CONTINUING DISCLOSURE What am I continuing to disclose and who is EMMA? Ohio GFOA Annual Conference & Membership Meeting September 21-23, 2016 Jennifer Blaser & Diana Silveira, Dinsmore & Shohl LLP
TABLE OF CONTENTS 1. Continuing Disclosure: SEC Rules 2. Continuing Disclosure Agreements 3. EMMA 4. Compliance Strategy/Best Practices 2
SEC Rules History 3
SEC Rules Securities Act of 1933 passed with the objective of providing investors full disclosure of material facts about securities offered and sold Securities Exchange Act of 1934 created the Securities and Exchange Commission (SEC)» While municipal securities are exempt from the registration and reporting requirements of the Securities Acts, issuers are subject to liability under the anti-fraud provisions of the Securities Acts (principally Rule 10b-5 of the Securities Exchange Act of 1934) On January 1, 1990, Rule 15(c)2-12 went into effect which required greater access to Official Statements for primary offerings» While the quality of disclosure for primary offerings significantly improved with the passage of Rule 15(c)2-12, there was a continuing concern with the adequacy of disclosure in the secondary market 4
SEC Rules To address continuing disclosure for municipal issuers in the secondary market, the SEC amended Rule 15(c)2-12 on November 10, 1994 Under the amended rule, broker-dealers are barred from buying municipal securities unless the issuer has agreed, in writing, to provide ongoing disclosure» This provision is the basis for a required Continuing Disclosure Agreement (CDA) 5
SEC Rule 15(c)2-12 Rule 15(c)2-12: governs primary offering disclosure and continuing disclosure, including submission of annual financial information and material event notices» Primary offering of municipal securities in principal amount of $1 million or more, subject to exceptions» Directly governs underwriters and indirectly governs issuers and obligated persons 6
Continuing Disclosure Agreements 7
Continuing Disclosure Agreements Issuer subject to Rule 15(c)2-12 must enter into a continuing disclosure undertaking» Continuing Disclosure Agreement Continuing Disclosure Agreements» Annual filing date» Sets forth what needs to be filed: Audited financials* Selected annual financial/operating data from the Official Statement (largest taxpayers, tax collection rates, assessed valuation, etc.) Material Event Notices (rating change, late payment, etc.) *if audit not available by filing date, is to be filed once it becomes available 8
Continuing Disclosure Agreements Not all Continuing Disclosure Agreement are the same» After current issuance of a security, if have outstanding debt: $10,000,000 or more financial/operating data Less than $10,000,000 Audited financials plus only Audited financials Each debt issuance has its own Continuing Disclosure Agreement» Example: 3 outstanding bond issues (each subject to 15(c)2-12) 3 Continuing Disclosure Agreements» Ideally all 3 Continuing Disclosure Agreements have the same required filing date and are substantially the same in all material aspects 9
Continuing Disclosure Material Events Material Events Events Principal and interest payment delinquencies Non-payment related defaults Unscheduled draws on debt service reserves reflecting financial difficulties Unscheduled draws on credit enhancements reflecting financial difficulties Substitution of credit or liquidity providers, or their failure to perform Adverse tax opinions or events affecting the tax-exempt status of the security Modifications to rights of security holders Bond calls Defeasances Release, substitution, or sale of property securing repayment of the securities Rating changes Failure to file continuing disclosures by deadline* Tender offers Bankruptcy, insolvency, receivership or similar event of the obligated person The consummation of a merger, consolidation, or acquisition involving an obligated person, or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms Appointment of a successor or additional trustee or the change of name of a trustee Materiality Without regard to materiality If material Without regard to materiality Without regard to materiality Without regard to materiality Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the security If material If material Without regard to materiality If material Without regard to materiality Without regard to materiality Without regard to materiality If material If material *Does not appear on the list but is a twelfth material event notice requirement in the rule. Source: Securities and Exchange Commission 10
