In March 2014, the U.S. Securities and Exchange Commission (SEC) established the Municipal Continuing Disclosure Cooperation Initiative (MCDC Initiative) to address what it felt were wide-spread violations of the federal securities laws by municipal issuers and underwriters of municipal securities in connection with certain representations about continuing disclosures in bond offering documents. The basis of the MCDC Initiative was to encourage issuers, obligors and underwriters to self-report to the SEC any materially inaccurate statements set forth in a final official statement regarding prior compliance with continuing disclosure obligations as described in Rule 15c2-12 of the Securities Exchange Act of 1934 (1934 Act). A key component of the MCDC Initiative was the SEC’s offering of favorable settlement terms to issuers, obligors and underwriters who complied with the self-reporting of possible violations.  The deadline for underwriter self-reporting was September 10, 2014, and the deadline for issuer and obligor self-reporting was December 1, 2014.

In June of this year, the SEC announced its first batch of underwriter settlements under the  MCDC Initiative, bringing enforcement actions against 36 municipal underwriting firms. It is anticipated that the SEC will now turn its attention to the possible violations disclosed to the SEC by municipal issuers and obligors under the MCDC Initiative.

The MCDC Initiative has focused the municipal securities community on the importance of compliance with the continuing disclosure obligations described in the 1934 Act. Many issuers and obligors are now contemplating the creation and implementation of formal Continuing Disclosure Compliance programs and policies. Such programs and policies should contain, among other things: the types of disclosures covered by the program or policy; a clear statement as to how, and by whom, the disclosures will be prepared, reviewed and approved; and provisions for employee training regarding the responsibilities under the 1934 Act and each person’s role and responsibility in the process.