In this week’s Muni Minutes: Find out what the SEC has planned, Philly’s good audit news, some super-cool trainings you WON’T WANT TO MISS out on and meet public finance’s 2014 lady trailblazers!
CURRENT EVENTS
What’s Happening at the SEC
More Individual, Secondary Market Enforcement in 2015 (B Buyer, January 5, 2015)
I think we can all agree that, after the increased SEC enforcement shown during 2014, we should not be surprised that 2015 will bring us more of the same. The SEC has already stated that they will place greater emphasis on individual liability and secondary market disclosures.
LeeAnn Gaunt, director of the SEC’s enforcement division’s municipal securities and public pensions unit has already stated that her office wants to get the MCDC settlements done as quickly as possible and stated that “we’ve got a lot of resources on it.”
Bond counsel from across the country have varying views on how this enforcement will unfold in 2015, but they all seem to agree that increased enforcement and focus on individual liability is our new normal under the SEC.
Some common themes: Settlement will provide at least the SEC’s view as to what is material disclosure regarding compliance with prior continuing disclosure undertakings and speculation on how the SEC divides and approaches MCDC submissions.
Some think that there will be “buckets of deals” sorted by how severe the misrepresentations in the official statements have been. Another key area to watch will be what the SEC does in cases where one party to the deal disclosed, but the other did not.
It could get interesting – and quick.
As I stated in the past, the MCDC intentionally created tension between the issuers and underwriters because of the differing due dates and underwriter’s incentive to disclose potential violation of securities laws at this time under the leniency clause.
Another aspect of enforcement will be personal liability. As we saw last year, there were many “firsts” for the SEC: Going after public officials personally for their role in securities violations as well as going after investment advisors for violating rules, including gifts and gratuities.
Peter Chan, the architect of the MCDC said that he expects to see more cases targeting individuals and more federal cases filed. Tougher penalties could mean less administrative cases and more litigation.
“My prediction is that we’re going to see more litigated SEC cases, perhaps even going to trial,” Chan said.
[Editor’s Note: While my gut says this could get bumpy, we’ll have to see how events unfold. I think “materiality” could be a big source of contention, given the lack of clarity provided prior to the filings. The $64 thousand dollar question is…what will the SEC come after and how much time and bond counsel fees will it cost us to defend?]
SIFMA, ICI Urge SEC Not to Approve MSRB Test Proposal (B Buyer, January 9, 2015)
Over in the Municipal Advisor Arena….No test, one test or two…that is the question!
In a proposal initiated last March by the MSRB (which was filed with the SEC in December), changes have been proposed in both testing and regulating Municipal Advisors. Here’s how it shakes out:
MSRBs position:
- Two classifications of advisor professionals: representative and principal
- Each would have to pass the same test (one test)
SIFMA’s position:
- Muni Securities Dealers are already qualified to be MAs
- Passing Series 52 Exam should be enough
- Qualified dealer representatives should be grandfathered in (no test)
ICI’s position:
- Tests should be administered based on what the MA is advising – two tests
- One for municipal fund securities
- One for other than municipal fund securities
Tamara Salmon, senior associate counsel at ICI said “For example, providing advice on municipal securities likely requires a representative to be knowledgeable about issues such as negotiated prices, debt limits and ratios, underwriting periods, agreements, par values, etc.,”
Salmon wrote, “None of these topics would be relevant for a municipal advisor whose advisory business is limited to providing advice relating to a municipal fund security such as an interest in a 529 education savings plan.”
[Editor’s Note: Given the SEC’s stance in 2014 and its increased focus on regulating MAs, I expect that more testing will be on the horizon, not less. What do you think?]
While Over at the IRS/Treasury….
IRS Closes Targeted Audit of Philadelphia Bonds (B Buyer, January 6, 2015)
The city’s $396.46 million, Series 2010A water and wastewater bonds were targeted for audit in October, due to IRS concern that “they might fail one or more of the bond related provisions of the federal tax code.”
The targeting issue appeared to stem from the fact that the first debt service payment on the bonds were made only two months after the bonds were issued – not the normal six months.
Michael Lehr, from the city’s bond counsel, Greenberg Traurig LLP, explained that the city wanted to keep its June 15th debt service payment dates, even though the refunding bonds were issued in April, 2010, due to a mandatory tender.
The IRS concurred and a “no change” letter was issued – just 2 1/2 months after the audit began. (an IRS audit typically takes 6 to 12 months)
[Editor’s Note: In this case, being proactive with debt service raised a red flag. This example illustrates how easily small things we don’t think about can trigger an audit. This was a great resolution for Philadelphia – but with the added expense of bond counsel fees.]
OUT & ABOUT
A MUST- ATTEND WEBINAR! Sign up and Mark your Calendars….
