SEC Approved Amendments to Rule 15c2-12 SEC Approved Amendments to Rule 15c2-12

SEC Approved Amendments to Rule 15c2-12

Summary

On August 20, 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to Rule 15c2-12 under the Securities Exchange Act of 1934 (the “2018 Amendments”), more than one year after initially proposing changes related to the liquidity and creditworthiness of issuers/obligated persons and the rights of existing holders of municipal securities. In adopting the 2018 Amendments, the SEC cited concern over the massive increase in municipal debt held by private financial institutions – which has tripled since the recent financial crisis to a total of over $190 billion in Q1 2018 – and how such debt has not previously been required to be reported to the holders of publicly offered obligations.

The 2018 Amendments add two events for issuers or obligated persons, public notice of which is to be provided within 10 business days of their occurrence:

  1. incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and
  2. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.

The 2018 Amendments define “financial obligation” more narrowly than originally suggested last year as “a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) a guarantee of (i) or (ii),” excluding publicly offered bonds for which a Final Official Statement is furnished on EMMA.

What This Means for You

The compliance date for issuers/obligated persons is 180 days after the 2018 Amendments are published in the Federal Register. Issuers/obligated persons are encouraged to consult with bond counsel regarding their existing continuing disclosure obligations and what to expect within the next year.

For more information, contact Jeff Lewis, Kristin McClellan, Erik Long, Ben Kitto, Austin Root, or any other member of Ice Miller’s Public Finance Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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