On May 4, 2020, the Chairman of the Securities and Exchange Commission (SEC) and the Director of the Office of Municipal Securities released a joint Public Statement entitled “The Importance of Disclosure for Our Municipal Markets.” In the Public Statement, Chairman Clayton and Director Olsen encourage municipal issuers to consider filing voluntary disclosure on EMMA about the current and expected impacts of COVID-19 on operations and finances.
The Public Statement is not an official rulemaking of the SEC, but should be viewed as important informal guidance. The Public Statement is available here.
The SEC Officials cited investors’ desire for updated information in providing the recommendations in the Public Statement, but issuers may desire to file voluntary disclosures to maintain positive investor relationships, or to control the quality of information that may have been disseminated in the news media.
If an issuer determines to provide a voluntary disclosure with EMMA, the Public Statement suggests including the following:
- The impact of COVID-19 on operations and financial condition;
- Information regarding sources of liquidity;
- Availability of state, federal, and local aid; and
- Reports prepared for other governmental purposes.
The Public Statement also encourages issuers to provide forward-looking statements that might be useful to investors, together with carefully crafted explanations of the factors or assumptions that were employed in such forward-looking statements. The Public Statement indicates that the authors “would not expect good faith attempts to provide appropriately framed current and/or forward-looking information to be second guessed by the SEC.” We believe this critical piece of the Public Statement should be encouraging to municipal issuers who are concerned with unnecessarily exposing the issuer to SEC enforcement liability for EMMA disclosures that are not required by continuing disclosure obligations.
Municipal issuers who are contemplating a voluntary EMMA filing should reach out to counsel to discuss the impact, scope, and content of such filing. Issuers should carefully craft any voluntary disclosure to provide tangible information relevant to investors, without attempting to provide certainty about unpredictable events or results.