Last week, the Securities and Exchange Commission proposed Rule Amendments to Improve Municipal Securities Disclosures. According to the SEC, these rule amendments are intended to “improve investor protection and enhance transparency in the municipal securities market”. Rule 15c2-12 would be amended to add two new event notices:
– Incurrence of a financial obligation of the issuer or obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the issuer or obligated person, any of which affect security holders, if material; and
– Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of the financial obligation of the issuer or obligated person, any of which reflect financial difficulties.
Currently, Rule 15c2-12 under the ’34 Act requires brokers, dealers, and municipal securities dealers that are acting as underwriters in primary offerings of municipal securities to reasonably determine, among other things, that the issuer or obligated person has agreed to provide to the Municipal Securities Rulemaking Board (MSRB) timely notice of certain events. The proposed amendments are aimed to “provide timely access to important information regarding certain financial obligations incurred by issuers and obligated persons that could impact such entities’ liquidity and overall creditworthiness.”
There is a 60 day comment period, so firms that are affected by these new rules and wish to comment should consult with counsel as to the most effective way to provide feedback to the SEC.