Continuing Disclosure: The Central Post Office has Arrived!

9/10/2004

Hawkins Partner assists Texas MAC in obtaining SEC interpretive letter.

The Securities and Exchange Commission has made it easier for both issuers and underwriters to comply with their SEC Rule 15c2‑12 continuing disclosure obligations and contractual undertakings. Under a September 7, 2004, interpretive letter issued by SEC staff to the Municipal Advisory Council of Texas (“Texas MAC”) and to John M. McNally, a Hawkins partner who represented Texas MAC in obtaining the letter, issuers of municipal securities and others (whether acting for themselves or through a dissemination agent) who normally would be required to file annual financial information and operating data, as well as material event notices, with each nationally recognized municipal securities repository (“NRMSIR”) and with any relevant state information depositary (“SID”) may instead satisfy these obligations by filing only with DisclosureUSA, a website newly created and operated by Texas MAC. The interpretive letter also assists underwriter compliance with Rule 15c2‑12, by permitting them to treat a continuing disclosure undertaking that provides for filings through DisclosureUSA to be in compliance with the Rule.

Essentially, DisclosureUSA acts as a “central post office” that takes filings with it and immediately re-transmits them to the NRMSIRs and SIDs. Use of DisclosureUSA is not required, but it is hoped that it will simplify the filing process and facilitate the availability and accessibility of filed information.

This simplified “one-stop” process is approved by the interpretive letter for any new continuing disclosure undertaking pursuant to the Rule that provides for filings through DisclosureUSA. In addition, the interpretive letter advises that the DisclosureUSA process is “consistent with the intent of Rule 15c2 12”, which should have the practical effect of also allowing it to be used for filings under existing continuing disclosure undertakings or new ones that don’t happen to reference DisclosureUSA. We do not believe that amendments to existing undertakings will be required to permit filings through DisclosureUSA.

When a filing is made with DisclosureUSA, it supplies confirmation of receipt and also confirmation of re-transmission to the NRMSIRs and SIDs. Currently, filings may be made either electronically or by paper, but paper filing will be phased out by the end of 2007. There is no fee for electronic filings that are directly uploaded, but those who submit filings in paper or as attachments to e‑mails will be charged modest fees per document.

DisclosureUSA will maintain a searchable indexing system to permit registered users to search for filings, which should greatly simplify the process of verifying whether filings have been made in compliance with Rule 15c2 2‑12 and retrieving information. The filed documents themselves are obtainable only through the NRMSIRs and SIDs.

DisclosureUSA also will maintain a “tickler” system that will, free of charge, notify registered users by e‑mail of upcoming filing deadlines. Making sure that DisclosureUSA has the correct time deadlines and making timely filings will continue to be the responsibilities of the filers themselves.

We at Hawkins applaud this improvement in secondary market disclosure, and of course are very pleased to have played our part in obtaining the staff’s favorable interpretation of Rule 15c2‑12 that permits it. We encourage filers to at least give it a try. Further information can be obtained directly from the DisclosureUSA website at www.DisclosureUSA.org, or contact any Hawkins lawyer.

Attorneys

John M. McNally

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