Michelle Mahoney

The revised rules became effective July 1, 2009. They mandate the use of the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market Access (EMMA) system for making required continuing disclosures outlined in the rules.

This new, electronic process replaces the previous decentralized, paper-based filing process. It is important to note, however, this new system does not affect any legal obligation a municipal bond issuer may have to provide disclosure information as may be required under applicable state law.

All continuing disclosure documents and information submitted to EMMA are available for free to investors and the public on the EMMA website. This site is similar to the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system for public company registrants.

Via the EMMA web portal, investors have access to real-time continuing disclosure information, which in the past may have been difficult to obtain. The system provides investors more transparency into an issuer’s compliance with continuing disclosure provisions. Now, more than ever, it is important issuers take care to timely prepare and file all continuing disclosure information, which may include:

• Audited financial statements
• Delinquencies in debt payments
• Nonpayment related defaults
• Bond calls and defeasances
• Rating changes
• Substitution of credit or liquidity providers or their failure to perform

Submissions of disclosure information to EMMA must be made in PDF format. Effective January 1, 2010, such PDF files must be word-searchable. Municipal bond issuers will need to work closely with their auditors, bond counsel and underwriters to obtain and file their disclosure information in an appropriate format.

In addition to required information, issuers also may report voluntary information, such as:

• Quarterly or monthly financial information
• Budget information
• Investment, debt and other financial policies
• Capital or other financing plans
• Changes of trustee, tender agent or remarketing agent
• Tender offers or secondary market purchase notices

This voluntary disclosure system offers issuers an opportunity to provide additional information to their current and potential investors. It provides an opportunity to communicate information that may have previously been inaccessible to the average investor.

The EMMA portal also includes:

• Official statements
• Information on 529 college savings plans
• Real-time price and yield information
• Interest rates for municipal securities, including auction rate securities and variable rate demand obligations
• An education center with useful information to help investors better understand data provided through the EMMA system

Future changes to municipal bond regulation are likely. The SEC issued a proposal in July 2009 to subject variable rate demand obligations to similar rules (they are currently exempt). The SEC also has proposed implementing a 10-day deadline for disclosure of material events and increasing the number of events that would trigger a continuing disclosure notice. Municipal bond issuers should continue to monitor these developments.

Contact your BKD advisor for more information about these rules.