MSRB NOTICE 2010-54 (DECEMBER 1, 2010)

REMINDER OF CHANGES TO THE CONTINUING DISCLOSURE SERVICE OF THE EMMA SYSTEM RELATING TO NEW SEC RULE 15C2-12 PROVISIONS

As previously announced,[1] amendments to the continuing disclosure service of the Municipal Securities Rulemaking Board (the “MSRB”) Electronic Municipal Market Access (“EMMA”) system to reflect amendments by the Securities and Exchange Commission (“SEC”) to Securities Exchange Act Rule 15c2-12 (“Rule 15c2-12” and the “Rule 15c2-12 Amendment”) become effective December 1, 2010.[2] The Rule 15c2-12 Amendment modifies several provisions of Rule 15c2-12 relating to the submission of continuing disclosure documents to EMMA.

The Rule 15c2-12 Amendment, among other things, (1) removes the exemption from the continuing disclosure provisions of Rule 15c2-12 for variable rate demand and other demand securities;[3] (2) modifies Rule 15c2-12 to establish a timeliness standard for submission of notices of certain events (“Rule 15c2-12 Event Notices”) of ten business days after the occurrence of the event; (3) deletes the general materiality condition for certain of the Rule 15c2-12 Event Notices; (4) modifies the language of the Rule 15c2-12 Event Notice regarding adverse tax events;[4] and (5) adds new Rule 15c2-12 Event Notices.[5]  The SEC Release provides an effective date of August 9, 2010 and a compliance date of December 1, 2010 for the 15c2-12 Amendments.

In order to allow issuers and obligated persons to adhere to the requirements of the Rule 15c2-12 Amendment as of today, the MSRB has enhanced the EMMA system to modify: a) the language of the EMMA continuing disclosure service to reflect the materiality standard changes under the Rule 15c2-12 Amendment; and b) the list of event-based disclosures that may be submitted to the EMMA continuing disclosure service under the Rule 15c2-12 Amendment. 

The continuing disclosure service of EMMA will accept submissions of, and make publicly available through EMMA, the following categories of event-based continuing disclosure documents:[6]

Rule 15c2-12 Event Notices

  • principal and interest payment delinquencies
  • non-payment related defaults, if material
  • unscheduled draws on debt service reserves reflecting financial difficulties
  • unscheduled draws on credit enhancements reflecting financial difficulties
  • substitution of credit or liquidity providers or their failure to perform
  • adverse tax opinions, IRS notices or material events affecting the tax status of the security[7]
  • modifications to rights of security holders, if material
  • bond calls, if material[8]
  • defeasances
  • release, substitution or sale of property securing repayment of the securities, if material
  • rating changes
  • tender offers[9]
  • bankruptcy, insolvency, receivership or similar event of the obligated person[10]
  • merger, consolidation, or acquisition of the obligated person, if material[11]
  • appointment of a successor or additional trustee, or the change of name of a trustee, if material

Additional/Voluntary Event-Based Disclosures [12]

  • amendment to continuing disclosure undertaking
  • change in obligated person
  • notice to investors pursuant to bond documents
  • certain communications from the Internal Revenue Service
  • secondary market purchases
  • bid for auction rate or other securities
  • capital or other financing plan
  • litigation/enforcement action
  • change of tender agent, remarketing agent, or other on-going party
  • derivative or other similar transaction
  • other event-based disclosures

*                 *                 *

Questions on this notice may be directed to Leslie Carey, Associate General Counsel, or Justin R. Pica, Director, Uniform Practice Policy, at (703) 797-6600. Questions about making continuing disclosure submissions should be directed to the Market Information Help Desk at (703) 797-6668.

December 1, 2010


[1] See MSRB Notice 2010-32 (August 27, 2010); Release No. 34-62742 (August 19, 2010), 75 FR 52383 (August 25, 2010).

[2] See Release No. 34-62184A; File No. S7-15-09 (May 26, 2010), 75 FR 33100 (June 10, 2010) (the “SEC Release”).

[3] Previously, primary offerings for demand securities as described in Rule 15c2-12(d)(1)(iii) were exempt from the continuing disclosure requirements of Rule 15c2-12.

[4] The Rule 15c2-12 Amendment expands the language of the Rule 15c2-12 Event Notice category to include adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the security or other material events affecting the tax status of the security.

[5] The Rule 15c2-12 Amendment includes the following new Rule 15c2-12 Event Notices: tender offers; bankruptcy, insolvency, receivership, or similar event of the issuer or obligated person; the consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and the appointment of a successor or additional trustee, or the change of name of a trustee, if material.

[6] The amendments to the EMMA continuing disclosure service do not modify the existing categories of financial/operating data disclosures available through EMMA.

[7] This category represents the expansion, in the Rule 15c2-12 Amendment, of the prior category of “adverse tax opinions or events affecting the tax-exempt status of the security” to “adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.”  See amended Exchange Act Rule 15c2-12(b)(5)(i)(C)(6).

[8] The Rule 15c2-12 Amendment expands this category to include tender offers.  See amended Exchange Act Rule 15c2-12(b)(5)(i)(C)(8).  The EMMA continuing disclosure service previously provided a voluntary event-based notice category of “tender offers/secondary market purchases.”  The EMMA continuing disclosure service will continue to utilize “bond call” as a separate category from “tender offer”.

[9] Id.  The prior “tender offers/secondary market purchases” category of voluntary event-based notice has been split into a new Rule 15c2-12 Event Notice category of “tender offers” and a voluntary event-based category of “secondary market purchases”.

[10] The prior “merger/consolidation/reorganization/insolvency/bankruptcy” category of voluntary event-based notice has been split into a new Rule 15c2-12 Event Notice category of “bankruptcy, insolvency, receivership or similar event of the issuer or obligated person” and a second Rule 15c2-12 Event Notice category of “merger, consolidation or acquisition of the obligated person.”  See amended Exchange Act Rule 15c2-12(b)(5)(i)(C)(12).

[11] Id.  The full reference to this category under amended Exchange Act Rule 15c2-12(b)(5)(i)(C)(13) is “the consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the normal course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material”.

[12] As noted above, the prior voluntary categories of tender offers, merger/consolidation/reorganization/insolvency/bankruptcy and change of trustee are no longer reflected as additional/voluntary event-based disclosures since they are now Rule 15c2-12 Event Notice categories.