6.3.3 Disclosure Standards and Guidance
There are no “standards” for what an OS must include apart from the requirements that it be sufficiently complete to allow a potential investor to make an investment decision without independent investigation and that it not contain material misstatements or omissions. Guidance as to what may be desirable to include in an OS is, however, available from a variety of sources. The Government Finance Officers Association (GFOA), for example, has produced comprehensive guidelines for disclosure in municipal offerings, titled Disclosure Guidelines for State and Local Government Securities (the “GFOA Guidelines”). The GFOA Guidelines are not legally binding, and even though they have not been updated since 1991, they still provide a useful standard for disclosure that can be referred to by issuers of municipal securities. The Disclosure Handbook for Municipal Securities published by the National Federation of Municipal Analysts (NFMA) contains specific disclosure recommendations for various types of debt financing techniques. The NFMA has published detailed guidelines for specific sectors of
What should be included in an OS?
While they are helpful to provide readers with relevant and customary information in a format they are familiar with, templates, guidelines, and checklists cannot substitute for judgment. Each municipal offering has its own story, and a mere update to a model disclosure document without careful reflection about the current transaction does not suffice. The issuer and its financing professionals must carefully consider the issuer’s current situation and the terms of the debt, security, and source of funds for its repayment and form an independent judgment as to what information must or should be included to assure that the OS contains the information needed for a potential investor to make an informed investment decision and does not contain material misstatements or omissions. A sense of balance and perspective is also essential.
the municipal market. The National Association of Bond Lawyers (NABL) has issued guidelines for developing and adopting disclosure policies.113
Attaining the standards set by NFMA and NABL and implementing the best practice recommendations of the GFOA requires issuers to administer a process to collect, interpret, and report on information necessary to investors. The goal in the end is to be comprehensive, yet concise to present the requisite information in a manner that is clear and practicable for investors.