In an effort to increase enforcement of continuing disclosure obligations, the Securities and Exchange Commission (“SEC”) announced a self-reporting program on March 10, 2014, referred to as the Municipalities Continuing Disclosure Cooperation Initiative (the “MCDC Initiative”). Pursuant to the MCDC Initiative, the SEC encourages both issuers and underwriters to voluntarily report materially inaccurate statements made in offering documents (such as official statements) regarding prior compliance with continuing disclosure obligations. In exchange for the self-reporting, the SEC’s Enforcement Division will recommend favorable settlement terms.

Rule 15c2-12, promulgated under the Securities Exchange Act of 1934, prohibits an underwriter from purchasing or selling municipal securities without first reasonably determining an issuer’s commitment to providing continuing disclosure materials regarding the municipal securities and the issuer. Additionally, the rule requires that final official statements detail any material non-compliance with continuing disclosure obligations that has occurred in the five years prior to the offering. The SEC has expressed interest in ramping up enforcement in response to a perception of widespread continuing disclosure violations in the marketplace.

In order to participate in the MCDC Initiative, issuers and underwriters must submit a brief questionnaire, vie email, fax or mail, by 12:00 a.m. EST, September 10, 2014. If the applicant is eligible to participate, the Enforcement Division will recommend standard settlement terms including a cease and desist proceeding with neither an admission nor denial, and will require certain undertakings including the adoption of continuing disclosure policies and compliance with existing continuing disclosure undertakings. The Enforcement Division will recommend no civil penalties for issuers and reduced civil penalties for underwriters. The SEC has warned that a failure to self-report may result in increased sanctions for violations.

The MCDC Initiative Questionnaire for Self-Reporting Entities can be downloaded here.