If you are an issuer of municipal securities and elected to self-report potential disclosure obligation violations with respect to such securities under the MCDC Initiative, the U.S. Securities and Exchange Commission (SEC) may contact you regarding a proposed settlement offer related to such violations.

On February 10, 2016, the Government Finance Officers Association (GFOA) alerted its members that the SEC has begun to propose settlement offers to issuers of municipal securities that self-reported potential violations of disclosure obligations under the SEC’s Municipalities Continuing Disclosure Cooperation Initiative (MCDC Initiative) in 2014.

As a condition to the public offering of municipal securities, issuers of such securities are generally obligated to disclose certain financial information and operating data, as well as the occurrence of certain events, on an annual basis while those securities are outstanding. As a result of perceived shortcomings in issuers meeting their continuing disclosure obligations, the SEC introduced the MCDC Initiative, which offered underwriters and issuers of municipal securities the opportunity to self-report potential violations of disclosure obligations during the past five years in exchange for more lenient settlements than would otherwise be available for violations which were not self-reported. While underwriters are subject to monetary penalties under the MCDC Initiative, issuers are in most cases subject only to non-monetary settlement arrangements. The opportunity to self-report such potential violations with respect to issuers ended on December 1, 2014.

The SEC recently completed its third and final round of settlements with respect to underwriters and is beginning to contact those issuers who have self-reported under the MCDC Initiative regarding settlements. In its alert, GFOA warns issuers that the SEC is providing only short time frames, as little as one week in some cases, to dispute any facts regarding and to decide whether or not to agree to a proposed settlement, though the SEC has clarified that an extension will be granted upon request. In any case, if you have self-reported potential disclosure obligations under the MCDC Initiative and are contacted by the SEC regarding a related settlement, please contact us as soon as possible to discuss the resolution of any such proposed settlements.