Continuing Disclosure Services
Due to new and changing regulations in the marketplace Ranson has started offering continuing disclosure services for current clients and any issues Ranson is a part of. Ranson is currently the hired Dissemination Agent for the Cities, Counties, Colleges, and Rural Water Districts. Ranson brings the updated submission requirements to the attention of the entities and works with them to obtain updated information to submit to the MSRB as required.
Continuing disclosure consists of submitting annual financial and operating data of an entity once the entity has issued a municipal bond issue, and/or, specific events occurring after issuance of the municipal bond issue that can have an impact on the ability of entity to make payments on the issue, the value of the bond, or other important information on the issue or entity.
Continuing disclosure information is not required for an issue if the size of the issue is less than $1 million; where bonds are sold to investors in units of no smaller than $100,000 ($100,000 minimum denomination) and are sold to no more than 35 “sophisticated” investors; where bonds are sold in $100,000 minimum denomination and mature in nine months or less from initial issuance; or where bonds were sold prior to December 1, 2010 in $100,000 minimum denomination and the bond owners can require the issuer to purchase back the bonds at face value every nine months or more frequently (demand securities). For demand securities issued on or after December 1, 2010, and for previously-issued demand securities that undergo certain conversions in interest-rate mode on or after December 1, 2010, continuing disclosure agreements will be entered into under Rule 15c2-12 that will require provision of continuing disclosures to EMMA for such demand securities. Continuing disclosure consists of submitting annual financial and operating data of an entity once the entity has issued a municipal bond issue, and/or, specific events occurring after issuance of the municipal bond issue that can have an impact on the ability of entity to make payments on the issue, the value of the bond, or other important information on the issue or entity.
The entity can designate someone in house to file the required information annually or they can hire an agent to act on their behalf and complete the filing for them. Ranson can complete this for a flat annual fee to be collected after the required filing has been completed. The annual fee will be based on the type of debt instrument that is outstanding and that requires the filings. Certain types of debt require additional operating data or data more specific information tied to a specific System of the entity. Example: A Utility System operated by a City would require additional information..
The Municipal Securities Rulemaker Board or MSRB runs an additional website called the Electronic Municipal Market Access or EMMA. EMMA publicly displays continuing disclosures that are required to be submitted under Rule 15c2-12 (Rule) of the Securities Exchange Act of 1934 (Exchange Act) or other voluntary disclosures can be made as well.
The Rule requires that for any new issues that meet certain requirements, that the following types of information must be provided to the MSRB’s EMMA system:
- annual operating and/or economic data that is specific for that entity; and
- audited financial statements for the entity.
The Rule also requires that the following notices be published to the MSRB’s EMMA system if they happen to occur while the issue is still outstanding:
- 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, Internal Revenue Service (IRS) notices or events affecting the tax status of the security;
- modifications to rights of security holders, if material;
- bond calls, if material;
- tender offers;
- release, substitution, or sale of property securing repayment of the securities, if material;
- rating changes;
- bankruptcy, insolvency, receivership or similar event;
- merger, consolidation, or acquisition, if material; and appointment of a successor or additional trustee, or the change of name of a trustee, if material; and
- notices of failures to provide annual financial information on or before the date specified in the written agreement.
The required submission date is based of a certain day count from the end of the entity’s fiscal year. This date could be different for each entity and even different for each outstanding issue for the same entity. Earlier issues that were completed had a shorter time frame because the filings were not necessarily required or heavily monitored as they are now. To know the submission date you will need to check final documents of each individual issue to confirm. They could be anywhere from 150 to 280 days after the end of the entity’s fiscal year.
Please contact Ranson with any additional questions or if you would like for Ranson to be your Dissemination Agent for purposes of Continuing Disclosure.