2013 was an active year for the Securities Exchange Commission in the municipal marketplace. The SEC took three actions in 2013 against issuers relating to disclosure and their relationship with the municipal marketplace. First Harrisburg, Pennsylvania in early May, then South Miami, Florida in late May, then Wenatchee Valley region in November. 2014 may be prime time for annual disclosure policy review and update by municipal issuers as the SEC becomes more active in this marketplace.
Harrisburg was the first issuer to be charge by the SEC for misleading statements made outside of its securities disclosure documents. The SEC alleged that there was a vacuum caused by the city’s failure to provide accurate information to investors about its financial condition and that municipal investors had to rely on other public statements misrepresenting city finances. See SEC press release.
South Miami settled charges with the SEC for failing to disclose actions taken after issuance that jeopardized the tax-exemption of the offering. See SEC press release.
The Greater Wenatchee Regional Events Center Public Facilities District was the first municipal issuer assessed a financial penalty by the SEC. The SEC also charged the underwriter and the developer for inaccuracies in the primary disclosure document and the failure of the issuer to include a discussion of an independent consultant’s examination which questioned the economic viability of the project. See SEC press release.
All three settlements included the municipal issuer undertaking or adopting new policies and procedures regarding the disclosure process. The SEC’s statements said that policies and procedures should:
be reasonably designed to result in accurate, complete and timely public disclosures;
identify the persons involved in the disclosure process;
evaluate other public disclosures including financial information made by the municipal issuers; and
assure responsible individuals receive adequate training about their obligations under securities laws.