Keep Calm and Disclose: New Continuing Disclosure Requirements


March 4th, 2019

Effective February 27, 2019, SEC Rule 15c2-12 imposed new continuing disclosure requirements on bond issuers, including schools. A school will only need to comply with the new requirements when:

  • it issues new bonds after February 26, 2019; and
  • in conjunction with issuing the bonds, it enters into a continuing disclosure agreement, which is generally required for all bond issues of $1 million or more.

Consequently, unless your school has a new bond issue on the horizon, your continuing disclosure responsibilities remain the same, even after February 26. Those responsibilities include:

  • annually filing the school’s audit and certain financial and operating data with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (EMMA); and
  • filing notices with EMMA within 10 business days after certain material events, including a payment default, adverse tax notice, bond call, or rating change.

For schools issuing bonds after February 26, 2019, the new continuing disclosure requirements add two additional material events that must be monitored and reported to EMMA:

  • incurring or entering into a new material financial obligation, or an agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation; and
  • a default, event of acceleration, termination, modification of terms, or a similar event concerning a financial obligation that reflects the school’s financial difficulties.

In plain English, a financial obligation is generally any kind of debt or financing arrangement, including:

  • state aid notes,
  • tax anticipation notes,
  • installment purchase agreements,
  • lease-purchase agreements,
  • land contracts,
  • lines of credit, and
  • bonds that do not involve the school entering into a continuing disclosure agreement (i.e., a bond issue of less than $1 million).

Once subject to the new continuing disclosure requirements, any time a school enters into a new financing arrangement, a school

official or the school’s disclosure agent (typically a financial advisor) likely will need to file an EMMA ma­terial event notice within 10 business days. Such a school also may need to file a material event notice with EMMA if it experiences “financial difficulties” and, due to those financial difficulties, there is a default, acceler­ation, termination, modification of terms, or similar event related to a financial obligation.

For a school issuing bonds after February 26, 2019, the new continuing disclosure requirements may sub­stantially increase its material event filings. Accord­ingly, it is critical that your school designate an official who will be responsible for continuing disclosure fil­ings or who will coordinate with the school’s disclosure agent. For schools planning a future bond issue, the school official responsible for continuing disclosure should create an inventory of all outstanding financial obligations and update that inventory immediately af­ter the school enters into a new financing arrangement. The updated inventory should be the school official’s cue to make sure that a material event notice is filed with EMMA. If your school uses a disclosure agent and that agent is not involved in a financing transaction handled by Thrun Law Firm, we will inform the disclosure agent about the new financing shortly before the transaction closes. We believe this process will assist our clients in complying with the new disclosure requirements.