SIFMA Seeks Changes to Muni Disclosure Rules, Leads Efforts to Improve Compliance
Section: Washington Update

The Securities Industry and Financial Markets Association has sent a letter to the U.S. Securities and Exchange Commission urging it to amend Rule 15c2-12 governing municipal securities disclosure. SIFMA believes that:
“SEC amendment or interpretation of Rule 15c2-12 would be a more comprehensive avenue for ensuring that information regarding direct purchases of securities and bank loans entered into by issuers is consistently and uniformly reported to the Municipal Securities Rulemaking Board’s EMMA website and made transparent to the market.”

The June 9 letter requests that the SEC develop a proposal to amend Rule 15c2-12 and release additional guidance. The letter also refers to the SEC’s 2012 report on the municipal securities market and its reference to several areas that need amendment. The letter, though brief in nature and not specific on areas to amend, directs the SEC to a SIFMA white paper, previously submitted to the SEC, which outlines opportunities for improvement in the current disclosure framework. 

The SIFMA white paper provides background on municipal disclosure and Rule 15c2-12 and states that the experience of many market participants in the Municipal Continuing Disclosure Cooperative (MCDC) Initiative has highlighted aspects of the rule that may be outdated or could be more efficient, as well as the need for revised or new guidance on compliance with the rule.

The white paper specifically mentions a number of areas needing amendment, including technical changes such as deletion of the reference to rating changes in 15c2-12(b)(5)(i)(C)(11), which is no longer necessary in light of ratings information being integrated with other details about a security or issue on EMMA. The white paper also makes a number of other recommendations, such as:  
  • An interpretation of “primary offering” as defined in 15c2-12(f)(7). Confusion in the market exists about the meaning of the term.
  • An amendment to the existing interpretation of the phrase in 15c2-12(b)(5)(ii)(C) “specify the date on which the annual financial information for the preceding fiscal year will be provided” to require statement of a date certain, together with guidance on harmonizing new with existing continuing disclosure agreements.
  • An interpretation of the following phrase in the 15c2-12(f)(3) definition of final official statement: “any instances in the previous five years in which each person... failed to comply, in all material respects, with any previous undertakings.” Has the Commission, in interpreting the meaning of “failed to comply, in all material respects” with the CDA applied state law or federal securities law?
  • Guidance on the vitality of the six factors enumerated in the Interpretation of Underwriter Responsibilities, including competitive bids.
  • Guidance on the responsibilities of municipal advisors, a category of regulated persons that did not exist when the core provisions of the rule and the Interpretation of Underwriter Responsibilities were articulated.
  • Guidance to issuers and obligated persons as to their responsibilities under the antifraud provisions of federal securities laws in complying with their CDAs and when certifying that “an official statement is a final official statement as defined in Rule 15c2-12.” What considerations come into play for an issuer or obligated person with respect to the inclusion of “any instances in the previous five years in which each person...failed to comply, in all material respects, with any previous undertakings” in a final official statement?

The letter and white paper are just a few of the initiatives underway at SIFMA. The group is also spearheading a work group looking at how disclosure compliance can be improved. The work group (which includes NASACT and other organizations with an interest in a well-functioning municipal market) identified several areas worthy of additional discussion and focus including:
  • Leveraging the financial audit process as a means of monitoring issuer compliance with continuing disclosure obligations and reminding issuers who may have failed to make required filings to do so (SIFMA has just undertaken a 50-state review of laws and regulations that govern local government disclosure, issuance and audit).
  • Recommending to the MSRB ways to improve the EMMA system, potentially including better structuring and organizing disclosure documents so that users can more easily find relevant information and further develop the issuer disclosure filing email reminder function.
  • Seeking guidance from the SEC on questions of the materiality of specific disclosure information.
  • Seeking guidance from the SEC on amending continuing disclosure agreements.

To obtain a copy of the SIFMA letter and white paper on suggested amendments to Rule 15c2-12 on municipal disclosure, visit  Questions on the disclosure improvements work group can be directed to Cornelia Chebinou in NASACT’s Washington Office.