Municipalities Continuing Disclosure Cooperation Initiative
The Securities and Exchange Commission's (SEC’s) Municipal Continuing Disclosure Cooperation (MCDC) Initiative was created to identify and address potential instances of noncompliance with continuing disclosure obligations of municipal issuers and underwriters. The MCDC, administered by the Division of Enforcement of the SEC, intends to offer both issuers and underwriters favorable settlement terms for voluntarily self-reporting potential violations of the federal securities laws regarding continuing disclosure. To the extent an entity meets the requirements of the MCDC Initiative and the Division decides to recommend enforcement action, the prescribed settlement with the SEC will include a cease and desist proceeding that does not require issuers or underwriters to admit or deny the SEC’s findings. As part of the standardized settlement, issuers will be required to establish policies, procedures, and training regarding continuing disclosure obligations and comply with existing obligations within 180 days, cooperate with subsequent investigations, disclose the settlement terms in future bond offering documents, and certify their compliance with the settlement terms one year after the proceedings. Issuers’ settlements do not include payment of a civil penalty. The standard settlement terms for underwriters require retaining an independent consultant to conduct a compliance review within 180 days of the proceedings and make recommendations regarding due diligence processes, taking reasonable steps to enact those recommendations within 90 days (unless undue burden is proved), cooperating with any subsequent investigations, and certifying compliance with the settlement terms one year after the proceedings. Underwriters’ settlements will also include civil penalties based on the number of violations, the size of the debt issuance transactions, and the size of the underwriting firm. The SEC accepted self-reporting questionnaires starting on March 10, 2014. Underwriters had until September 10, 2014 to comply, and issuers had until December 1, 2014. The MCDC Initiative did not include any assurances against individual liability nor for issuers or underwriters that elected not to participate in the Initiative.
- SEC MCDC Initiative: A Call to All Municipal Issuers
- SEC MCDC Initiative, Part 2: Issuer Considerations and Actions
Financial Industry Regulatory Authority (FINRA) Resources
- Frequently Asked Questions (FAQs) on Eligibility Proceedings for Firms Participating in the MCDC Initiative