The Securities and Exchange Commission (SEC) on July 29, 2013 charged a school district in Indiana and its municipal bond underwriter with falsely stating to bond investors that the school district had been properly providing annual financial information and notices required as part of its prior bond offerings in compliance with its previous continue disclosure agreements. According to the SEC, this marked the first time it had charged a municipal issuer, the underwriter and its principal with securities fraud for falsely claiming that it was compliant with annual disclosure obligations.

The underwriter agreed to pay nearly $580,000 to settle the SEC's charges, and the employee of the underwriter and the issuer also agreed to settlements, which include a one-year collateral bar and a permanent supervisory bar for the employee of the underwriter. The SEC press release and related SEC orders can be found here.

MSRB Provides Guidance on Disclosure

Since July 1, 2009, the Municipal Securities Rulemaking Board's (MSRB) Electronic Municipal Market Access (EMMA) system has been the designated recipient of the financial information and other disclosure documents submitted by issuers pursuant to continuing disclosure agreements entered into in accordance with Rule 15c2-12. On August 12, 2013, the MSRB reported that it published "an advisory and set of guides to assist issues of municipal bonds better understand the types of information they must publicly disclose and how to use the MSRB's Electronic Municipal Market Access (EMMA(r)) website to make these disclosures."

The MSRB often encourages greater disclosure than an issuer is contractually obligated to provide by its continuing disclosure agreements. The MSRB release should be considered together with the issuer’s disclosure obligations under its continuing disclosure agreements to determine what information it is required to disclose. As highlighted in the SEC's recent enforcement action against the City of Harrisburg, Pennsylvania, any public statements, whether oral or written (including continuing disclosure filings made on EMMA), if misleading or omits material information, could result in anti-fraud liability under the federal securities laws. The MSRB release can be found here.