In August 2018, Lumesis conducted a survey of municipal issuers regarding the management of their continuing disclosure obligations. Our outreach was to a finite set of diverse issuers and obligated parties and over 200 responded to the ten question survey. Below, we provide insight into the survey results.
Overall, 98% of the respondents were “Very Confident” or “Somewhat Confident” that their organization is fully compliant with the disclosure and material event obligations. Further, almost 70% of the survey respondents conduct a periodic review to ensure their disclosure management policies and procedures are up to date while only 12% did not perform such a review (the other 18% did not respond to that question).
Procedures and Tracking of Obligations
Of the more than 200 respondents, 87% indicated that they had a procedure in place to manage their continuing disclosure process. Just over 68% of our respondents tracked their disclosure obligations internally with just over 30% relying on a third party to track their disclosure obligations. Two-thirds of the survey respondents had some type of alert system to advise of filing obligations coming due.
Disclosure and Material Event Filings
When it comes to filing continue disclosure, our survey found that over 62% of issuers and obligors make their own filings. However, a closer look at the reported data tell us that 48% file both continuing disclosure and material event filings while the balance of the 62% that make their own filings file only for the audit and financial and operating data.
Interestingly, of the group that uses a third party to file some or all of their required filings, only 28% check the work of the third party while almost 65% chose not to answer this question.
In our survey we asked the participants: “[I]s it your understanding that a third party is responsible for any liability resulting from missed or late filings?” Just under 26% gave the correct answer, “no,” while just under 10% said “yes” with the balance not responding.
For the roughly 74% that answered “yes” or did not respond, it is important to make clear that the responsibility for making filings and any liability for failing to make filings -- along with proper disclosure around the same -- rests with the issuer/obligor. We have previously provided insight into this subject in two Bond Buyer articles. Both articles can be found here. The topic is also handled in-depth during during our webinar regarding Issuer-Focused 15c2-12 Disclosure Management with the law firm of Ballad Spahr.