On February 10, 2016, the Government Finance Officers Association (“GFOA”), which is a professional association for individuals who are involved with government financial management, issued an alert to its members that the Securities and Exchange Commission (“SEC”) has begun reaching out to government debt issuers with settlement offers in connection with the SEC’s Municipalities Continuing Disclosure Cooperation Initiative (“MCDC Initiative”). The GFOA alert can be found here.
In 2014, the SEC launched the MCDC Initiative to encourage bond issuers (including school districts and municipalities) and underwriters to self-report instances of material misstatements in bond offering documents regarding the issuer’s prior compliance with its continuing disclosure obligations in exchange for favorable settlement terms. Issuers who decided to self-report were required to do so by December 1, 2014.
Since the 2014 reporting deadline, the SEC has been pursuing settlements with underwriters (not issuers), and those settlements included the payment of monetary penalties for violations. According to the GFOA alert, the SEC is now turning its attention to pursuing settlements with issuers. While the SEC will not pursue monetary penalties against issuers who self-reported, it may pursue enforcements against governmental officials who are culpable of the misstatements in bond offering documents.
Whether or not a district or cooperative self-reported potential misstatements, it may be contacted by the SEC in connection with the MCDC Initiative.
If you receive any communications from the SEC regarding the MCDC Initiative, please exercise caution and consult with legal counsel. Please contact Heather Brickman or Kerry Burnet with questions regarding the MCDC Initiative.