November 2008
Proposed Amendments to SEC Rule 15c2-12 and the Use of the Electronic Municipal Market Access System (EMMA) for Continuing Disclosure
Public Finance Update November 2008 - Printable PDF

Elizabeth Blutstein, Julianna Ebert, Brian Lanser, Ann Murphy, Jennifer Powers, Michael Roshar, Rebecca Speckhard, Bridgette DeToro, Allison Sell

Continuing disclosure under SEC Rule 15c2-12 (the "Rule") requires that issuers or obligated persons of municipal securities file certain annual financial information and other data with the nationally recognized municipal securities repositories (NRMSIRs) and state information depositories (SIDs), if any, and provide notice of eleven material events with the Municipal Securities Rulemaking Board (MSRB) or the NRMSIRs and any SIDs, unless a particular exception to the Rule applies. On July 30, 2008, the SEC published two releases, one relating to proposed amendments to the Rule (SEC Release No. 34-58255; available at: http://www.sec.gov/rules/proposed/2008/34-58255.pdf) and the other related to the use of the Electronic Municipal Market Access System (EMMA) for continuing disclosure (SEC Release No. 34-58256; available at: http://www.sec.gov/rules/sro/msrb/2008/34-58256.pdf). The SEC accepted comments on these two releases through September 22, 2008.

Proposed Amendments to SEC Rule 15c2-12

The proposed amendments to the Rule would make a procedural change by requiring that all continuing disclosure filings be made electronically with the MSRB, eliminating any filing requirements with each of the NRMSIRs and any applicable SIDs. As part of the proposed amendments, the MSRB would become the only NRMSIR; currently there are four NRMSIRs. It is contemplated that continuing disclosure filings would be submitted to the MSRB by issuers and obligated persons through EMMA, as discussed below.

In addition, the proposed changes to the Rule would make a substantive change to the filing requirements applicable to "upon request" filers. If approved as written, the revised Rule would require that even small issuers, which previously qualified for the "small-issuer exemption" under the Rule, would need to provide annual financial information and operating data to the MSRB, rather than providing this information only upon request. The other continuing disclosure exceptions under the Rule for primary offerings of $1,000,000 or less, certain primary offerings with denominations of $100,000 or more and the "material events only" disclosure for offerings of 18 months or less, would not be substantively affected by the proposed Rule change.

EMMA

EMMA was launched as a pilot program by the MSRB in the spring of 2008 to provide for equal dissemination of disclosure documents and other related information to market participants. EMMA currently offers free web-based access to official statements and advance refunding documents submitted to the MSRB since 1990. Real-time pricing information that has been reported to the MSRB is also available on the EMMA website for current transactions.

The MSRB initially requested that the SEC approve the use of EMMA for continuing disclosure so EMMA can be used for this purpose by the later of January 1, 2009 or the date on which the proposed amendment to the Rule, naming the MSRB as the sole NRMSIR, goes into effect. However, on November 6, 2008 the MSRB released a notice stating that it has filed an amended request asking that the SEC approve the operational use of EMMA for continuing disclosure by the later of July 1, 2009 or the effective date of the proposed amendments to the Rule (See MSRB Notice 2008-45 (November 6, 2008)). EMMA would provide a free and centralized location for filing and viewing continuing disclosure documents required under the Rule (including annual financial information and other data and material events notices) and other disclosure items described in a continuing disclosure certificate. If the proposed use of EMMA for continuing disclosure moves forward as planned, issuers and other obligated persons would file continuing disclosure documents with the MSRB through the EMMA website, and would no longer make any filings with NRMSIRs and any applicable SIDs. The EMMA website can be viewed at http://emma.msrb.org/.

Whether the proposed amendments to the Rule and the proposed use of EMMA for continuing disclosure go into effect as written, remains to be seen. The SEC is expected to provide a decision regarding these proposals in the near future.