For many years significant attention has been given to the quality and transparency of disclosure practices by issuers in the municipal market. More recently, and particularly in light of the COVID-19 impact on the finances and operations of many municipal issuers, there has been a heightened focus on the timeliness of information provided to investors. An investor relations program is not a substitute for the requirements of Securities and Exchange Commission (SEC) Rule 15c2-12 but is a means to broadly share that required disclosure information and to provide a framework and a platform for voluntary disclosures to promote the efficient sale of debt instruments in both the primary and secondary markets and to improve the overall reception of debt offerings by investors. See GFOA best practices “Understanding Your Continuing Disclosure Responsibilities” and “Voluntary Disclosure”.
An investor relations program is optional, but it can help issuers achieve important disclosure objectives such as broad dissemination of information, dissemination of quality information and timely release of information, and issuers should evaluate establishing an investor relations program in the context of meeting their continuing disclosure responsibilities and their broader disclosure goals.
GFOA recommends that governmental bond issuers consider developing an investor relations program in conjunction with their continuing disclosure policy. The centerpiece of such a program is a commitment to provide broad dissemination of comprehensive disclosure of financial, operating, and other significant information in a timely manner consistent with federal, state and local laws.
Issuers are encouraged to promote the accessibility of required disclosure information and to consider providing additional information to investors beyond what is required under any continuing disclosure undertaking. While an investor relations program is optional, a well-designed program can help issuers achieve several important disclosure objectives.
OBJECTIVES OF AN INVESTOR RELATIONS PROGRAM
Broad Dissemination of Information to the Market
Investor Relations Website and Other Communication Platforms: One of the most common ways for issuers to provide financial transparency to investors is by posting disclosure information on an investor relations website and regularly updating that site with financial data supplemental to the requisite annual reports and material events notices that must be filed with the MSRB’s Electronic Municipal Market Access (“EMMA”) website. This investor relations website may be a website that an issuer hosts as part of their governmental platform or a website an issuer contracts for with a third party. Other ways of communicating with investors include conference calls, net roadshows, Twitter, or other social platform accounts that provide means of broad dissemination of information. In any event, the issuer must control, maintain, and update the content of such communication platforms.
Responding to Investor Questions: Consideration should be given to means of communication to all investors when a single investor poses a question. Investors may contact issuers directly from time to time with questions regarding issuers’ finances or operations. Fielding questions from investors is not prohibited, but it is a best practice for issuers to identify a single point person for responding to such inquiries to maintain consistency and to respond to inquiries with information that is already available to the general public when possible. Any material information should be disseminated to the market at large.
Quality and Type of Information
Information Quality Control: Issuers should consult with their legal counsel and advisors regarding appropriateness of disclosing information prior to releasing it publicly. Disclosures to the market should be dated, clearly state that any disclosure speaks only as of its date, and that the issuer has not undertaken to update or correct the information based on events occurring after that date. Public statements, press releases, website postings, and statements to the press and governing board proceedings are all widely and publicly available and are often monitored by rating agencies, investor analysts and other market participants. However, issuers should take steps to ensure that an investors relations program platforms do not promote political-speak that may include non-disclosure information. “Newsworthy” developments such as natural disasters or the emergence of financial setbacks or challenges present heightened risk. Issuer websites and other communication platforms can be useful tools for providing a reliable source of accurate information in cases where other information is confusing. Consideration should be given to the fact that any record, created as a result of the investor relations program, may be subject to internal policies and/or federal, state and local laws concerning document retention and freedom of information.
ESG: In response to increased interest in Environmental, Social and Governance (“ESG”) disclosure, many issuers provide ESG-related information to investors and other stakeholders on their websites, often under an ESG designated section or tab.
Bond Proceeds Accountability: Issuers are encouraged to provide information that enables the public and investors to track expenditures of bond proceeds back to the capital plan. This transparency increases accountability and oversight and is a helpful resource for investors looking to invest into specific projects or types of projects. Additionally, some governmental entities may have policy or statutory requirements relating to accountability, including the use of citizen’s oversight committees, annual performance audits, and financial audits on the use of bond proceeds.
Timely Release of Information
The SEC and certain municipal market participants have raised concerns about timeliness of municipal disclosure both in the context of the time it takes issuers to prepare and release their required disclosure information as well as in the context of availability of information in response to an event that has a financial or operational impact. See GFOA best practice “Voluntary Disclosure”. An investor relations program is a helpful tool in providing information to the market in a timely manner because it creates a framework which identifies who in the issuer organization is responsible for collection and dissemination of information, established information review and approval process, and specifies when and how information should be released to investors and the market. To be effective in providing information in a timely manner, an investor relations program needs to be tightly integrated with other departments and teams in the issuer organization, such as executive management team, as well as legal, finance, accounting and operating departments.
Enhanced marketing outreach: Engaging in marketing activities to alert investors of a pending bond sale can be effective, especially if the debt instruments are sold competitively. Such pre- sale activities may include posting bond sale information on the issuer website, scheduling investor meetings (whether in-person or online) or conference calls, and webcasting of issuer conference calls and on-site visits.
Providing information to rating agencies: It is important to maintain a good relationship with the rating agencies and credit analysts, including distribution of disclosure information and keeping them informed of any changes that could affect credit quality as well as any actions or plans to address financial problems.
Two-way communication: In addition to providing information to investors, an investor relations program should be designed to collect information such as credit concerns or bond structure feedback from investors and effectively communicate such information within the issuer organization.
- GFOA Best Practice, Website Posting of Financial Documents
- GFOA Best Practice, Understanding Your Continuing Disclosure Responsibilities
- GFOA Best PSEC through its Office of Municipal Securities, May 2020, “The Importance of Disclosure for Our Municipal Markets”
- EMMA - http://emma.msrb.org/
- Board approval date: Friday, March 8, 2019