Resources / Disclosure Notes

Continuing Disclosure & Coronavirus: Keep Filing If Possible

by | Mar 23, 2020

The spread of Severe Acute Respiratory Syndrome 2 (commonly referred to as the “coronavirus”) in the United States, and the resulting disease known as COVID-19, has resulted in massive disruptions to daily activities and limited the ability of many municipal issuers and borrowers to conduct normal business operations. The potential public health effects and the economic ramifications of COVID-19 are projected to be devastating for many. Given the impact on state and local governments and other issuers and borrowers in the municipal market, complete continuing disclosure compliance may not be possible while the COVID-19 situation persists. To provide guidance during this uncertain time, a representative of the Securities and Exchange Commission’s (SEC) Office of Municipal Securities joined a recent webinar hosted by the Municipal Securities Rulemaking Board to discuss the continuing disclosure obligations of municipal issuers and borrowers.

The SEC representative’s statements were his own views and not statements of the position of the SEC. Nevertheless, the SEC representative’s views, which are summarized below, may be useful for municipal issuers and borrowers experiencing disrupted operations, or those devoting significant resources to their community’s COVID-19 response.

  • The SEC is not expected to provide a waiver or grace period for continuing disclosure filings impacted by COVID-19.
  • If an annual report is delayed because of COVID-19, the issuer should file a failure to file notice that explains the reason for the delay.
  • If a material event notice is delayed because of COVID-19, the issuer should explain the delay in the event notice itself.
  • The above failures, if deemed material, should be disclosed by the issuer in its next Official Statement as a failure to comply with disclosure undertakings, as required by SEC Rule 15c2-12.

The guidance above is consistent with existing law and similar to the guidance most municipal market professionals would give if any crisis or unforeseen circumstance caused delays or an inability to comply with continuing disclosure undertakings entered into pursuant to SEC Rule 15c2-12.

In an effort to promote continuing disclosure compliance and encourage robust disclosure in the municipal market, the SEC has previously expressed doubt that an underwriter could participate in an offering of municipal securities if the applicable obligated person’s prior noncompliance with its continuing disclosure obligations made it unreasonable to conclude that the issuer would comply with the continuing disclosure undertaking relating to the new offering. Given the extraordinary and unprecedented effects of the spread of COVID-19, it would be unlikely that an underwriter would view noncompliance caused by COVID-19 as indicative of an obligated person’s propensity for future compliance with a new continuing disclosure undertaking. Continuing disclosure remains an important contractual obligation of municipal issuers and borrowers, but prioritizing essential services and the health and safety of the communities served by those issuers and borrowers over continuing disclosure should not be expected to jeopardize their ability to issue debt in the municipal market in the future.


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