March 21, 2017
SEC Proposes Significant Alterations for Financial Obligation Disclosures for Governmental Issuers and Certain Nonprofit Organizations

The Securities and Exchange Commission (SEC) recently sent a clear message to participants in the municipal markets: it intends to require a greater level of disclosure, and more timely disclosure, regarding an obligated person’s incurrence of debt and other financial obligations. The SEC’s recent actions signal that it expects more detail about the terms of any material non-public transactions that could trigger events of default and cross-defaults for investors. Those terms include covenants and events of default. The SEC’s Rule 15c2-12 generally requires underwriters of municipal securities to obtain an agreement from “obligated persons” to provide, among other things, timely notice of certain events listed in the rule. “Obligated persons” include governmental issuers and nonprofit organizations that have borrowed proceeds of securities from a governmental issuer. On March 1, 2017, the SEC proposed to amend the Rule, the first significant revisions since 2010.1

1 - Under the 2010 revisions, the SEC modified and expanded the “listed events” that must be reported by an obligated person, and required that the obligated person provide notice of any such event within 10 business days of its occurrence.

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