On August 20, 2018, the Securities and Exchange Commission (SEC) adopted amendments to SEC Rule 15c2-12, which identify two new events requiring disclosure with the Municipal Securities Rulemaking Board (MSRB) via the EMMA system within 10 business days of their occurrence.

Under Rule 15c-2-12, underwriters must reasonably determine that an issuer of municipal securities, or an obligated person with respect to municipal securities, has provided specified information to the MSRB, including timely notice of the occurrence of certain specified events. This rule is designed to enhance disclosure and transparency within the municipal securities market by making information about municipal securities more readily available.

The amendments adopted on August 20th identified two new specified events requiring such notice to the MSRB:

• Incurrence of a financial obligation, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and
• Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.

The amended rule also defines a financial obligation as a (i) debt obligation, (ii) derivative instrument entered into in connection with, or pledged as security or source of payment for, an existing or planned debt obligation or (iii) a guarantee of (i) or (ii). The rule clarifies that a municipal security with an official statement on EMMA will not be considered a financial obligation.

The amended rule will be effective beginning 180 days after the SEC’s final rule is published in the Federal Register. This results in an approximate compliance date of mid-February 2019. The amendments are only effective for continuing disclosure undertakings entered into after the compliance date and will not change existing continuing disclosure undertakings.

However, it should be noted that continuing disclosure undertakings on or after the compliance date require disclosure of certain events related to all financial obligations, whether incurred before or after the compliance date

The full text of the amended rule may be found on the U.S. Securities and Exchange Commission website. Issuers of municipal securities are strongly encouraged to familiarize themselves with the amended rule and to discuss its implications with their bond counsel. Compliance with continuing disclosure requirements (including both existing continuing disclosure requirements and these amendments) should be a core feature of an issuer’s financial reporting process.

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