On March 10, 2014, the U.S. Securities and Exchange Commission (“SEC”) announced a cooperation initiative out of its Enforcement Division to encourage issuers and underwriters of municipal securities to self-report certain violations of federal securities laws rather than wait for their violations to be detected. Under the Municipalities Continuing Disclosure Cooperation (“MCDC”) Initiative, the Enforcement Division will recommend favorable settlement terms to issuers and underwriters who self-report that they have made inaccurate statements in bond offerings about their prior compliance with continuing disclosure obligations. To be eligible for the MCDC Initiative, an underwriter or issuer must self-report by completing a questionnaire and submitting it to the SEC. The deadline for self-reporting for underwriters is September 10, 2014 and the deadline for issuers is December 1, 2014.
The MCDC Initiative began as the result of the SEC finding widespread failures of continuing disclosure compliance. In many cases, it involved the failure of issuers to file anything since closing on issues that are subject to continuing disclosure. This summer marks the fifth anniversary of the launch of the EMMA website, so all continuing disclosure filings for the past five years are now available on the EMMA website.
At this time it is unknown how many issuers or underwriters will use the MCDC Initiative to self-report any possible violations. However, we are advising our clients that this may be a good time to conduct a self-audit of your past disclosure filings and continuing disclosure obligations to see if you have missed any reports or made any technical errors. A self investigation of your internal procedures and continuing disclosure obligations will enable issuers to get in compliance with any prior missed filings and also give you internal information if any questions arise in the future from an underwriter or the SEC.
If we can assist you in reviewing your past disclosure filings or review any documentation you have prepared internally in relation to continuing disclosure or the MCDC Initiative, please contact any of our attorneys.
As an additional resource, the National Association of Bond Lawyers (“NABL”) published a white paper on August 5, 2014, regarding the MCDC Initiative and the considerations that should be made by issuers and obligated persons of self-reporting under the MCDC Initiative. A copy of the NABL white paper can be found at: http://www.nabl.org/uploads/cms/documents/MCDC_Initiative_-_Considerations_for_Analysis_by_Issuers_of_Materiality_and_Self-Reporting_8-5-14.pdf