WASHINGTON — The Securities and Exchange Commission is expected to approve changes to its Rule 15c2-12 on disclosure this morning that appear largely unchanged from the proposal originally floated last July to increase the quantity and timeliness of continuing disclosures.
If approved, the changes would go into effect Dec. 1, according to
In addition to expanding the types of events that issuers must disclose on an ongoing basis, the proposal would require that issuers disclose the events within 10 days of their occurrence, rather than the existing requirement that they be filed in a “timely basis.” Issuers have complained that this would be a difficult standard to meet and have asked the commission to consider starting the 10-day requirement once they are notified of an event’s occurrence, but SEC staff rejected that idea.
The SEC also plans to remove the need for a materiality determination for at least five events: failure to pay principal and interest; unscheduled payments out of debt service reserves reflecting financial difficulties; unscheduled payments by parties backing the bonds, reflecting financial difficulties or a change in the identity of the parties backing the bonds or the parties’ failure to perform; defeasances, including situations where the issuer has provided for future payment of all obligations under a bond; and rating changes.
A materiality determination would be retained for some events, including, for example, bond calls, the SEC said in its fact sheet.
The rule changes also would increase the number of events to include: tender offers; bankruptcy, insolvency, receivership or similar proceedings; mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated person or their termination, if material; and the appointment of a successor or additional trustee or the change in the name of a trustee, if material.
Meanwhile, the proposal also would remove an exemption for variable-rate demand obligations from continuing disclosure agreements and provide antifraud guidance to dealers warning that they should not assume an issuer will adhere to its continuing disclosure obligations if it has a history of “persistent and material non-disclosure.”
As early as today, staff are likely to approve a related Municipal Securities Rulemaking Board proposal that would specially designate issuers on its Electronic Municipal Market Access, known as EMMA, site who include in their continuing disclosure agreements with bondholders any of the following commitments: filing annual financial information within 120 days of the end of their fiscal years or, during a transition period lasting through Dec. 31, 2013, filing annual financial information within 150 days of the end of their fiscal years; or preparing audited financial statements in compliance with accounting standards set by the Governmental Accounting Standards Board.
