Magazine article American Banker

REGULATION: Changes Ready to Take Effect for SEC's Rule 15c2-12 on Disclosure

Magazine article American Banker

REGULATION: Changes Ready to Take Effect for SEC's Rule 15c2-12 on Disclosure

Article excerpt

Byline: Andrew Ackerman

Changes to the Securities and Exchange Commission's Rule 15c2-12 designed to both increase the quantity and timeliness of issuers' continuing disclosures and take effect Wednesday and strongly encourage issuers of variable-rate demand obligations to use so-called long-form disclosure in their offering documents.

The changes to the rule, which the SEC approved in May, apply to continuing disclosure agreements executed on or after Wednesday, SEC staff have said. Dealers generally are prohibited from underwriting municipal securities unless the issuer has contractually agreed to adhere to the rule, which mandates the filing of annual financial and operating information and event notices with the Municipal Securities Rulemaking Board.

In general, the rule change expands the categories of events that issuers must disclose on an ongoing basis and requires that they submit these filings to the MSRB within 10 days of an event's occurrence, replacing the previous "timely basis" filing standard. While the issuer previously could determine if an event was material, the rule changes require that most events - such as tender offers or failure to pay principal and interest - be reported without regard to materiality.

The SEC also is requiring that issuers disclose a broader array of events that may adversely affect a bond's tax exemption, including the receipt of a so-called Internal Revenue Service notice of proposed issue, or Form 5701-TEB.

The adopting release also removes a long-standing exemption for VRDOs from continuing disclosures. …

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