July 21, 2016
On the To Do List for Municipal Bond Issuers: Disclosure Policies and Procedures
The federal securities laws prohibit fraud in connection with the sale of securities including state and municipal bonds. Specifically, it is unlawful to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, in connection with the sale of bonds. A state or municipal issuer may be liable to investors in connection with an intentional or even reckless material misstatement or omission in bond offering documents and other communications to the bond market. The SEC also has pursued enforcement actions based on negligence (that is, based on an issuer’s failure to take reasonable care in reviewing its disclosure documents for accuracy and completeness).
The following article recommends that issuers adopt and follow written disclosure policies and procedures, in part to evidence that the issuer took reasonable care in preparing, reviewing and approving its disclosure documents. The article also identifies key components of these policies and procedures, and suggestions for developing workable policies and procedures.