Recent SEC enforcement actions enhance efforts to narrow gap between municipal and corporate disclosure obligations

Article Abstract:

The SEC in 1994 with its amendment of Rule 15c2-12 and recent enforcement actions have sought to make disclosure obligations for municipal securities as strict as they are for corporate ones. The entity being regulated was the underwriter rather than the issuer and the former had to obtain a written agreement from the latter for the benefit of the bondholders to give certain financial information on an annual basis and timely notice of certain material events. The SEC was more active on the enforcement scene after 1994. In 1995 and 1996, more than 15 enforcement actions were begun, as well as investigations which may result in future enforcement actions.

United States. Securities and Exchange Commission

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A municipal issuer may be responsible if its bonds are deemed taxable, even if the issuer relied on the opinion of legal counsel

Article Abstract:

A US Tax Court decision in Harbor Bancorp v Commissioner has upheld the IRS's authority to hold a municipal issurer responsible when the interest on bonds it has issued becomes taxable. This holds even when independent legal counsel claimed the issue was tax-exempt and the issuer derived no benefit, and it may give bondholders a new way to seek recovery from the issuer. The ruling states that issuers have a duty to oversee receipt and disposition of the proceeds, and discourages municipalities from acting as passive conduits.

Taxation

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Recent SEC amendments require state and local governments to provide continuing disclosure for their municipal securities

Article Abstract:

Amendments by the Securities and Exchange Commission (SEC) to Rule 15c2-12 will make states and political subdivisions provide continuing disclosure for most sales of municipal securities on or after July 3, 1995. Some lawyers have questioned the SEC's authority to set Rule 15c2-12(b)(5), which requires both annual disclosure of financial information and operating data, and the timely disclosure of any of 11 specific events. Anti-fraud rules apply to both sorts of disclosure, creating a broad disclosure system.

Public Finance Activities, Regulation, Licensing, and Inspection of Miscellaneous Commercial Sectors, Regulation misc. commercial sectors, Public Finance-Local, Securities & Exchange Commisn, Public Finance-State, Public finance, Government securities, Local finance, State finance, states, local

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