Continuing Disclosure Rules Amended by SEC

On August 20, 2018, the Securities and Exchange Commission amended Rule 15c2-12 to add two events to the list of notice events included in continuing disclosure undertakings by issuers, or other obligated individuals.

The two new notice events are: 

(i)        Incurrence of a financial obligation of the issuer or obligated person, if material, or agreement to covenants, events of default, remedies, priority rights or other similar terms of a financial obligation of the issuer or obligated person, any of which affect security holders, if material; and 

(ii)        Default, event of acceleration, termination event, modification of terms or other similar events under the terms of a financial obligation of the issuer or obligation person, any of which reflect financial difficulties. 

All continuing disclosure agreements entered into after February 27, 2019 are required to include the two new notice events.  

A "financial obligation” is defined by the SEC as a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The definition does not include ordinary obligations incurred in the normal course of business, or municipal securities as to which a final official statement has been provided to EMMA. 

In Connecticut, it is likely the term “financial obligation” will capture swaps, direct or privately placed debt obligations, energy performance contracts, clean water fund obligations, drinking water fund obligations, lease-purchase contracts and installment sale contracts. 

If you have any questions about this alert, please feel free to contact any of the attorneys listed below to better understand the impact these amendments may have on post-issuance disclosure procedures, materiality determinations and preparation of notice filings.