denominations of $100,000 that either are sold to 35 or fewer sophisticated investors or that mature in nine months or less, or bonds that have matured or been defeased through advice refundings.
The MSRB consistently advocates more disclosure than is required, and the guide suggests a policy of disclosing all material information, even if the issue might be partially or entirely exempt from disclosure requirements under Rule 15c2-12 on disclosure of the Securities Act of 1934.
"Even though certain types of offerings qualify for a full or partial exemption from Rule 15c2-12, as described below, and no continuing disclosure agreement may have been executed, many issuers and obligated persons nonetheless voluntarily submit to EMMA some or all of the disclosures that would be considered required continuing disclosures, or other categories of voluntary disclosures, with respect to such offerings," the MSRB guide states. "All issuers and obligated persons with respect to fully or partially exempt offerings may wish to consider nonetheless providing some or all of the continuing disclosures contemplated under Rule 15c2-12 or for which voluntary categories are available on EMMA."
The MSRB also released a companion guide for conduit issuers, with guidance for more specific situations in which governments or government instrumentalities have issued bonds on behalf of a different borrower. Some conduit issuers have been concerned that available guidance is not tailored to them, and worry about being subject to SEC investigations if conduit borrowers fail to file properly for bonds issued in their names.
Both new disclosure guides are available in the MSRB's online toolkits, along with the Investor Toolkit that provides information for investors in municipal securities and The State and Local Government Toolkit includes other tools and resources for issuers.