Among the steps the MSRB recommends are steps that would provide guidance to underwriters to help them determine when they can reasonably believe that an issuer will live up to its continuing disclosure agreement. Under current rules, an issuer must reasonably believe that an issuer will meet its continuing disclosure obligations before it can underwrite an issue.
The BDA has been in meetings at the SEC where it was suggested that if an issuer has not met its continuing disclosure obligations in the past, then an underwriter could not reasonably believe that the issuer would do so in the future, absent some change on the part of the issuer, and therefore the underwriter would have to refuse to underwrite any new bonds from the issuer. This view of current law goes beyond just having an issuer file the past 5 years of continuing disclosures. The MSRB is asking the SEC to clarify just what an issuer would have to do to allow the underwriting of new bonds.
The MSRB also recommends that all VRDO primary offerings be required to file an OS, that the SEC clarify when a VRDO is being remarketed and when there is a primary offering and that the SEC increase disclosures relating to underlying obligors and renew emphasis on certain key disclosures.
A memo on the MSRB recommendations prepared by Nixon-Peabody is available here and the text of the MSRB letter is available here.
