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March 10, 2014 at 09:24 AM
The Securities and Exchange Commission’s enforcement division announced Monday that issuers and underwriters of municipal securities must self-report by Sept. 10 certain securities law violations or face steeper sanctions.
At issue is the disclosure of information that could affect a bond’s value or repayment after it is first issued, called continuing disclosure. If issuers fail to share that information as required, they generally must disclose that fact in offering documents over the next five years.
To encourage issuers and underwriters of municipal securities to self-report such failures rather than wait for them to be detected, the agency announced the same day the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative.
Andrew Ceresney, director of the agency’s enforcement division, encouraged “eligible parties” in a statement “to take advantage of the favorable terms” the SEC is offering under the MCDC Initiative.
“Those who do not self-report and instead decide to take their chances can expect to face increased sanctions for violations,” Ceresney warned.
Under the initiative, the Enforcement Division says that it will recommend standardized, favorable settlement terms to municipal issuers and underwriters who self-report that they have made inaccurate statements in bond offerings about their prior compliance with continuing disclosure obligations specified in Rule 15c2-12 under the Securities Exchange Act of 1934.
Issuers and underwriters must self-report by completing a questionnaire and submitting it via email or by fax or mail no later than Sept. 10.
Mike Nicholas, CEO of Bond Dealers of America, says that BDA “supports the SEC’s goal toward self-reporting of violations to the extent an obvious violation of the securities law has occurred.” He cautions, however, “that there may be disproportionate administrative, reporting and other burdens on underwriters via the settlement obligation requirements [under the SEC initiative] and we will be examining those in more detail in the coming days.”
