We all have heard the statement, “everything is getting extensions.” Well, you are right. In most cases, if you are talking taxes and single audits, but not for the continuing disclosure requirements.  

Since July 2009, the Municipal Securities Rulemaking Board (MSRB) has been designated by the Securities and Exchange Commission (SEC) as the recipient of continuing disclosures submitted by issuers of municipal securities and other obligated persons concerning SEC Rule 15c2-12. The filing of these disclosures is done using the Electronic Municipal Market Access (EMMA) for the purpose of accepting the submission, in electronic form, of financial information. That information is then made available to the public for free. The disclosures are broadly divided between disclosures of financial information or operating data related to the issuer of municipal securities and disclosures of specific events relevant to the municipal securities.  

Recent SEC enforcement and investigation activities related to disclosure practices in the municipal securities market have highlighted the importance of good disclosure practices in promoting a fair and efficient market, as well as avoiding incomplete or misleading discourses.  

Financial Disclosures Under Rule 15c2-12

Rule 15c2-12 provides four categories of financial discourse, depending on the type of primary offering. These categories include annual financial information, audited financial statements, customary financial information, and failure to file notes.

Annual financial information consists of financial information or operating data, provided on an annual basis, of the type included in the official statement. This information related to issuers of municipal securities or an obligated person for whom financial information or operating data is presented in the official statement. The majority of this information is contained in the annual audited financial statements or the Comprehensive Annual Financial Report (CAFR). However, please be aware that there are other requirements when filing this information.  

Due Dates and Potential Extension Due to COVID-19

The normal deadline for filings of continuing disclosure requirements through EMMA is based on the requirement in the official statements for each qualifying debt instrument. Currently, the MSRB has not granted an extension to file this information as a result of the COVID-19 pandemic.  

What if Your Audit is Not Completed By the Deadline?

You can file unaudited financial statements in their place as a provisional measure, with the audited financial statements subsequently submitted when they become available. If you do not make the deadline, the MSRB has an obligation to provide a failure to file notice to the public. Thus, for most offerings, both the audited financial statements and updated quantitative information would need to be submitted on a timely basis to avoid the failure to file notice. If you file unaudited statements, this would not usually trigger a failure to file notice.  

In all cases, if you are going to be late, or use unaudited information, you must file a Failure to Provide notice with EMMA.  

Each issuer will need to be aware that the deadline has not currently been extended and they need to submit the necessary acceptable information to EMMA to avoid the failure to file notices.  

If you are considering engaging in an audit, or are worried that you may not meet the required deadline, contact a CRI professional for more help on developing a plan to keep your organization up-to-date and compliant.