December 1 Deadline Approaches for Issuers to Participate in SEC’s MCDC Initiative

On August 1, 2014, the SEC’s Enforcement Division announced an extension of the deadline for state and local government issuers to participate in the commission’s Municipalities Continuing Disclosure Cooperation (MCDC) Initiative from September 10, 2014 to December 1, 2014.  The deadline for underwriters to participate was not extended beyond September 10, 2014 (view the SEC press release on the extension). MCDC is a voluntary program, announced by the SEC on March 10, 2014, that provides government issuers and underwriters with the opportunity to self-report instances of material misstatements in bond offering documents regarding the issuers’ prior compliance with its continuing disclosure obligations. While the program is voluntary, the GFOA raised a number of concerns with the SEC (see advocacy letter), including concerns about the limited time that governments would have to review instances of material misstatements reported by underwriters participating in the initiative. The extended deadline the SEC provides state and local governments with nearly three months after underwriters submit their findings of material misstatements made by issuers to communicate with underwriters, review and determine the accuracy of their findings, and discuss whether or not to dispute the findings.

The GFOA’s Committee on Governmental Debt Management has released a series of alerts to provide members with background information on MCDC and recommendations on how to approach the initiative.  These alerts, which are provided below, recommend that issuers contact all underwriters on their bond deals over the past five years to ask that underwriters share any information they provided to the SEC under the initiative pertaining to these bonds.  The documents also discuss some of the common reporting errors that issuers can expect to see from underwriters, and provides a link to Considerations for Analysis by Issuers of Materiality and Self Reporting, a publication issued by the National Association of Bond Lawyers (NABL) intended to assist issuers in determining materiality for the purposes of MCDC.