SEC Approves Rule 15c2-12 Amendments
While SEC Rule 15c2-12 does not directly require issuers of municipal securities to adhere to certain disclosure requirements, the Rule does require underwriters to reasonably determine that the issuer has agreed to disclose annual financial and operating information, as well as material event notices. Issuers must make these disclosures within 10 business days of the event’s occurrence on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (EMMA) website. Reasonable determinations are made through the continuing disclosure agreement (CDA) that is signed by the issuer.
On August 15, 2018, the Securities and Exchange Commission adopted amendments to Rule 15c2-12 of the Securities Exchange Act to include additional material event notices. In its press release, the SEC noted that the scope of material “financial obligations” that must be addressed within CDAs and material event filings include (i) debt obligations; (ii) derivative instruments related to existing or planned debt obligations; or (iii) guarantees of (i) or (ii). The following is a brief overview of the amendments:
• “Debt Obligations” include material bank loans
• “Debt Obligations” also include material leases “that operate as a vehicle to borrow money”
• Material “Derivative Instruments” include derivatives that are designed to hedge against the risks of a debt obligation, but not derivatives designed to mitigate investment risks
It is worth noting that unlike the proposed amendments, the final amendments to the Rule do not include disclosure of obligations from judicial, administrative, and arbitration proceedings or operating leases. GFOA strongly opposed having these items included in the amendments.
The compliance date for the new amendments to the Rule is February 27, 2019. Language must be included in CDAs for municipal bond issues on and after that date. Material events occurring after this date must be filed on EMMA.
Please stay tuned in the coming months as GFOA’s Debt Committee amends and updates best practices, advisories, and resource materials directly and indirectly referring to continuing disclosure responsibilities of municipal bond issuers in the United States. It is recommended that issuers discuss the impending changes with their internal bond team, counsel, and other professionals involved in their debt management programs to ensure compliance.
Government Finance Officers Association of the United States & Canada
203 N. LaSalle Street – Suite 2700 | Chicago, IL 60601-1210
Phone: (312) 977-9700 | Fax: (312) 977-4806