continuing disclosure · 2017. 3. 22. · continuing disclosure agreements not all continuing...
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CONTINUING DISCLOSUREWhat am I continuing to disclose…and who is EMMA?
Ohio GFOA Annual Conference & Membership Meeting
September 21-23, 2016
Jennifer Blaser & Diana Silveira, Dinsmore & Shohl LLP
TABLE OF CONTENTS
1. Continuing Disclosure: SEC Rules
2. Continuing Disclosure Agreements
3. EMMA
4. Compliance Strategy/Best Practices
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SEC Rules History
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SEC Rules
Securities Act of 1933 – passed with the objective of providing investors full disclosure of material facts about securities offered and sold
Securities Exchange Act of 1934 – created the Securities and Exchange Commission (SEC)
» While municipal securities are exempt from the registration and reporting requirements of the Securities Acts, issuers are subject to liability under the anti-fraud provisions of the Securities Acts (principally Rule 10b-5 of the Securities Exchange Act of 1934)
On January 1, 1990, Rule 15(c)2-12 went into effect which required greater access to Official Statements for primary offerings
» While the quality of disclosure for primary offerings significantly improved with the passage of Rule 15(c)2-12, there was a continuing concern with the adequacy of disclosure in the secondary market
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SEC Rules
To address continuing disclosure for
municipal issuers in the secondary market,
the SEC amended Rule 15(c)2-12 on
November 10, 1994
Under the amended rule, broker-dealers are
barred from buying municipal securities
unless the issuer has agreed, in writing, to
provide ongoing disclosure
» This provision is the basis for a required
Continuing Disclosure Agreement (CDA)
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SEC Rule 15(c)2-12
Rule 15(c)2-12: governs primary offering disclosure and continuing
disclosure, including submission of annual financial information and
material event notices
» Primary offering of municipal securities in principal amount of $1
million or more, subject to exceptions
» Directly governs underwriters and indirectly governs issuers and
obligated persons
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Continuing Disclosure
Agreements
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Continuing Disclosure Agreements
Issuer subject to Rule 15(c)2-12 must enter into a continuing
disclosure undertaking
» Continuing Disclosure Agreement
Continuing Disclosure Agreements
» Annual filing date
» Sets forth what needs to be filed:
• Audited financials*
• Selected annual financial/operating data from the Official
Statement (largest taxpayers, tax collection rates, assessed
valuation, etc.)
• Material Event Notices (rating change, late payment, etc.)
*if audit not available by filing date, is to be filed once it becomes available
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Continuing Disclosure Agreements
Not all Continuing Disclosure Agreement are the same
» After current issuance of a security, if have outstanding debt:
• $10,000,000 or more Audited financials plus
financial/operating data
• Less than $10,000,000 only Audited financials
Each debt issuance has its own Continuing Disclosure Agreement
» Example: 3 outstanding bond issues (each subject to 15(c)2-12)
3 Continuing Disclosure Agreements
» Ideally all 3 Continuing Disclosure Agreements have the same
required filing date and are substantially the same in all material
aspects
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Continuing Disclosure Material Events
Material Events
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Events Materiality
Principal and interest payment delinquencies Without regard to materiality
Non-payment related defaults If material
Unscheduled draws on debt service reserves reflecting financial difficulties Without regard to materiality
Unscheduled draws on credit enhancements reflecting financial difficulties Without regard to materiality
Substitution of credit or liquidity providers, or their failure to perform Without regard to materiality
Adverse tax opinions or events affecting the tax-exempt status of the security Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or
final determinations of taxability, notices of Proposed Issue (IRS Form 5701-TEB), or
other material notices or determinations with respect to the tax status of the security
Modifications to rights of security holders If material
Bond calls If material
Defeasances Without regard to materiality
Release, substitution, or sale of property securing repayment of the securities If material
Rating changes Without regard to materiality
Failure to file continuing disclosures by deadline*
Tender offers Without regard to materiality
Bankruptcy, insolvency, receivership or similar event of the obligated person Without regard to materiality
The consummation of a merger, consolidation, or acquisition involving an obligated
person, or the sale of all or substantially all of the assets of the obligated person, other
than in the ordinary course of business, the entry into a definitive agreement to
undertake such an action or the termination of a definitive agreement relating to any
such actions, other than pursuant to its terms
If material
Appointment of a successor or additional trustee or the change of name of a trustee If material
*Does not appear on the list but is a twelfth material event notice requirement in the rule. Source: Securities and Exchange Commission
Continuing Disclosure - Offering Documents
Offering Document/Official Statement
» Must summarize the requirements of the Continuing Disclosure Agreement
» Issuer must disclose if in material compliance with prior continuing disclosure obligations for past 5 yearsExample: Rule 15(c)2-12 (the “Rule”), promulgated by the Securities and Exchange Commission, requires continuing disclosure with respect to new offerings of municipal securities of $1,000,000 or more. The Issuer is obligated to provide such continuing disclosure with respect to one or more previously issued and currently outstanding bond or note issues. The Issuer has been in material compliance with its continuing disclosure obligations for the past 5 years. The audited financial statements of the District are not always available by the annual filing date of October 15; therefore, historically, the Issuer filed all required operating data by the filing date and filed the audited financial statements within thirty days after they became available on the Ohio Auditor of State’s website. The Issuer did not provide notice of an insurer downgrade in 2012 with respect to the Issuer’s Series 2010 Bonds A notice of such insurer downgrade was filed on February 16, 2016.
