Continuing Disclosure

S.E.C. Rule 15c2-12 requires issuers of most bonds issued after July 2, 1995, or certain other "obligated persons," to agree in writing, at the time the bonds are issued, to provide continuing disclosure to the marketplace for the life of the bond issue.

This Continuing Disclosure Agreement not only obligates the issuer (or obligated person) to provide annual reports and current material event disclosures, but also exposes the issuer (or obligated person) to potential liability for securities fraud under S.E.C. Rule 10b-5 if those disclosures contain material misstatements or omit any information, whether or not required by the Continuing Disclosure Agreement, necessary to make the information contained in such disclosures not misleading in any material respect.

Orrick has established procedures and practices to help issuers and other obligated persons to handle the burdens and to minimize cost, staff time, and exposure to liability associated with Rule 15c2-12. From almost the moment the Securities and Exchange Commission adopted the aforementioned requirements in Rule 15c2-12 in November, 1994, Orrick has been at the forefront in assisting issuers and others in complying with the Rule and related securities laws by (i) coordinating the development of standard forms of the Continuing Disclosure Agreement, (ii) producing a series of well-received seminars (in California, New York, Nevada and Hawaii), and (iii) formally organizing a Continuing Disclosure Practice that combines the proven reliability and cost-effectiveness of Orrick’s wholly-owned subsidiary The BLX Group, which already provides annual post-issuance arbitrage rebate services for more than 5,000 bond issues, with the disclosure expertise of our Public Finance attorneys, generally ranked number one in the country as bond counsel and underwriters' counsel for most of the last decade.

The Continuing Disclosure Practice group provides a full range of services designed to assure that annual reports and material event notices are prepared and disseminated on time, to the required recipients, with the agreed content and the least exposure to risk of securities law liabilities. For example, with respect to each Annual Report, Orrick would, among other services:

  • Determine from the Continuing Disclosure Agreement what categories of information are required to be included in the Annual Report, about which obligated persons and by when it must be provided to each Nationally Recognized Municipal Securities Information Repository ("NRMSIR") and any state information depository ("SID").
  • At least sixty (60) days prior to the date on which the Annual Report is due, provide a template of tables to complete, list of data to provide, and/or questions to be answered in preparing the Annual Report (the "Checklist/ Questionnaire").
  • Review and supplement the Checklist/Questionnaire with a view to eliciting any information, in addition to the information required by the Continuing Disclosure Agreement, that might be necessary in order that the information provided in the Annual Report does not omit anything required to make the Annual Report not misleading in any material respect, so as to reduce exposure for potential violation of Securities and Exchange Commission Rule 10b-5.
  • Assist the officers or employees of the issuer (or obligated person) designated with responsibility for continuing disclosure to assemble information necessary for the Annual Report.
  • Review material compiled to determine whether it covers the categories referred to above. Make appropriate follow-up inquiries based on the information compiled.
  • Format or assist in formatting such material into an Annual Report with appropriate limitations and disclaimers aimed at reducing potential liability.
  • Review final form of Annual Report and render a so-called "10b-5 opinion" (optional).
  • Submit or confirm submission of the Annual Report to each NRMSIR and any SID.
  • Maintain, or cause to be maintained, for at least six (6) years, a record of the Annual Report submitted to NRMSIRs and any SID.

Similar services can be provided with respect to each of the eleven events specified in the Continuing Disclosure Agreement requiring timely reporting if material.

Orrick also offers a somewhat broader range of services to clients interested in a comprehensive disclosure strategy. This broader approach includes (1) reviewing the financial and operating data to be included in the official statement for each bond issue with a view to avoiding overinclusion that unnecessarily expands the scope of required continuing disclosure and (2) preparing or reviewing the Continuing Disclosure Agreement for each issue with a view to minimizing the scope of continuing disclosure required, by being as specific as possible to avoid any ambiguity about the information contractually agreed to be provided and assuring as much consistency among Continuing Disclosure Agreements as possible, in order to avoid unnecessary and potentially dangerous inconsistencies. This broader approach may also include designated Disclosure Counsel services, in order to achieve greater consistency and coordination among initial issuance disclosure in Official Statements and post-issuance continuing disclosure.