What is MCDC?
On March 10, 2014, the SEC’s Enforcement Division announced the Municipalities Continuing Disclosure Cooperation (MCDC) Initiative. According to the SEC, the purpose of MCDC is to provide issuers and underwriters the opportunity to self-report instances of material misstatements in bond offering documents regarding the issuer’s prior compliance with its continuing disclosure obligations.
The SEC’s Enforcement Division has established standardized settlement terms for participating issuers under MCDC, which are described below. For issuers found to be in violation, the settlement to be recommended by the Division must include undertakings by the issuers.
Specifically, as part of the settlement, the issuer must undertake to:
- establish appropriate policies and procedures and training regarding continuing disclosure obligations within 180 days of the institution of the proceedings;
- comply with existing continuing disclosure undertakings, including updating past delinquent filings within 180 days of the institution of the proceedings;
- cooperate with any subsequent investigation by the Division regarding the false statement(s), including the roles of individuals and/or other parties involved;
- disclose in a clear and conspicuous fashion the settlement terms in any final official statement for an offering by the issuer within five years of the date of institution of the proceedings; and
- provide the Commission staff with a compliance certification regarding the applicable undertakings by the issuer on the one year anniversary of the date of institution of the proceedings.
Though the terms of the initiative preclude SEC from imposing monetary fines on participating issuers, the SEC reserves the right to pursue separate civil enforcements against individuals within a government who it deems to be culpable of the misstatements.
On August 24, 2016, the SEC Office of Municipal Securities announced enforcement actions against 71 municipal issuers for violations in municipal bond offerings from 2011 to 2014, as part of the MCDC Initiative. During this heightened state of attentiveness regarding issuers continuing disclosure responsibilities, GFOA is acutely aware that issuers require information. In addition to the member Alerts, the GFOA Debt Committee continues to update best practices to enhance members’ familiarity with and knowledge of continuing disclosure responsibilities. In addition, the Federal Liaison Center is committed to providing the issuer community quick, quality information reported from the SEC as we continue to progress through the MCDC Initiative.
GFOA’s best practices have long provided guidance on how to meet disclosure commitments. Many GFOA best practices either focus on or contribute to members understanding about continuing disclosure documents. Recent alerts have also assisted issuers in understanding recent SEC enforcement actions throughout the MCDC process. GFOA issued a series of alerts on the MCDC initiative that remind issuers of the importance of making timely filings of financial information in accordance with each issuer’s continuing disclosure agreement. A portion of these types of best practices and alerts are described below. It is important to note that information contained in disclosure alerts and best practices are developed to educate members about the SEC MCDC Initiative and should not be construed as legal advice. GFOA urges issuers to seek legal counsel if missed deadlines or filing failures are discovered.
- GFOA Alert: The SEC MCDC Initiative and Issuers
- GFOA Alert: MCDC Initiative Settlement Terms for Issuers
- GFOA Alert: Recent SEC Enforcement Actions
- Small Government/New Issuer-Debt Issuance Checklist: Considerations When Issuing Bonds - GFOA provides new and infrequent issuers key considerations for issuing debt, including links to other useful and related GFOA debt management resources.
GFOA Best Practices
GFOA Best Practice: Understanding Your Continuing Disclosure Responsibilities - This best practice offers issuers guidance on important components to include in their continuing disclosure policies and emphasizes the need for governments to adopt procedures to ensure that continuing disclosure responsibilities are met.
GFOA Best Practice: Disclosures of Pension Funding Obligations in Official Statements - Recognizing the increased scrutiny in recent years on the state of government pension liabilities, GFOA offers guidance about the information that issuers should consider including in their official statements about their pension funding obligations.
GFOA Best Practice: Maintaining an Investor Relations Program - GFOA best practice provides guidance to issuers on key components to include in an investor relations program.
GFOA Best Practice: Using Technology for Disclosure - As the use of technology for communication with the municipal market has increased, GFOA developed this best practice to provide recommendations to issuers about how to use issuer websites and the MSRB’s Electronic Municipal Market Access (EMMA) platform to share required and voluntary financial information with investors.
GFOA Best Practice: Debt Management Policy - GFOA recommends that state and local governments adopt comprehensive written debt management policies, and this best practice introduces finance officers to the core elements that comprise a working debt management policy, including disclosure practices.
Additional GFOA Resources