I don’t avidly promote many specific trainings, but this will be one of the exceptions. As many of you know, I have worked with both Orrick and BLX for well over a decade.
Orrick is the nation’s leading bond & tax counsel and BLX is well-known for the quality of both their swap and arbitrage services. BLX was also actively engaged in MCDC calculations last year for both underwriters and issuers.
Title: Continuing Disclosure after MCDC
Hosted by: Bondbuyer Webinars,
Date: February 5, 2015, 12:00PM ET / 9:00AM PST
Signup: Continuing Disclosure after MCDC
The SEC’s Municipal Continuing Disclosure Compliance Initiative has focused a spotlight on finding gaps in continuing disclosure. It signals aggressive enforcement by the SEC and raises the stakes for compliance by Issuers, Borrowers and Underwriters.
Topics to be addressed in the webinar include:
What have we learned about continuing disclosure from MCDC?
What should new official statements say about continuing disclosure compliance?
What should be considered in drafting new Continuing Disclosure Agreements?
What policies and procedures should issuers, borrowers and underwriters employ?
What tools and services are available to assist or monitor compliance?
Besides being great information….IT’S FREE!!
Conferences in early 2015:
The Bond Buyer’s National Outlook 2015 Conference, January 27, 2015
Metropolitan Club, New York, NY
The Bond Buyer’s Texas Public Finance Conference, February 9-11, 2015
Omni Barton Creek Resort & Spa, Austin, TX
The Bond Buyer and BDA’s National Municipal Bond Summit March 1-3, 2015
The Westin Beach Resort & Spa, Fort Lauderdale, FL
Editor Commentary: Trailblazing Women in Public Finance 2014
This week, I found something truly fun and positive in municipal finance to read – yeah!
In its fourth annual such event, two outstanding women in the public finance world have been honored with the prestigious Freda Johnson Award: The 2014 recipients were Lois Scott, Chief Financial Officer of the City of Chicago and Kym Arnone, managing director at Barclay’s.
In the public sector, Lois Scott’s demonstrated leadership, commitment to women professionals, mentorship, innovation and integrity made her a clear choice for the Freda Johnson Award. Her career encompasses private companies, investments banks, non-profits and the White House, Ms.
Scott co-founded Women in Public Finance in 1997 and Scott Balice Strategies LLC (a national financial advisory firm) in 2003. She is known as one of the most creative and skilled public finance professionals in the country.
In the first-ever private sector award. Kym Amone took the prize. She has over 30 years of experience in the industry, with her primary focus as being the lead banker in tobacco financings – having senior managed 66% or $43 billion worth of financings in that sector.
She has also senior managed over $20 billion in New York debt as well as several other states. She has demonstrated success time and again due to her strong work ethic, integrity and intellectual honesty. Kym was also recently appointed as Chair of the MSRB.
Additionally, eight other amazing public finance women have been nominated as Trailblazers.
They are:
JULIA COOPER – DIRECTOR OF FINANCE, CITY OF SAN JOSE – Commitment to the Local Community
KATHERINE KRAVEN – CHIEF ADMINISTRATIVE AND FINANCIAL OFFICER, BABSON COLLEGE – Going the Extra Mile
ALICIA GLEN – DEPUTY MAYOR FOR HOUSING AND ECONOMIC DEVELOPMENT, NEW YORK CITY – Open to Opportunities
STEPHANIE RAWLINGS-BLAKE – MAYOR OF BALTIMORE – A Passion to Serve
LISEL WELLS – COUNSEL, NIXON PEABODY LLP – They call her Commander Bond
DIANA HOADLEY – BOARD MEMBER: NORTHEAST WOMEN IN PUBLIC FINANCE – Making Ideas Better
LEAH SANDBANK – MEMBER: McMANIMON, SCOTLAND & BAUMANN LLC – Feet to the Fire
SUSAN DUSHOCK – SENIOR VP, SUNTRUST BANK – Rolling with it – To the Top
As you can see, these trailblazers have very different backgrounds, focus and industries, but they all have one important thing in common: years of committed expertise to the public finance sector .
[Editor’s note: This is a fairly lengthy article – with splashes of ads from the sponsors, but a really interesting read, nonetheless. If interested, you can read more Here’s the full article Trailblazing Women in Public Finance 2014 – Enjoy!]
Registration is Open for Our Next Online Training Series
In closing, there’s only 48 hours left to sign up for PIC Essentials, our three week, online webinar mini-series training on audit-proven tactics you can implement in your post issuance compliance program.
The entire series is time conscious, cost effective and focused strictly on items taken directly from October’s “compliance improvement survey”.
If you need or want more help in any of these areas, we’d love to have you join us!
We hope you found this week’s edition of the Monday Muni Minutes valuable and informative.
As always your comments are welcome…
To your compliance success,
Debbie
The greatest compliment you can pay us is to share this newsletter with your issuer friends….
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