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To Speak or Not to Speak? Public Statements Regarding COVID-19 & Antifraud Provisions To Speak or Not to Speak? Public Statements Regarding COVID-19 & Antifraud Provisions

To Speak or Not to Speak? Public Statements Regarding COVID-19 & Antifraud Provisions

On March 11, 2020, the World Health Organization officially proclaimed the coronavirus (“COVID-19”) to be a pandemic. In an effort to lessen the risk of the transmission of COVID-19, governments at all levels and private industries have taken measures to limit social interactions to limit the spread of COVID-19, affecting business activities and impacting global, state and local commerce and financial markets, which in turn carries the potential to affect revenues and tax collections of all types.

The emergence and spread of COVID-19 is evolving on a daily basis. In light of these rapid changes and unchartered territory in the municipal market, we remind our public finance clients of some of the disclosure issues and considerations that COVID-19 may raise. The Office of Municipal Securities staff bulletin (“Bulletin”), which was recently published on February 7, 2020 (here), reminds issuers and obligated persons of municipal securities that antifraud provisions of securities laws apply to public statements made by municipal issuers, which are reasonably expected to reach investors and trading markets.

In the context of COVID-19, of particular importance is that the Bulletin cites broad examples of public statements that could be subject to antifraud provisions, including speeches, media interviews, municipal issuer websites and even social media.

What This Means for You

As the full impact of COVID-19 evolves, it will remain more important than ever for issuers and obligated persons to provide factual information, as opposed to speculative or forward-looking statements (whether positive or negative), when discussing the effects of COVID-19 on their business or operations. Consider the following best practices at this time:
 
  • Developing written talking points or a "public statement," which is updated regularly and shared internally among those in leadership and communications roles in order to maintain a consistent message across all platforms.
  • Consider making a component of your COVID-19 response team a group focused on public disclosure, which would ideally be comprised of individuals familiar with the legislative/regulatory factors, financial performance, external economic factors or other factors material to your organization's COVID-19 response and general operations. 
  • With respect to specific inquiries from investors: 
    • If information necessary to respond has already been included in a public statement, then the response to the inquiry can come from information in the public statement; or
    •  If information necessary to respond is not obtainable from a public statement, then the responding party should be careful to avoid the selective disclosure of material non-public information or otherwise be prepared to make those statements to the general public.
While the pandemic itself is likely not an event that triggers any of the reportable event notices required by SEC Rule 15c2-12 under a typical continuing disclosure undertaking, these events should nevertheless be monitored closely. As the COVID-19 pandemic continues to evolve, voluntary disclosure on the MSRB's EMMA website of particular impacts on your business or operations may at some point be prudent if circumstances warrant such a notice and would promote healthy investor relations. These are extraordinary times, so please consult your counsel if you have questions or concerns regarding any of these disclosure considerations.

For more information, contact Erik Long, Kristin McClellan, Tyler Kalachnik, Ben Kitto, David NieAustin 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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