NABL Releases Paper To Help Issuers Comply with SEC’s MCDC Initiative

Earlier this week, the National Association of Bond Lawyers released a paper designed to help state HFAs and other municipal issuers determine whether they should consider self-reporting misleading statements they may have made in their bond offering documents as part of the U.S. Securities and Exchange Commission’s (SEC) Municipalities Continuing Disclosure Cooperation initiative (MCDC).

The MCDC initiative allows municipal issuers and underwriters to report instances in which their bond documents may have contained materially misrepresentative statements about the issuer’s compliance with its continuing disclosure agreements. Underwriters who self-report and take corrective actions will be eligible to pay reduced penalties, while issuers who self-report might not have to pay any penalty at all. Issuers must report any violations by December 1 (the submission deadline for underwriters is September 9).

While SEC has stated that issuers and underwriters should only disclose those violations that are “material,” the agency has provided little guidance on types of misstatements would meet that standard. The NABL paper provides issuers with a framework they can apply to determine whether any of the misstatements made in their bond documents would be considered “material,” and thus whether the issuer should consider reporting them through the MCDC initiative.