8.4 Continuing Disclosure
Public agencies take on certain responsibilities to file information regularly when they issue municipal securities, including an annual report and notices of certain events. The legal basis for this formal ongoing disclosure obligation is SEC Rule 15c2-12 under Section 15(c)(2) the Securities Exchange Act of 1934 (See Chapter 6, Securities Laws Pertaining to Municipal Debt). SEC Rule 15c212, subject to certain exemptions described below, requires the bond underwriter to obtain a commitment from the issuer or other obligated party to provide this ongoing disclosure (also known as an “undertaking”). This undertaking generally takes the form of a continuing disclosure certificate or continuing disclosure agreement (CDA) executed by the issuer or other obligated person with respect to the securities, or other obligor, at closing. In most cases, the information to be provided subject to a CDA includes annual financial and operating information of the kind and substance contained in the offering documents, audited financial statements, notice of the occurrence of certain events, and notice of any failure to meet these reporting requirements.
The GFOA Best Practice Understanding Your Continue Disclosure Responsibilities recommends that issuers have a clear understanding of their specific reporting responsibilities outlined in the CDA. If the issuer has included certain financial information in its OS it must take the appropriate steps to see that this information is updated and reported annually. It is imperative that issuers work with their bond counsel, underwriter, and other consultants to determine what will be reported and in what form. Additionally, issuers should work with bond counsel or other external consultants to ensure they understand how to implement changes to legal and regulatory requirements. For example, in 2010, the SEC implemented a widespread change to SEC Rule 15c2-12 that may affect an issuer’s reporting requirements. See Section 8.4.2, Event Notices.
Both the annual report and any event notices are required to be filed in searchable PDF format through the Electronic Municipal Market Access website (EMMA) maintained by the Municipal Securities Rulemaking Board. Many issuers’ filings are handled by finance or other staff, while others engage the trustee, financial advisor, or other outside consultant as a dissemination agent, to remind the issuer of the required filings and assist with their preparation and submission to EMMA.