6.3 The Official Statement

The offering document in a public offering of municipal securities is usually called the Official Statement (OS). If the securities are being offered on a limited basis, the offering document might be called an offering circular, an offering memorandum, a private placement memorandum, or a limited offering memorandum. The OS in a public offering of municipal securities is analogous to the prospectus in a corporate registered offering. The OS contains the issuer’s “official” statements; that is, the statements about itself upon which it intends others to rely, including statements about its financial condition, the securities, the project or program to be financed with the securities, and the sources of repayment for the securities. Its purpose is to tell potential investors what they need to know in order to decide whether or not to buy the securities all the “material” information needed for an investment decision.

The OS is the issuer’s document, but in practice it is a joint product of the issuer’s financing team. Coordination of OS preparation is generally undertaken by underwriters’ counsel or the issuer’s disclosure counsel in a negotiated sale and by the issuer’s financial advisor or the issuer’s disclosure counsel in a competitive sale. This party generally prepares a draft OS on the basis of information provided by the issuer (with respect to itself, its operations, and its financial condition) and bond counsel (with respect to descriptions of financing documents and tax law matters). All members of the financing team review and comment on OS drafts. Parties also conduct a “due diligence” investigation with respect to the OS. This due diligence involves inquiries of issuer officials and review of supporting documentation. A POS and an OS are generally not posted electronically or printed and distributed until all concerned parties are comfortable that the information included is accurate and complete.