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SEC Approves Amendments to Disclosure Rules for Municipal Securities

On August 20, 2018, the SEC approved amendments to Exchange Act Rule 15c2-12 – first proposed in March 2017 – which are intended to better inform investors about the current financial condition of state and local issuers of municipal securities, thereby promoting more informed investment decisions when investors trade in the secondary market. The amendments are focused on issuers’ material "direct placements," i.e., direct bond or direct loan financings conducted by municipal issuers with increasing frequency during the past decade as an alternative to traditional public offerings.

Specifically, the amendments add two new triggering events that require issuers to make public disclosure under the Rule within ten business days:

  • Any incurrence of a financial obligation of the issuer or obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the issuer or obligated person, any of which affect security holders, if material; and

  • Any default, event of acceleration, termination event, modification of terms, or other similar events under the terms of the financial obligation of the issuer or obligated person, any of which reflect financial difficulties.

Under the amendments, the term "financial obligation" means (i) any debt obligation (including a lease arrangement that operates as a vehicle to borrow money); (ii) any derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) any guarantee of (i) or (ii). The term "financial obligation" does not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board (MSRB) consistent with Rule 15c2-12.

The SEC decision to amend Rule 15c2-12, designed to ensure the public availability of certain disclosures about municipal securities, means that additional information about bond issuers will be available on the MSRB’s Electronic Municipal Market Access (EMMA®) website, which has for years provided public access to municipal bond trade price, official statement and other disclosure and related information. The amendments will impact only those issuers whose continuing disclosure agreements are entered into in connection with offerings occurring on or after the compliance date for the amendments – which date will be 180 days after publication of the final rule in the Federal Register.

© Copyright 2019 Murtha Cullina


About this Author

Edward B. Whittemore, Murtha Cullina, exempt securities offerings lawyer, SEC compliance representation attorney

Ted Whittemore advises public, private, emerging and nonstock/non-profit businesses on a broad range of corporate, securities and governance matters with a focus on general corporate law, registered and exempt securities offerings, SEC compliance representation, mergers and acquisitions, and corporate finance. Ted has represented issuers and investors in public and private offerings of debt and equity securities and has advised securities professionals (broker-dealers, investment advisers, and their personnel) on registration, reporting and other regulatory and...