Deadline Approaching for Disclosure of Continuing Disclosure Violations


The Securities and Exchange Commission (the SEC) recently launched its Municipalities Continuing Disclosure Cooperation Initiative (the MCDC Initiative). Obligated persons (including issuers and conduit borrowers) and underwriters of bonds have until September 9, 2014 to self-report to the SEC instances in the past five years where failure to comply in a material respect with a continuing disclosure undertaking was not properly disclosed in a subsequent Official Statement. The SEC will offer favorable settlement terms to those who self-report; conversely, where the SEC discovers the failure to comply, obligated persons and underwriters are likely to face an enforcement action.

Immediate Action Steps (bear in mind that the more bond issues you have, the more time-consuming the investigative process may be):

  1. Determine your bond issues sold in the 2009-2014 period
  2. Consult with staff and outside disclosure advisors (often your financial advisor) to determine any instances in the five years previous to each of such issues where outstanding continuing disclosure obligations (whether for disclosure of routine financial data or material events such as rating changes) were not met in a timely fashion
  3. Determine whether such instances of noncompliance were disclosed in subsequent official statements for bond issues within five years of the noncompliance. (For example: City issued bonds in 2004, 2009 and 2012. In 2007, City failed to timely file annual financial statements for fiscal year 2006 which was required under the terms of the continuing disclosure undertaking set forth in the 2004 bond resolution. The violation should have been disclosed in the 2009 and 2012 official statements. If it was not, these nondisclosures are eligible for self-reporting.)
  4. Coordinate with lead underwriters who purchased relevant bond issues to determine whether they will be reporting a violation of their own under Rule 15c2-12 relating to any of your bond issues in order to avoid a circumstance in which the underwriter self-reports and you do not, potentially leaving yourself open to an SEC enforcement action.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dorsey & Whitney LLP | Attorney Advertising

Written by:


Dorsey & Whitney LLP on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.