What MSRB wants you to know about 15c2-12

Bonds

WASHINGTON — As the days until rule changes requiring new continuing disclosures tick down, the Municipal Securities Rulemaking Board is adding its voice in an effort to prepare market participants for the new reality due to set in Feb. 27.

The MSRB on Friday released its “10 Things to Know: New SEC Rule 15c2-12 Requirements,” which aims to support market participants in complying with the Securities and Exchange Commission’s amendments to that rule. The MSRB has no enforcement authority and the rule ultimately places responsibility for compliance on issuers, whom the MSRB does not regulate. But the MSRB’s EMMA website is the means for compliance with the rule.

“The market depends on the MSRB to facilitate compliance with disclosure requirements, including when they change,” said MSRB President and CEO Lynnette Kelly. “Appropriate enhancements to the EMMA website — and our commitment to ensuring readiness and resources for issuers — are fundamental to our mission to ensure a fair and efficient market.”

Lynnette Kelly

The SEC lacks the authority to directly regulate issuers except through the antifraud provisions in the securities laws, so 15c2-12 requires underwriters of new issues of $1 million or more to “reasonably determine” that the issuer has entered into a written agreement to provide certain disclosures to bondholders. The SEC announced last year that it was amending the rule to require those agreements to include disclosure of material financial obligations, as well as events that “reflect financial difficulty” related to such obligations.

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The MSRB’s first five “things to know” describe the requirements of 15c2-12, such as what issuers will have to agree to disclose and that such disclosures must be made no more than 10 business days after the event occurs.

The second half of the list deals more with the procedure of making the disclosures on EMMA. For example, “submitters will be asked to provide a description, date and other information about the additional event disclosures.”

The final item points out that voluntary disclosures of bank loans and other “alternative financings” can still be made on EMMA even if not required by 15c2-12. The rule amendments will only require issuers to agree to those disclosures in new continuing disclosure documents ratified from Feb. 27 onward.

The MSRB’s “10 Things” list comes hot on the heels of an alert issued for Government Finance Officers Association Members Wednesday, to which the National Association of Bond Lawyers and the Securities Industry and Financial Markets Association also contributed.

The SEC is running with a greatly reduced staff during the ongoing partial government shutdown, so as the rule’s effective date comes closer market participants are unable to ask the SEC directly for guidance.

House Democrats are passing spending bills piecemeal in an effort to pressure Republicans into agreeing to reopen the government, but so far the two sides have remained deadlocked over the issue of funding for a southern border wall.

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