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Legal Issues

MCDC Settlements Complete - December 21, 2016

Are MCDC Settlements complete?

According to an article in the public finance daily newspaper, The Bond Buyer, the SEC is finished bringing settlements under its Municipalities Continuing Disclosure Cooperation (“MCDC”) initiative.  In the December 14 article LeeAnn Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit said, “We currently do not expect to recommend enforcement action against any additional parties under the initiative.  We now think it is appropriate to turn our attention to issuers and underwriters and obligors that didn’t participate.” 


The SEC has previously entered into settlements with 72 issuers from 45 states, and 72 underwriters, under the MCDC initiative.  While the underwriters paid a total of $18 million in settlements, the issuers who settled with the SEC did not have to pay penalties, but agreed to establish appropriate written policies and procedures regarding their continuing disclosure obligations. 


Meanwhile, many other issuers made voluntary disclosure filings under the MCDC initiative, but have not been contacted by the SEC.  It now appears that those issuers no longer have to worry about the outcome of their filings and will not be the subject of any further settlements with the SEC. 


This is good news for issuers who faced the uncertainty of having filed but not knowing what to expect next.  In many cases, issuers had claimed in their filings that any reported omissions were not material.  Undoubtedly, there will be significant speculation about the meaning of the SEC’s decision not to pursue further settlements unless further clarification is forthcoming.