GFOA Publishes Alert on SEC Municipalities Continuing Disclosure Cooperation Initiative

Friday, July 11, 2014

This week, the GFOA published an alert for members on the SEC’s MCDC initiative, which was announced by SEC’s Enforcement Division on March 10, 2014. The initiative provides issuers and underwriters the opportunity to self-report instances of material misstatements in bond offering documents regarding the issuer’s prior compliance with its continuing disclosure obligations. The SEC is not defining the term “material,” however, and has indicated that a determination of the materiality of submissions under the initiative will be made on a case-by-case basis, depending on the overall facts and circumstances of a situation. The deadline for self-reporting under the MCDC Initiative is September 10, 2014.


While SEC encourages issuers and underwriters to participate by offering predetermined and more lenient settlement terms, the GFOA urges its members to exercise caution and familiarize themselves with the details of the initiative before consenting to engage in this program. For example, though the terms of the initiative preclude the SEC from imposing monetary fines on participating issuers, the SEC reserves the right to pursue separate enforcements against individuals within a government it deems to be culpable. Additional information on individual liability and standardized settlement terms under the initiative, as well as additional background information and GFOA recommendations on the initiative, are provided in the alert. Members are urged to review the alert as you contemplate reacting to the initiative.