Last year, the SEC’s Division of Enforcement launched the “Municipalities Continuing Disclosure Initiative” offering “favorable settlement terms” to municipal issuers and underwriters who self-report continuing disclosure violations.  At that time, it was claimed that there were a lot of problems and that it was expected there would be more such settlements in the future.  See http://www.sec.gov/divisions/enforce/municipalities-continuing-disclosure-cooperation-initiative.shtml.

Despite the fanfare, the SEC has used pre-packaged settlements in the past, and will most likely continue to do so.  Thus, not really, a year later, much to get excited about.

The new SEC Chairman wants to prosecute those underwriters who recommend municipal issuers who hae “persistent and material” disclosure delinquencies.

In particular, the SEC may apply a stricter interpretation of previous guidelines that it issued for these underwriters.  Such an interpretation would relate to the issuers’ accuracy and completeness pertaining to its disclosures. The SEC may also amend Securities Exchange Act of 1934 Rule 15c2-12, governing broker-dealers and municipal securities dealers disclosure obligations for municipal bond offerings. 

It is likely that there will be no legislative fix, and the SEC may then act accordingly.