• New Filing Requirements -- Continuing Disclosure Obligations
  • October 6, 2009 | Authors: Lisa A. Chiesa; W. Ronald Stout; Linda S. Hackett
  • Law Firm: Thorp Reed & Armstrong, LLP - Pittsburgh Office
  • Effective July 1, 2009, issuers of municipal securities, such as school districts and municipalities ("Issuers") and obligated persons who are committed by contract or other arrangement to support the payment of municipal securities ("Obligated Persons") must now provide the annual financial information and operating data that is required by Securities and Exchange Commission ("SEC") Rule 15c2-12 (the "Rule") via the EMMA[1] system, instead of via NRMSIRS.[2] EMMA is designed to improve the opportunity for public investors to access material information about municipal securities issuers, their securities and the prices at which the securities trade. The amendments to the Rule do not change the type of information that must be disclosed to the public, they merely change the manner in which the disclosure is to be made.

    Pursuant to the Rule, the following information must be provided:

    (a) annual financial information and operating data of the type included in the final offering statement (including audited financial statements);

    (b) material event notices which include (1) principal and interest payment delinquencies, (2) non-payment related defaults, (3) unscheduled draws on debt service reserves reflecting financial difficulties, (4) unscheduled draws on credit enhancements reflecting financial difficulties, (5) substitution of credit or liquidity providers, or their failure to perform, (6) adverse tax opinions or events affecting the tax-exempt status of the security, (7) modifications to rights of security holders, (8) bond calls, (9) defeasances, (10) release, substitution, or sale of property securing repayment of the securities, or (11) rating changes; and

    (c) notices of a failure to provide annual financial information and operating data.

    The primary purpose of the Rule is to prevent fraud and increase transparency in the market place. Prior to the adoption of the amendments, an Issuer or Obligated Person was required to file annual financial information with the NRMSIRS, the State Information Repository ("SID"), if one exists in the particular state in which the municipal securities were issued, and the Municipal Securities Rulemaking Board (the "MSRB"). Although the SEC has amended the Rule to eliminate the reference to NRMSIRS and SIDs and require that information be filed only with EMMA, it does not preempt state law. Therefore, state law may still require that Issuers and/or Obligated Persons submit information to the appropriate SID. Currently in Pennsylvania, there is no SID and therefore no state law requirement for filing continuing annual financial disclosure at the state level.

    Submission procedures for posting information on EMMA and answers to specific questions can be found on EMMA’s website at www.emma.msrb.org/. There is no charge to submit information via EMMA, and each submitter has a choice of an internet-based electronic submission interface or an electronic computer-to-computer streaming connection. All submitters must be registered in the MSRB Gateway in order to make submissions. All Issuers and Obligated Persons must set up a "company account" in the MSRB Gateway and each user of the "company account" must set up a user account. The registration process for the MSRB Gateway is outlined in the "EMMA Dataport Manual for Continuing Disclosure Submissions" which can be found at www.emma.msrb.org.

    Note that for most Issuers and Obligated Persons, the filing deadline is generally six (6) months following the end of its fiscal year.


    [1]EMMA is the MSRB’s Electronic Municipal Market Access System.

    [2]NRMSIRS are Nationally Recognized Municipal Securities Information Repositories.