The SEC Adopts Amendments to Rule 15c2-12 of the Securities Exchange Act of 1934

Public Law & Finance

The Securities and Exchange Commission (the “SEC”) adopted amendments to Rule 15c2-12 (the “Rule”) of the Securities Exchange Act of 1934 that requires issuers and obligated persons to disclose material financial obligations that may impact such issuer’s or obligated person’s liquidity, overall creditworthiness, or an existing security holder’s rights.

The Rule requires, among other things, that underwriters in a primary offering of municipal securities reasonably determine that the issuer or obligated person has entered into a written agreement or contract to provide notice of certain events to the Municipal Securities Rulemaking Board (the “MSRB”) within 10 business days of the occurrence of any of the events.

In recent years, issuers and obligated persons have used direct purchase transactions as alternatives to traditional public offerings of municipal securities.

The SEC’s amendments to the Rule will provide investors and the public with more timely information with respect to those direct purchase transactions and other financial obligations. The two additional event notices added to the Rule are the following:

  1. Incurrence of a financial obligation of the issuer or obligated person, if material, or agreement to covenants [sic], events of default, remedies, priority rights, or other similar terms of a financial obligation of the issuer or obligated person, any of which affect the security holders, if material; and
  2. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of the financial obligation of the issuer or obligated person, any of which reflect financial difficulties

The amendments provide that a financial obligation is (a) a debt obligation, (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation, or (c) a guarantee of (a) or (b).

A financial obligation does not include (i) municipal securities where a final official statement has been provided to the MSRB in accordance with the Rule, and (ii) ordinary financial and operating liabilities incurred in the normal course of an issuer’s or obligated person’s business.

The SEC provided, however, that a debt obligation generally includes (A) lease arrangements entered into by issuers and obligated persons that operate as vehicles to borrow money, and (B) short-term and long-term debt of an issuer or obligated person under the terms of an indenture, loan agreement, lease, or similar contract.

A financial obligation is “incurred” when the obligation becomes legally enforceable against an issuer or obligated person.

Issuers and obligated persons must comply with the new amendments beginning 180 days after publication in the Federal Register. On that date, continuing disclosure undertakings must include the two new event notices. The amendments to the Rule, however, do not affect existing continuing disclosure undertakings by issuers and obligated persons.

Interested parties can review the SEC’s press release, along with a link to the final rule, for the amendments at

For additional information on this topic, please contact your regular Calfee attorney or the author(s) listed below:


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