SEC Settlements with Underwriters Begin on Municipal Continuing Disclosure Requirements

On June 18, 2015, the SEC released its first settlements with municipal securities underwriters on their continuing disclosure obligations under SEC rule 15c2-12, also known as MCDC. These come after firms self-reported violations of compliance with the rule last fall.

Many municipal underwriters have been included in the SEC settlement process, but only 36 initial settlements have been announced. Financial penalties have been consistent with guidelines detailed in the SEC release, and are not larger than $500,000 for firms with over $100 million in total revenue, $250,000 for firms with total revenue between $20 and $100 million, and $100,000 for firms with total revenue under $20 million. We expect the SEC to announce settlements with over 200 additional firms.

The initial 36 settlements contain required undertakings for respondents that include an obligation to engage an independent consultant. Specifically, the order requires that firms hire an independent consultant “to conduct a review of Respondent’s policies and procedures as they relate to municipal securities underwriting due diligence.”

Oyster Consulting has a team of experienced experts that can help firms satisfy the obligations stipulated in their settlements with the SEC. Oyster Consulting’s teams on these engagements typically include regulatory attorneys, public finance and fixed income subject matter experts, each with 20 to 30 years of industry experience, as well as project managers to ensure that reviews of policies and procedures on municipal underwriting due diligence, third party vendors, and a review of continuing disclosure obligations compliance on previous underwritings are adequate.

Oyster Consulting is currently acting as the independent consultant in these matters, and has been submitted for approval to the SEC. We have served as an independent consultant in numerous other matters related to SEC findings.