MSRB Receives Approval to Modify the Continuing Disclosure Service of the Electronic Municipal Market Access ("EMMA") System

On August 19, 2010, the Securities and Exchange Commission (the “SEC”) approved[1] the Municipal Securities Rulemaking Board’s (the “MSRB”) proposed rule change[2] to amend the continuing disclosure service of its Electronic Municipal Market Access (“EMMA”) system. The rule change consists of amendments to the continuing disclosure service of EMMA to reflect SEC amendments[3] to Securities Exchange Act Rule 15c2-12 (“Rule 15c2-12” and the “Rule 15c2-12 Amendment”).  

The Rule 15c2-12 Amendment, among other things, (1) removes the exemption from the continuing disclosure provisions of Exchange Act Rule 15c2-12 for demand securities;[4] (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;[5] and (5) adds new Rule 15c2-12 Event Notices.[6]  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 on the December 1, 2010 compliance date, the rule change: a) modifies the language of the EMMA continuing disclosure service to reflect the materiality standard changes under the Rule 15c2-12 Amendment; and b) modifies the list of voluntary event-based disclosures that may be submitted to the EMMA continuing disclosure service under the Rule 15c2-12 Amendment.[7]  An updated version of the Specifications for Automated Submissions to the MSRB Continuing Disclosure Submission Service has been posted to the MSRB web site reflecting the changes to Rule 15c2-12. Submitters to the EMMA continuing disclosure service that utilize computer-to-computer connections will be able to test these changes beginning in early Fall.[8]     

Effective December 1, 2010, 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:[9]

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 events affecting the tax status of the security[10]
• modifications to rights of security holders, if material
• bond calls, if material[11]
• defeasances
• release, substitution or sale of property securing repayment of the securities, if material
• rating changes
• tender offers[12]
• bankruptcy, insolvency, receivership or similar event of the obligated person[13]
• merger, consolidation, or acquisition of the obligated person, if material[14]
• appointment of a successor or additional trustee, or the change of name of a trustee, if material

Additional/Voluntary Event-Based Disclosures (certain communications from the Internal Revenue Service, tender offers, merger/consolidation/reorganization/insolvency/bankruptcy and change of trustee are no longer reflected as additional/voluntary event-based disclosures).

• 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

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Questions on this rule change and the EMMA continuing disclosure service may be directed to Leslie Carey, Associate General Counsel, or Justin R. Pica, Director, Uniform Practice Policy, at 703-797-6600.  Questions about testing the changes to the EMMA continuing disclosure service should be directed to the Market Information Help Desk at 703-797-6668.

August 27, 2010

TEXT OF RULE CHANGE [15]

MUNICIPAL SECURITIES RULEMAKING BOARD
ELECTRONIC MUNICIPAL MARKET ACCESS SYSTEM –
EMMA ®

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EMMA CONTINUING DISCLOSURE SERVICE

No change.

Submissions to the EMMA Continuing Disclosure Service

Designated Electronic Format for Documents.  No change. 

Method of Submission.  No change.

Timing of Submissions.  No change.

Document Types .  The EMMA continuing disclosure service accepts submissions from issuers, obligated persons, and their agents of (i) the continuing disclosure documents described in Rule 15c2-12, and (ii) other continuing disclosure documents concerning municipal securities not specifically described in Rule 15c2-12.

The continuing disclosure documents described in Rule 15c2-12 consist of the following categories of documents:

• annual financial information concerning issuers or other obligated persons as described in paragraph (b)(5)(i)(A) of Rule 15c2-12, or other financial information and operating data provided by issuers or other obligated persons as described in paragraph (d)(2)(ii)(A) of Rule 15c2-12;
• financial statements for issuers or other obligated persons if not included in the annual financial information as described in paragraph (b)(5)(i)(B) of Rule 15c2-12;
• notices of certain events, if material, as described in paragraph (b)(5)(i)(C) of Rule 15c2-12; and
• notices of failures to provide annual financial information on or before the date specified in the written undertaking as described in paragraph (b)(5)(i)(D) of Rule 15c2-12.

Categories of other disclosure documents concerning municipal securities not specifically described in Rule 15c2-12 include:

• other financial or operating data disclosures, including but not limited to quarterly or monthly financial information; interim or additional financial information or operating data; budget documents; investment, debt or financial policies; consultant reports; information provided to rating agencies, credit or liquidity providers or other third parties; changes in accounting standards, fiscal year or timing of annual disclosure; contractual undertaking, for the benefit of bondholders, of an issuer or obligated person to prepare audited financial statements pursuant to generally accepted accounting principles as established by the Governmental Accounting Standards Board (GASB) or the Financial Accounting Standards Board (FASB), as applicable; contractual undertaking, for the benefit of bondholders, of an issuer or obligated person to submit annual financial information to EMMA within 120 calendar days after the end of the applicable fiscal year (provided that the EMMA continuing disclosure service will accept the submission, through December 31, 2013, of an alternative transitional undertaking of an issuer or obligated person to submit annual financial information to EMMA within 150 calendar days after the end of the applicable fiscal year); uniform resource locator (URL) of the issuer’s or obligated person’s Internet-based investor relations or other repository of financial/operating information; and other uncategorized financial or operating data; and
• other event-based disclosures, including but not limited to amendments to continuing disclosure undertakings; changes in obligated person; notices to investors pursuant to bond documents; certain communications from the Internal Revenue Service; tender offer or secondary market purchase notices; notices of bid for auction rate or other securities; capital or other financing plans; litigation or enforcement action documents; documents relating to mergers, consolidations, reorganizations, insolvency or bankruptcy; changes of trustee, tender agent, remarketing agent, or other on-going party; materials relating to derivative or other similar transactions; and other uncategorized event-based disclosures.

The MSRB may combine two or more categories, may divide any category into two or more new categories or subcategories, or may form additional categories for purposes of indexing documents submitted as uncategorized financial/operating data or event-based disclosures, as appropriate, based on the types of documents received.

In addition, for the categories of continuing disclosures listed below, a submitter may provide, in lieu of or in addition to a continuing disclosure document, a statement of the information indicated below by means of a text/data input field: contractual undertaking of an issuer or obligated person to prepare audited financial statements pursuant to generally accepted accounting principles as established by GASB or FASB, as applicable; contractual undertaking of an issuer or obligated person to submit annual financial information to EMMA within 120 calendar days (or, through December 31, 2013, within 150 calendar days) after the end of the applicable fiscal year; and URL of the issuer’s or obligated person’s Internet-based investor relations or other repository of financial/operating information.  Submitters also may indicate any change or rescission of any such contractual undertaking or change or remove any such URL at any time by means of a text/data input field, and any such changes, rescissions or removals will be reflected on the EMMA portal; provided that a contractual undertaking of an issuer or obligated person to submit annual financial information to EMMA within 150 calendar days after the end of the applicable fiscal year will continue to be displayed on the EMMA portal through June 30, 2014, and will automatically cease to be displayed on the EMMA portal after such date, unless the issuer or obligated person has previously changed or rescinded such contractual undertaking and has indicated such change or rescission through the text/data input field.

Information to be Submitted. No change.

Submitters. No change.

Public Availability of Continuing Disclosure Documents

No changes.