Continuing Disclosure Amid the COVID-19 Pandemic


The COVID-19 pandemic is presenting unique challenges and causing operational and financial disruptions for many governmental issuers and other borrowers (obligated persons), who are subject to the continuing disclosure requirements of Rule 15c2-12 of the U.S. Securities and Exchange Commission (SEC). One of these challenges is the determination of whether and what to disclose to bondholders under existing continuing disclosure undertakings or in the context of voluntary disclosure.

Recognizing the uncertainty surrounding disclosure obligations during this time, the Chairman of the SEC and the Director of the SEC’s Office of Municipal Securities released a joint public statement on May 4, 2020, addressing the importance of disclosure for municipal bond markets and generally encouraging obligated persons to provide bondholders with as much information about their current financial and operating condition as is reasonably practicable. What is reasonably practicable will depend on many factors that should be discussed with your bond or disclosure counsel. There are, however, some best practices that obligated persons should keep in mind to ensure compliance with their continuing disclosure obligations:

Any forward-looking information should be appropriately framed when it comes to assumptions and estimates. In addition, the joint public statement speaks to obligated persons using “meaningful cautionary language” when providing forward-looking information, such as descriptions of (i) relevant facts or assumptions concerning the reliability and materiality of the information, (ii) how certain information may be incomplete or unknown, and (iii) the process used to produce the information. “Meaningful cautionary language” may include adequate risk disclosure, warning readers about specific risks that may materially impact assumptions, estimates, forecasts, and similar forward-looking information.

In addition, consideration should be given to the existence of certain circumstances in connection with the COVID-19 pandemic, some of which are addressed in the joint public statement, which may cause heightened awareness when it comes to the prospects of providing voluntary disclosure. Examples of these circumstances include: (i) events that are certain (or nearly certain) to cause a payment default in the future, (ii) the need for a payment deferral, (iii) certainty (or near certainty) of a rating change or change in rating outlook in the future, (iv) addressing the impact of COVID-19 in industry sectors that have been placed on negative credit watch, (v) timing considerations with respect to municipal offerings or annual disclosure, and/or (vi) public statements generally acknowledging the pandemic has affected expenses and/or revenues in a meaningful manner and related plans for remedial action. While the existence of these circumstances does not require voluntary disclosure, the existence of these circumstances may present unique opportunities for dialogue between obligated persons and public finance professionals as to the relevance and importance of voluntary disclosure as a result of the COVID-19 pandemic.

Obligated persons are strongly encouraged to consult with their bond or disclosure counsel in complying with annual or other periodic disclosure commitments, material events disclosures, and handling voluntary disclosure to the extent it is appropriate.

While the observations above should be considered in light of COVID-19, obligated persons should also continue to make every attempt to comply with their existing continuing disclosure obligations in a timely manner.

Click HERE for a copy of the joint public statement. 


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National Law Review, Volume X, Number 148