On August 24, 2016, the Securities and Exchange Commission (SEC) announced enforcement actions against 71 municipal issuers and other obligated persons (collectively, the municipal issuers) under the SEC’s Municipalities Continuing Disclosure Cooperation (MCDC) Initiative for selling municipal bonds with offering documents that contained materially false statements or omissions about compliance with continuing disclosure obligations. These enforcement actions are the first against municipal issuers since the first action under the MCDC Initiative was announced against Kings Canyon Joint Unified School District (CA) in July 2014. Details of the SEC’s MCDC Initiative can be found here.

The 71 municipal issuers charged comprise a wide variety of issuers from 45 states including states, state authorities, local issuers ranging from small towns to large counties, local authorities, school districts or charter schools, colleges or universities, health care providers, utilities, and a retirement community.

These municipal issuers settled the actions without financial penalty (unlike the SEC’s prior MCDC enforcement actions against underwriters) and without admitting or denying the findings and agreed to cease and desist from future violations. Pursuant to the terms of the MCDC Initiative, the municipal issuers agreed to establish appropriate policies, procedures and training regarding continuing disclosure obligations, comply with existing continuing disclosure undertakings (including updating past delinquent filings), disclose the settlement with the SEC in future offering documents, and cooperate with any future SEC investigations.

The settlements included disclosure failures that occurred between 2011 and 2014 and covered both competitive and negotiated transactions. The conduct the SEC cited in the settlements ranged from failures to disclose that such municipal issuer had made no continuing disclosures at all to those where the disclosures were very late or incomplete. The settlements also included situations where municipal issuers made false statements that they were in compliance with their continuing disclosure agreements as well as those where municipal issuers were silent about their continuing disclosure and misled investors by omission. The settlements also included a situation where there was a failure to file a material event notice.

Further specifics of these enforcement actions and links to the SEC’s settlements with each municipal issuer can be found here.

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