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SEC’s Office of Municipal Securities Offers Guidance Regarding COVID-19’s Impact on Rule 15c2-12 Continuing Disclosure Undertaking Requirements

March 31, 2020

Every continuing disclosure undertaking entered into under Section (b)(5)(i) of Rule 15c2-12 (the “Rule”) of the Securities and Exchange Commission (“SEC”) requires the issuer or obligated person (as defined in the Rule) under such undertaking to report notice of certain events electronically to the Municipal Securities Rulemaking Board (“MSRB”) no later than 10 business days of their occurrence. The COVID-19 pandemic and the resulting array of federal, state and local measures designed to contain its spread are not among such events.

Nevertheless, the pandemic and resulting government actions have raised a number of questions regarding compliance with ongoing disclosure requirements under the Rule. On a March 19, 2020, MSRB webinar, Ahmed Abonamah, deputy director of the SEC’s Office of Municipal Securities, and David Hodapp, assistant general counsel of the MSRB, gave some insight as to some of the scenarios issuers and obligated persons may come across.

During the course of the webinar, Abonamah and Hodapp were asked to respond to the following specific questions:

From the reported discussion of these questions on the webinar, we can glean the following principles.

The SEC Cannot Absolve Issuers for Late Filings

The Terms of the Undertaking Control

“Ratings Changes” and “Negative Watch”

Another scenario (not discussed on the webinar) that may arise is actions by rating agencies putting many categories of bonds on “negative watch” for a potential downgrade as a result of the pandemic. The SEC has previously indicated in adopting statements for amendments to the Rule that this does not constitute a “ratings change” for purposes of the Rule, and does not require filing a notice with the MSRB.

This is part of a series of our COVID-19 alerts providing clients with practical advice on measures they can take to navigate through these troubled times. If you have any questions, please contact your Miller Canfield attorney or any of the authors of this alert.

This information is based on the facts and guidance available at the time of publication, and may be subject to change.  This information is based on the facts and guidance available at the time of publication, and may be subject to change.