The Municipal Securities Rulemaking Board launched a new service on Monday that will allow state and local issuers, borrowers, and others to schedule automated emails that remind them of filing deadlines for annual and quarterly financial disclosures.
“Recent enforcement actions by the Securities and Exchange Commission against municipal bond issuers have brought into focus the legal liabilities and financial harms that can result from incomplete or untimely disclosures,” the board said.
Under the SEC’s Rule 15c2-12, muni broker-dealers are not supposed to underwrite muni bonds unless the issuers have contractually agreed in writing to disclose annual financial and operating information and material events as they occurs. Issuers typically include these continuing disclosure agreements, which are considered to be contracts with bondholders, in their official statements. The agreements set forth schedules for filing financial and operating information and commitments to file material event notices.
The disclosure documents are filed on the MSRB’s EMMA website.
“In keeping with the MSRB’s mission to protect both investors and issuers of municipal securities, the MSRB is providing additional tools to help issuers understand and comply with their financial disclosure obligations,” said MSRB executive director Lynnette Kelly. “Regular and timely disclosure of financial information has the dual benefit of helping issuers protect their access to the municipal market and helping ensure that investors have the information they need to make informed decisions.
The MSRB is providing its new alert feature to disclosure submitters who have an MSRB Gateway Account and use this account to log into the EMMA Dataport. An issuer can add up to three additional email recipients to its scheduled reminders, the board said.
“For example, issuers may wish to send email reminders to appropriate internal staff, their financial advisor or bond counsel,” the board said.
The new alert has led some market participants to question whether Digital Assurance Certification will take action against the board. DAC sued the Texas Municipal Advisory Council, which operated the Central Post Office, a central collection place for issuers’ secondary market disclosure documents, in January 2007, less than a month after DAC obtained a patent for its disclosure services. DAC acts as a disclosure agent for issuers and has a similar alert system for its issuer clients. Issuers pay for DAC services. The MSRB’s alert system is free.
The MSRB also published a document explaining the importance of timely, accurate and complete disclosure of financial information and providing tips on supporting good disclosure. In addition, it has posted an online tutorial on submitting financial disclosures and a checklist of the information needed to complete a financial disclosure submission to the EMMA website.
All of this information is available on the MSRB’s State and Local Government Toolkit, which can be found on the board’s website under “Resources for State and Local Governments.”