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EMMA
Continuing Disclosure filings to be made on EMMA
» Electronic Municipal Market Access System
» Home Page: http://emma.msrb.org/
EMMA provides details on each publically offered security including:
» Official Statement
» CUSIP, maturity information, interest rate, principal amounts,
initial offering price and yield
» Continuing disclosure broken into Audited Financials,
Financial/Operating Data, Event Notices
» Trade Activity
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Filing on EMMA
Start on the Home Page: http://emma.msrb.org/
Click “EMMA Dataport” in the top right of the home page
Then Log-In
» Use your User ID and Password
» If you’re new to EMMA, Register
• To register, certain information will be needed about who you
are and who you are filing for
• Someone will need to confirm your information
Once logged in, the Submission Portal will load
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EMMA Submission Portal
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EMMA Submission Page
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EMMA Submission Page
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EMMA CUSIP Page
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EMMA CUSIP Page
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EMMA Contact Info Page
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EMMA Upload Page
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EMMA will
warn you
about this
EMMA Upload Page
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EMMA Preview Page
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After Publication on EMMA
Once you click “Publish”, the main Submission webpage will load
This time, there will be a button to allow you to
“Print Submission Confirmation”
EMMA will also send you a Confirmation Email
We highly recommend that you print the Confirmation, either via the
link or the email
If there is ever a question regarding whether a filing was made, or if
you need to amend a filing, you will need the Submission ID number
from the Confirmation
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EMMA Material Event Filing
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Compliance Strategy/ Best
Practices
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Compliance Strategy/Best Practices
Written Policy
Dissemination Agent
EMMA – E-mail Reminders
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Compliance Strategy
Written Policy
This policy should include the following information:
» Who is in charge?
» A file of Continuing Disclosure Agreements, review reporting
requirements and reporting dates
» Confirm all necessary data is filed timely
» Annual review
» Monitor material events
» Periodic training
Even if a dissemination agent is hired it is ultimately the Issuer’s
obligation to confirm required filings are made on time and with
complete and accurate information
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Compliance Strategy Dissemination Agent
Dissemination Agent
A dissemination agent can fill the following roles:
» Remind and assist in required filings
» Provide disclosure templates for annual filings
» Provide corrective action for failed filings
» Assist with filings of voluntary or material event filings
Dissemination agents usually cannot monitor if there has been a
material event
» Issuer must notify dissemination agent of a material event
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MSRB EMMA E-mail Reminders
The MSRB EMMA site allows users to set up e-mail alerts in
advance of required filings
Signing up for these can provide peace of mind that required filing
dates will not be missed
For example, an e-mail reminder alert can be scheduled for 60 days
before required annual filings
This reminder will occur annually unless canceled
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CONTACT INFORMATION
Jennifer BlaserDinsmore & Shohl LLP
191 W. Nationwide Blvd., Ste. 300
Columbus, Ohio 43215
Phone: (614) 233-5391
Diana SilveiraDinsmore & Shohl LLP
191 W. Nationwide Blvd., Ste. 300
Columbus, Ohio 43215
Phone: (614) 233-5406
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