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SEC Settles with 71 Municipal Issuers and Obligated Persons under Its MCDC Initiative

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August 26, 2016

Client Alert
On August 24, 2016, the Securities and Exchange Commission (“SEC”) issued cease-and-desist orders to 71 municipal issuers and obligated persons in response to voluntary self-reporting of potential misrepresentations in municipal bond offering documents regarding compliance with prior disclosure obligations under the SEC’s Municipalities Continuing Disclosure Cooperation (“MCDC”) initiative. Established in 2014, the MCDC initiative offered issuers1 and underwriters the opportunity to self-report potential violations during the previous five years in exchange for more lenient settlements than would otherwise be available for violations which were not self-reported. Our initial Client Alert on the MCDC initiative (dated March 12, 2014) can be found here. The SEC previously settled with 72 underwriters under the MCDC initiative in three rounds of orders. Our Client Alerts on the MCDC settlements with underwriters (dated June 25, 2015; October 5, 2015; and February 3, 2016) can be found here, here, and here.

The SEC noted that each order is based on information that was self-reported by the issuer. The issuers neither admitted nor denied the alleged violations in the settlements. 

The 71 orders involved state-wide issuers as well as counties, school districts, colleges and universities (both public and private), small towns and non-profit healthcare providers from 45 states.

In these orders, the SEC alleged that in official statements, private placement memoranda or remarketing circulars, issuers made materially false and/or misleading statements and/or material omissions about their compliance with prior continuing disclosure undertakings (“CDUs”) under SEC Rule 15c2-12.

Each order included examples of instances in which an issuer failed, in the judgment of the SEC, to comply in all material respects with prior CDUs and where the offering document did not disclose such failure.

Below is a summary of the disclosure failures in the issuers’ offering documents that were highlighted in the SEC orders: 

Under the settlements, the issuers agreed to undertake, and to certify compliance with, the following:

Issuers also agreed to cooperate with any subsequent SEC investigations, including any investigation of “the roles of individuals and/or other parties involved.”

These orders are the first issuer settlements under the MCDC initiative. We do not know if there will be additional issuer settlements under MCDC.


  1. In this Client Alert, “issuer” also refers to an “obligated person” under SEC Rule 15c2-12.

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