Vermont Bar Journal, Vol. 40, No. 2 Vermont Bar Journal, Fall 2016, Vol. 42, No. 3 | Page 21

by J. Paul Giuliani, Esq.

WHAT’S NEW

Municipal Law
SEC Speaks to the Selectboard
On August 24, 2016, the U. S. Securities Exchange Commission announced the
settlement of enforcement actions involving a number of municipal bond offerings.
These actions were brought by the SEC
against 71 issuers of municipal bonds located in 45 states (including Maine, New
Hampshire and Vermont). In the past two
years, the SEC has filed a total of 142 enforcement actions against municipal bond
issuers and their underwriters. The respondents in these actions ranged in size from
small special-purpose utility districts to
large public universities.
The subjects of the SEC’s enforcement
initiative fall into one of three categories.
First, there are traditional units of government (state agencies, towns, cities, school
districts, special purpose districts, etc.)
whose obligations are commonly known as
“municipal bonds” among banks, individuals and institutional investors. The next category includes “obligated persons” such
as a health care facility, private school or
manufacturing business , each of whom finances their capital improvements through
a state agency such as the Vermont Economic Development Authority or the Vermont Educational and Health Buildings Finance Agency (so-called conduit financing). Lastly, there are national and regional
underwriters who purchase and market securities issued by or for the benefit of these
entities.
Rule 15c2-12 of the Securities Exchange
Act of 1934 generally prohibits an underwriter from purchasing or selling municipal securities unless it has reasonably determined that the municipal issuer or other
obligated person has undertaken the obligation, in a written agreement (a “continuing disclosure agreement”), to provide annual financial information, including audited financial statements, when and if available, to the Electronic Municipal Market
Access system (EMMA), an information repository maintained by the Municipal Securities Rulemaking Board.
The continuing disclosure agreement
also includes an undertaking by the municipal issuer or obligated person to furnish
EMMA with timely notice of certain specified “material events” pertaining to the securities being offered,