SEC Chairman and Director of the Office of Municipal Securities Encourage COVID-19 Disclosures in the Municipal Securities Market

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May 8, 2020

Client Alert
On May 4, 2020, Jay Clayton, Chairman of the Securities and Exchange Commission (“SEC”), and Rebecca Olsen, Director of the Office of Municipal Securities, issued a public statement (the “Municipal Issuer Statement”) strongly encouraging issuers, conduit borrowers and other obligated persons (referred to herein as “issuers”) of municipal securities to make current and forward‑looking disclosures describing the effects of the COVID‑19 pandemic on their finances and operations in primary offering documents, contractually required continuing disclosure filings, and voluntary continuing disclosure filings, and offering some assurances with respect to the liability issuers assume when disseminating forward‑looking information.
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Background

On April 8, 2020, Chairman Clayton and William Hinman, Director of the Division of Corporation Finance, issued a statement (the “Corporate Issuer Statement”) addressing public company disclosures in light of the effects of and uncertainties created by COVID‑19, urging companies to provide investors with as much information as practicable regarding their current financial and operating status and encouraging consistency with respect to company public and confidential disclosures.2 The Corporate Issuer Statement also urged companies to disclose material information regarding their planning for, and expectations regarding, a company’s future financial condition and operating status and highlighted the availability of safe harbors for forward‑looking statements available to corporate issuers.

The Municipal Issuer Statement is expressly intended to parallel the objectives of the Corporate Issuer Statement, while recognizing the significant differences between the corporate and municipal securities markets, including the large number of issuers, the diverse sources of revenues for repayment, the use of complex credit structures and the prevalence of “buy and hold” retail investors in the municipal securities market. Like the Corporate Issuer Statement, the Municipal Issuer Statement encourages timely and robust current and forward‑looking disclosures relating to the impact of COVID‑19 on an issuer’s operating and financial condition, and also offers considerations with respect to the content of such disclosures, as well as some assurance that current and forward‑looking disclosures made in good faith and accompanied by appropriate cautionary language will likely not be subject to second‑guessing by the SEC. The Municipal Issuer Statement also notes that issuers and investors should consider both issuer-specific disclosures (e.g., the impacts of COVID-19 on an issuer’s overall financial and operating position) and security-specific disclosures (e.g., the impacts of COVID-19 on the different types of municipal securities that an issuer may have outstanding and their sources of repayment, such as property taxes, sales taxes, and revenues from the operation of airports, public transit systems, public utilities and other governmental enterprises).

Examples of COVID‑19‑Related Disclosures

The Municipal Issuer Statement provides the following examples of COVID‑19‑related disclosures considered important for inclusion in primary offering documents, contractually required continuing disclosure filings, and voluntary continuing disclosure filings:

Disclosure Considerations

The Municipal Issuer Statement acknowledges the liability that issuers may assume by making voluntary, unaudited, and non‑routine disclosures, including forward‑looking statements, but outlines considerations that may weigh in favor of making such disclosures notwithstanding liability concerns, including:

Practical Considerations for Market Participants

In addition to considering making voluntary disclosure filings on the MSRB’s EMMA system regarding the impacts of COVID-19 on their finances and operations, issuers should consider the following matters:

Legal Considerations

The Municipal Issuer Statement represents the views of Chairman Clayton and Director Olsen and is not a rule, regulation, or statement of the SEC; the SEC has not approved nor disapproved its content. The Municipal Issuer Statement has no legal force or effect, as it does not alter or amend applicable law and it creates no new or additional obligations for any person. Notwithstanding these caveats, issuers should consider disclosing, when appropriate and if available, the type of information identified as potentially important to investors, including information prepared for third parties such as governmental authorities or private lenders, that has or could become public.

As with any disclosure of material information to the investing public, all such statements should be accompanied by any additional information necessary to make the statements made by the issuer complete and not misleading, as well as appropriate disclaimers regarding forward-looking statements.  Issuers that elect to provide voluntary COVID-19 disclosures should also recognize that these disclosures may become stale as the pandemic and its impacts change over time, and may need to consider providing updates to these disclosures at appropriate times. Issuers should consider consulting with experienced municipal securities law counsel regarding any COVID-19 disclosures. 

Issuers may take comfort in the recognition by the drafters of the Municipal Issuer Statement of the challenges and uncertainties involved in disclosing forward‑looking information generally, and particularly in times of deep economic distress, coupled with the assurances that current and forward‑looking information, when provided in good faith and accompanied by appropriate cautionary language, can be shared with investors with limited concern for the second‑guessing of such disclosures by the SEC.


  1. See Chairman Jay Clayton and Rebecca Olsen, Director, Office of Municipal Finance, The Importance of Disclosure for our Municipal Markets (May 4, 2020), available at https://www.sec.gov/news/public-statement/statement-clayton-olsen-2020-05-04.
  2. See Chairman Jay Clayton and William Hinman, Director, Division of Corporation Finance, The Importance of Disclosure — For Investors, Markets and Our Fight Against COVID-19 (Apr. 8, 2020), available at https://www.sec.gov/news/public-statement/statement-clayton-hinman.
  3. See Robert A. Fippinger, The Securities Law of Public Finance, § 8:4.4[B] (3d ed. 2019).

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