Continuing Disclosure - Offering Documents Offering Document/Official Statement» Must summarize the requirements of the Continuing Disclosure Agreement» Issuer must disclose if in material compliance with prior continuing disclosure obligations for past 5 years Example: Rule 15(c)2-12 (the Rule ), promulgated by the Securities and Exchange Commission, requires continuing disclosure with respect to new offerings of municipal securities of $1,000,000 or more. The Issuer is obligated to provide such continuing disclosure with respect to one or more previously issued and currently outstanding bond or note issues. The Issuer has been in material compliance with its continuing disclosure obligations for the past 5 years. The audited financial statements of the District are not always available by the annual filing date of October 15; therefore, historically, the Issuer filed all required operating data by the filing date and filed the audited financial statements within thirty days after they became available on the Ohio Auditor of State s website. The Issuer did not provide notice of an insurer downgrade in 2012 with respect to the Issuer s Series 2010 Bonds A notice of such insurer downgrade was filed on February 16, 2016. 11
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EMMA Continuing Disclosure filings to be made on EMMA» Electronic Municipal Market Access System» Home Page: http://emma.msrb.org/ EMMA provides details on each publically offered security including:» Official Statement» CUSIP, maturity information, interest rate, principal amounts, initial offering price and yield» Continuing disclosure broken into Audited Financials, Financial/Operating Data, Event Notices» Trade Activity 13
Filing on EMMA Start on the Home Page: http://emma.msrb.org/ Click EMMA Dataport in the top right of the home page Then Log-In» Use your User ID and Password» If you re new to EMMA, Register To register, certain information will be needed about who you are and who you are filing for Someone will need to confirm your information Once logged in, the Submission Portal will load 14
EMMA Submission Portal 15
EMMA Submission Page 16
EMMA Submission Page 17
EMMA CUSIP Page 18
EMMA CUSIP Page 19
EMMA Contact Info Page 20
EMMA Upload Page EMMA will warn you about this 21
EMMA Upload Page 22
EMMA Preview Page 23
After Publication on EMMA Once you click Publish, the main Submission webpage will load This time, there will be a button to allow you to Print Submission Confirmation EMMA will also send you a Confirmation Email We highly recommend that you print the Confirmation, either via the link or the email If there is ever a question regarding whether a filing was made, or if you need to amend a filing, you will need the Submission ID number from the Confirmation 24
EMMA Material Event Filing 25
Compliance Strategy/ Best Practices 26
Compliance Strategy/Best Practices Written Policy Dissemination Agent EMMA E-mail Reminders 27
Compliance Strategy Written Policy This policy should include the following information:» Who is in charge?» A file of Continuing Disclosure Agreements, review reporting requirements and reporting dates» Confirm all necessary data is filed timely» Annual review» Monitor material events» Periodic training Even if a dissemination agent is hired it is ultimately the Issuer s obligation to confirm required filings are made on time and with complete and accurate information 28
Compliance Strategy Dissemination Agent Dissemination Agent A dissemination agent can fill the following roles:» Remind and assist in required filings» Provide disclosure templates for annual filings» Provide corrective action for failed filings» Assist with filings of voluntary or material event filings Dissemination agents usually cannot monitor if there has been a material event» Issuer must notify dissemination agent of a material event 29
MSRB EMMA E-mail Reminders The MSRB EMMA site allows users to set up e-mail alerts in advance of required filings Signing up for these can provide peace of mind that required filing dates will not be missed For example, an e-mail reminder alert can be scheduled for 60 days before required annual filings This reminder will occur annually unless canceled 30
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CONTACT INFORMATION Jennifer Blaser Dinsmore & Shohl LLP 191 W. Nationwide Blvd., Ste. 300 Columbus, Ohio 43215 Phone: (614) 233-5391 jennifer.blaser@dinsmore.com Diana Silveira Dinsmore & Shohl LLP 191 W. Nationwide Blvd., Ste. 300 Columbus, Ohio 43215 Phone: (614) 233-5406 diana.silveira@dinsmore.com 32