By Attorney Kristin Cooper
While the COVID-19 pandemic continues to impact many aspects of our day-to-day lives, it is important for issuers of municipal securities to consider their primary and secondary disclosure obligations which continue to exist in the bond marketplace. Primary disclosures (in offering documents) are necessary to ensure prospective investors understand the potential risks of purchasing an issuer's bonds or notes. A large lawsuit, looming environmental clean-up liabilities, or projected losses in revenue may need to be disclosed to prospective investors, generally in a document known as the Official Statement.
Secondary market disclosures are required by documents entered into in connection with a bond issue closing (Continuing Disclosure Certificate or undertaking). They include material events filings upon the occurrence of one of 16 different listed events, as well as annual disclosures consisting of operating data of the type included in the Official Statement and audited financial statements, when and if available.
The SEC has highlighted the need for timely and accurate disclosure in light of COVID-19. Changes to an issuer's finances and operations may require a voluntary disclosure to provide relevant and necessary information for investors. However, the need to provide timely and accurate information must be balanced with the need to protect issuers against providing potentially inaccurate forward-looking statements.
A working group of those central to the municipal bond industry has prepared guidance entitled "General Continuing Disclosure Considerations for Municipal Securities Issuers" which provides considerations for preparing primary and secondary disclosures, including those related to COVID-19. You can access the guidance here. It is recommended that all issuers of municipal securities review their disclosure obligations at least annually, provide frequent training for both current and new employees and officials, and remain vigilant of operational and financial circumstances which may warrant a disclosure to the marketplace.
For questions regarding disclosure obligations in connection with municipal securities, please contact one of the members of Ahlers & Cooney's Public Finance Group.