On January 20, the Municipal Securities Rulemaking Board ("MSRB") submitted comments to the Securities and Exchange Commission ("SEC") urging the Commission to revisit Rule 15c2-12. In its comment letter, the MSRB proposed that the SEC promulgate additional rules requiring disclosures by municipal issuers of any form of debt incurred, including "bank loans or other debt-like obligations such as swap transactions, guarantees, and lease financing arrangements..." A full copy of the MSRB comment letter is available here - http://www.msrb.org/msrb1/pdfs/MSRB-Comment-Letter-on-SEC-Rule-15c2-12-January-2015.pdf.
In the comment letter, the MSRB noted its belief that "the availability of timely disclosure of additional debt in any form and debt-like obligations is essential to foster market transparency and to ensure a fair and efficient municipal market. The MSRB is aware of the increasing use of bank loans and direct-purchase debt as financing alternatives to public offerings in the municipal securities market for funding capital improvement projects or refunding outstanding bonds. Specifically, these debt obligations are not subject to Rule 15c2-12 and, therefore, are not required to be reported through filings on EMMA." EMMA is the MSRB's online Electronic Municipal Market Access system.
The recent MSRB comment letter is a continuation of a theme launched in April 2012 when the agency issued a notice encouraging state and local governments to make voluntary disclosure of bank loan documents. MSRB Notice 2012-18 encourages the voluntary filing of bank loan information including either a summary of the key terms of the bank loan, or the bank loan financing documents themselves.
In the January 20th comment letter, the MSRB urged the Commission to consider adoption of an ongoing municipal disclosure item similar to that required of corporate registrants under Form 8-K, Item 2.03-Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant. The MSRB stated that such a requirement would satisfy their concerns.
The MSRB comments were submitted in response to SEC Request for Comment under the Paperwork Reduction Act on Rule 15c2-12. For more information on these issues, please contact J. Andrew Gipson.