The Securities and Exchange Commission (SEC) has ended settlements under its Municipalities Continuing Disclosure Cooperation (MCDC) Initiative. Details of the SEC’s MCDC Initiative can be found in our prior Alert. For those issuers (including obligors) and underwriters who self-reported violations under the MCDC Initiative but have not heard from the SEC regarding a settlement of those self-reported violations, the SEC will not recommend enforcement action under the MCDC Initiative against such issuers and underwriters, marking the end of the MCDC Initiative. Having ended settlements under its MCDC Initiative, the SEC will now turn its focus to issuers and underwriters who may have committed violations but chose not to self-report under the MCDC Initiative. The SEC may also look at instances where violations were not self-reported by issuers or underwriters even though those same issuers or underwriters self-reported other violations under the MCDC Initiative.
Issuers who settled under the MCDC Initiative did not pay penalties but rather agreed to establish written policies and procedures (including appointing a designated individual responsible for ensuring compliance with such policies and procedures) and conduct training regarding their continuing disclosure obligations in order to ensure compliance with federal securities laws. Issuers who settled under the MCDC Initiative must also disclose the settlements in future offering documents and must cooperate with any future SEC investigations. Underwriters that settled under the MCDC Initiative paid fines based on their size and number of violations up to a maximum of $500,000 and agreed to hire an independent consultant to analyze such underwriter’s policies and procedures and provide recommendations for changes and improvements to such policies and procedures. In total, the SEC’s MCDC Initiative led to settlements with 72 issuers from 45 states and 72 underwriters who paid a total of approximately $18 million in MCDC settlements.
To gain an understanding of what to expect and what to do should the SEC contact you about an enforcement matter, please refer to Cozen O'Connor's prior webinar relating to this topic.