© Copyright 2014 by K&L Gates LLP. All rights reserved. Municipalities Continuing Disclosure Initiative and Electronic Municipal Market Access

THE DEVIL IS IN THE DETAILS! klgates.com 2

BACKGROUND  Securities Exchange Commission (SEC) generally (historically) regulated the issuance of corporate (not public) securities  In the 1990s, embarked on a new venture  The “municipal market”  What prompted this? klgates.com 3

RULE 15C-2(12)  1994 – circa  Applies to the underwriter of municipal bonds  With some exceptions, underwriter must receive a “deemed final” official statement  Includes all “material” information about the issuer  No “material” omissions  No “material” misstatements klgates.com 4

CONTINUING DISCLOSURE UNDERTAKING  Undertaking by the governmental issuer  An annual requirement  Extends for the life of the bond issue  The undertaking includes required filings  Annual financial statements – audited (when available)  Updated financial and operating data that was included in the official statement  Timing – 7-9 months of fiscal year end klgates.com 5

CONTINUING DISCLOSURE UNDERTAKING  Material Events  Listed items  Failure to comply with covenants Redemption or defeasance of Bonds Rating Changes – Up or Down Time to File Promptly Now – within 10 business days klgates.com 6

– COMPLIANCE  Sketchy  Until 2009, filings were to be made with 4 national repositories  Data not publicly available  2009 – SEC/MSRB created Electronic Municipalities Marketplace Access (“EMMA”)  Official central repository  No more private repositories klgates.com 7

 SEC made a number of pronouncements  Really “concerned” about the municipal marketplace  What about those “undertakings”? klgates.com 8

MUNICIPALITIES CONTINUING DISCLOSURE COOPERATION INITIATIVE (MCDC)  When an issuer sells bonds to the public, it prepares a prospectus or official statement describing the bonds and the issuer and include a description of the annual financial information, including certain listed events, to be filed for subsequent investors to access after the initial offering of the bonds.  The Securities and Exchange Commission (SEC) has been concerned that issuer compliance with these continuing disclosure obligations is deficient. klgates.com 9

 MCDC focuses attention on what issuers have said in their official statements about their past compliance with continuing disclosure obligations.  MCDC gives underwriters and issuers the “opportunity” to report if they find “material misstatements” about compliance with their continuing disclosure obligations in any official statement released in the past five years.  Underwriters had to report any transactions under the MCDC by September 10,  Issuers have until December 1, 2014, to report to the SEC under the MCDC. klgates.com 10

 If an issuer files a report with the SEC, it agrees to various terms for settlement if the SEC concludes that there was a “material misstatement” in the issuer’s official statement.  The SEC’s offered terms for settlement include no financial penalties for issuers, but there are consequences to consider.  Issuers must determine whether they should self-report -- and are advised to discuss with counsel whether and how to report and consider potential outcomes. klgates.com 11

HOW TO AVOID MCDC! Electronic Municipalities Market Access “EMMA” EMMA is the SEC’s official repository for all information related to municipal bonds. It’s open to the public at: klgates.com 12

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LINKS TO MSRB/EMMA  (Video) Tutorial on Submitting Primary Market Disclosures for a New Issue: Tutorials.asp?section=1&video=0 Tutorials.asp?section=1&video=0  MSRB Podcast for State & Local Governments: Providing Disclosure Information to Investors:  klgates.com 14

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