Loading...
RES 2016-20 ADOPTING A MUNICIPAL SECURITIES DISCLOSURE POLICYMUNICIPAL SECURITIES DISCLOSURE POLICY As an issuer of municipal securities, the City of Bainbridge Island (City) is subject to the antifraud provisions of the Securities Act of 1933, as amended, and the Securities and Exchange Act of 1934, as amended, and the Securities Act of Washington (chapter 21.70 RCW). These acts impose various obligations on the City, including requiring disclosure of material information regarding its publicly-offered bonds to allow investors to make informed decisions. All documents and statements prepared or made in connection with the purchase or sale of the City’s securities cannot contain any untrue statement of a material fact or omit a material fact necessary in order to make the statements not misleading. This policy is designed to assist the City in its compliance with securities laws and to promote best practices regarding disclosure. The City has three major disclosure obligations: (1) to prepare an official statement for all public offerings of its securities that is delivered to the underwriter(s) for distribution to potential and actual purchasers and that sets forth the terms of the securities and information regarding the City, (2) to provide ongoing disclosure in compliance with paragraph (b)(5) of the Securities and Exchange Commission Rule 15c2-12 (“Rule 15c2-12”), and (3) if and when the City provides information that can reasonably be expected to be relied on by the market, to ensure that the information is not inaccurate or misleading. 1.Official Statements and Other Disclosure Documents The City prepares an official statement for each publicly offered security offering. The Finance Director and the City’s bond counsel, disclosure counsel and financial advisor are responsible for preparing the official statement. If the City requests a rating, a rating presentation is prepared. A. Procedure and Timeline for Preparing Official Statements In advance of each financing, the Finance Director determines the financing team, including financial advisor, bond counsel and underwriters (for negotiated offerings only). Currently, the City’s bond counsel compiles official statements. The Finance Director and the Accounting Manager are responsible for providing drafts of the official statement or sections of the official statement, as appropriate, drafts of the rating presentation and investor presentation, if applicable, to the financing team and other City officials in a timely manner to provide adequate time for such individuals to perform a thorough review. The financial advisor or underwriter prepares a schedule for each financing, including dates for distributing drafts of the official statement and financing team calls and meetings to discuss the official statement. The Finance Director shall provide certain sections of the disclosure documents to individuals with subject matter knowledge of that section for their review and comments. The City Manager shall review the disclosure documents to provide a broader perspective. The City Council shall be informed of the availability of the official statement in advance of its publication and be given the opportunity to comment and ask questions. B. Training The Finance Director shall arrange periodic training opportunities to finance staff who participate in the City’s debt offerings regarding disclosure obligations and best practices. Training sessions shall include education on the City’s disclosure obligations under applicable securities laws and responsibilities and potential liabilities regarding such obligations. The Finance Director shall be responsible for maintaining a record (including attendance) of such training. C. Document Retention The Finance Director shall cause to be retained, for a period of at least five years, printed or electronic copies of each preliminary and final official statement and any written certifications or opinions relating to disclosure matters. Drafts of official statements and other disclosure materials are not required to be retained. D. Certifications and Opinions In connection with the closing of bonds, the transcript will include a disclosure counsel opinion, if applicable, City attorney’s certificate or opinion regarding litigation, and a certificate of the City regarding the official statement. 2. Ongoing Disclosure Each time the City issues publicly-offered securities it enters into a written undertaking to provide continuing disclosure for the benefit of the holders and beneficial owners of the securities as required by Rule 15c2-12. The undertakings require the City, not later than nine months after the end of each fiscal year, to provide to the Municipal Securities Rulemaking Board the City’s annual financial statements, which need not be audited, and certain specified historical financial and operating data. Audited annual financial statements well be provided when available. In each undertaking, the City also agrees to provide or cause to be provided, in not more than 10 business days after the occurrence of the event, notice of the occurrence of certain “Listed Events,” as defined in the undertaking. The City is responsible for complying with each undertaking, including the filing of annual financial reports within the specified time and the providing of timely notice of any Listed Event(s). In addition, City Finance Department employees are registered with EMMA and familiar with the filing requirements and procedures. The duty to comply with the undertaking is included in the Finance Director’s job description. The City shall keep a record of each undertaking and a copy of each filing pursuant to the undertakings. Any failure to comply with an undertaking shall be disclosed in future City official statements for five years. 3. Speaking to the Market The SEC has stated that when a municipal issuer of outstanding securities provides “information to the public that is reasonably expected to reach investors and the trading market, those disclosures are subject to the antifraud provisions”; the information cannot be misleading or contain incorrect information. In order to violate the antifraud rules, the misrepresentation must be made publicly, must be material, must involve a security traded on an efficient market and must be such as would induce a reasonable, relying investor to misjudge the value of the security. Examples of information that could be relied on by investors in the City’s outstanding securities include ongoing disclosure filings, audited financial statements, investor presentations, and financial information posted on the City’s website. 4. Compliance with MCDC Order On June 10, 2016, the City entered into an Offer of Settlement with the U.S. Securities and Exchange Commission in connection with the Municipalities Continuing Disclosure Cooperation Initiative. As part of that Order, the City agreed to: (1) adopt written policies and procedures, (2) periodic training regarding continuing disclosure obligations, (3) within 180 days, comply with existing continuing disclosure undertakings, including updating any past delinquent filings, (4) disclose the terms of the Order in any of the City’s official statements for 5 years after the institution of the proceedings, and (5) certify in writing compliance with these requirements no later than one year after the institution of the proceedings. This policy is designed to comply with (1) above. The Finance Director has confirmed that the City is in compliance with its ongoing disclosure undertakings during the past five years. The Finance Director is directed to provide the certification required in (5) within one year.