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Legal Update

SEC Amends Rule 15c2-12, Significantly Alters Continuing Disclosure Obligations for Municipal Finance Transactions

1 June 2010
Mayer Brown Legal Update

On May 26, 2010, the Securities and Exchange Commission (the “SEC”) approved final amendments to Rule 15c2-12 (the “2010 Amendments”) significantly altering continuing disclosure obligations for municipal finance transactions. Rule 15c2-12 provides the foundation for secondary market disclosure by issuers and borrowers in the municipal bond market. Rule 15c2-12 obligates underwriters and remarketing agents to ensure that issuers and borrowers have entered into a written agreement (also know as a “continuing disclosure agreement”) to provide certain financial or operating information annually and timely notice of certain described events (also known as “listed events”) to the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (EMMA) system. All continuing disclosure agreements entered into in connection with primary offerings of municipal securities that occur on or after December 1, 2010 must comply with Rule 15c2-12 as amended by the 2010 Amendments. The 2010 Amendments (1) remove the exemption from continuing disclosure that currently exists for variable rate demand obligations; (2) require that the occurrence of certain events must be disclosed regardless of whether the event is deemed “material”; (3) expand the types of events that have to be disclosed; and (4) require that the notice of the occurrence of a “listed event” must be filed within 10 business days after the occurrence of the event. The 2010 Amendments are summarized in greater detail below.

  • No Exemption for Variable Rate Demand Obligations. The 2010 Amendments repeal the continuing disclosure exemption for newly-issued variable rate demand obligations and variable rate demand obligations that constitute a “primary offering” within the meaning of Rule 15c2-12.
  • Materiality Irrelevant for Certain Existing Listed Events. Currently, Rule 15c2-12 requires that notice be given upon the occurrence of any of 11 listed events, provided that the notice must be made only if the event is “material.” The 2010 Amendments remove the materiality determination for the following listed events:
    • Principal and interest payment delinquencies
    • 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
    • Defeasances
    • Rating changes

  • Materiality Still Relevant for Certain Existing Listed Events. The current requirement for notice of occurrence of the following events, if material, will continue:
    • Nonpayment-related defaults
    • Modifications to existing rights of security holders
    • Redemptions
    • Release, substitution, or sale of property securing repayment of the securities

  • Materiality Irrelevant for Certain New Listed Events. The 2010 Amendments add events that must be disclosed regardless of materiality:
    • Tender offers
    • Bankruptcy, insolvency, receivership, or a similar proceeding by an obligated person

  • Materiality Determination for Certain New Listed Events. The 2010 Amendments provide that notice of two new events must be filed if determined to be material.
    • Consummation of a merger, consolidation, acquisition, or sale of all or substantially all of the assets of an 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
    • Appointment of a successor or additional trustee or the change of name of a trustee

  • Change to Existing Listed Event: Tax Matters. Currently, notice of an adverse tax opinion or occurrence of an event affecting the tax-exempt status of the security must be given in a timely manner. The 2010 Amendments expand and clarify the type of tax event that would trigger a notice without regards to a materiality determination 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 securities, or other events affecting the tax status of the security.” The materiality determination would apply only to notices or determinations other than those described above.

  • Ten Business Days for Notice of Listed Event. The 2010 Amendments require that the notice of a listed event be filed within 10 business days after the occurrence of the listed event. Currently, Rule 15c2-12 only provides that notice of a listed event must be filed in a “timely manner.”

If you have any questions regarding the recent amendments to Rule 15c2-12, please contact: at +1 312 701 7323, at +1 312 701 7303, or  at +1 312 701 8056.

Learn more about our Government Relations practice.


  • Joanna K. Horsnail
    T +1 312 701 8056
  • John A. Janicik
    T +1 312 701 7323
  • David Narefsky
    T +1 312 701 7303

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