Skip to main content

Nixon Peabody LLP

  • People
  • Capabilities
  • Insights
  • About
Trending Topics
    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    Practices

    View All

    • Affordable Housing
    • Community Development Finance
    • Corporate & Finance
    • Cybersecurity & Privacy
    • Entertainment & Media
    • Environmental
    • Franchising & Distribution
    • Government Investigations & White Collar Defense
    • Healthcare
    • Intellectual Property
    • International Services
    • Labor, Employment, and Benefits
    • Litigation
    • Private Wealth & Advisory
    • Project Finance
    • Public Finance
    • Real Estate
    • Regulatory & Government Relations
    Industries

    View All

    • Aviation
    • Cannabis
    • Consumer
    • Energy
    • Financial Services
    • Healthcare
    • Higher Education
    • Infrastructure
    • Manufacturing
    • Nonprofit Organizations
    • Real Estate
    • Sports & Stadiums
    • Technology
    Value-Added Services

    View All

    • Alternative Fee Arrangements

      Developing innovative pricing structures and alternative fee agreement models that deliver additional value for our clients.

    • Continuing Education

      Advancing professional knowledge and offering credits for attorneys, staff and other professionals.

    • Crisis Advisory

      Helping clients respond correctly when a crisis occurs.

    • DEI Strategic Services

      Providing our clients with legal, strategic, and practical advice to make transformational changes in their organizations.

    • eDiscovery

      Leveraging law and technology to deliver sound solutions.

    • Environmental, Social, and Governance (ESG)

      We help clients create positive return on investments in people, products, and the planet.

    • Global Services

      Delivering seamless service through partnerships across the globe.

    • Innovation

      Leveraging leading-edge technology to guide change and create seamless, collaborative experiences for clients and attorneys.

    • IPED

      Industry-leading conferences focused on affordable housing, tax credits, and more.

    • Legal Project Management

      Providing actionable information to support strategic decision-making.

    • Legally Green

      Teaming with clients to advance sustainable projects, mitigate the effects of climate change, and protect our planet.

    • Nixon Peabody Trust Company

      Offering a range of investment management and fiduciary services.

    • NP Capital Connector

      Bringing together companies and investors for tomorrow’s new deals.

    • NP Second Opinion

      Offering fresh insights on cases that are delayed, over budget, or off-target from the desired resolution.

    • NP Trial

      Courtroom-ready lawyers who can resolve disputes early on clients’ terms or prevail at trial before a judge or jury.

    • Social Impact

      Creating positive impact in our communities through increasing equity, access, and opportunity.

    • Women in Dealmaking

      We provide strategic counsel on complex corporate transactions and unite dynamic women in the dealmaking arena.

    1. Home
    2. Insights
    3. Alerts
    4. SEC releases coronavirus (COVID-19) disclosure guidance for issuers of municipal securities

      Alerts

    Alert / Public Finance

    SEC releases coronavirus (COVID-19) disclosure guidance for issuers of municipal securities

    May 11, 2020

    LinkedInX (Twitter)EmailCopy URL

    By Elizabeth Columbo, Daniel Deaton, Julie Seymour and Noah Lebowitz

    Clayton encourages voluntary and forward-looking disclosure of COVID-19 effects on municipal financial condition and operations.

    DOWNLOAD

    PDF: SEC releases COVID-19 disclosure guidance for issuers of municipal securities

    On May 4, 2020, Jay Clayton, Chairman of the Securities and Exchange Commission (SEC) and Rebecca Olsen, Director of the Office of Municipal Securities, released a public statement (the Statement) entitled “The Importance of Disclosure for our Municipal Markets.” The Statement, which parallels recent guidance directed to public companies, discusses the SEC’s concerns and expectations regarding disclosure by municipal issuers of the effects of COVID-19 on their financial condition and operations.

    Background

    The Statement discusses the impact of the coronavirus pandemic on the municipal securities market and suggests the type of disclosures issuers of municipal securities should consider, whether in connection with offerings or on a voluntary basis.

    • “[W]e…request that municipal issuers provide investors with as much information about their current financial and operating condition as is reasonably practicable…. [I]n today’s markets, the typical practice of providing historic financial information in the form of an annual information filing or similar disclosure may not enable investors to make informed assessments of the municipal issuer’s current and expected future financial condition.”
    • “We also encourage municipal issuers to provide investors with forward-looking information regarding the potential future impact of COVID-19 on their financial and operating conditions. We understand that providing detailed information regarding future operating conditions and resource needs is challenging, particularly as response strategies designed to mitigate and more effectively treat COVID-19 are evolving rapidly and are likely to change in the future.”
    • “We acknowledge that developing voluntary, unaudited, and non-routine disclosures regarding current financial status and operating conditions may be challenging, particularly under the current circumstances…. Nevertheless, we believe providing as much current issuer- and security-specific information as is practicable will benefit issuers, investors[,] and our municipal securities markets more generally.”

    Our takeaways

    Diversity, complexity of municipal market heightens SEC’s COVID-19 disclosure concerns.

    The SEC is concerned that investors in the municipal securities market increasingly will strain to understand how COVID-19 is impacting the financial condition and operations of municipal issuers. Noting the diversity among types of municipal issuers and securities offered, including complex issuer-specific credit structures, pledged revenue streams, and derivative products, the Statement suggests that meaningful issuer- and security-specific disclosures of COVID-19 impacts will be needed to inform investors. Recognizing the difficulties faced by a municipal issuer to accurately explain how coronavirus will impact its finances and operations as the pandemic is rapidly evolving, the SEC “request[s] that municipal issuers provide investors with as much information about their current financial and operating condition as is reasonably practicable.”

    The SEC underscores the importance of forward-looking information that meaningfully informs investors.

    The SEC acknowledges the challenges faced by municipal issuers in developing “voluntary, unaudited, and non-routine disclosures,” such as a lack of formal process or framework. However, the SEC notes that in this environment, the “typical practice” of disclosing historical financial information (e.g., audited financial statements) on an annual basis or similar disclosure “may not enable investors to make informed assessments of the municipal issuer’s current and expected future financial condition.” That is, while noting the challenges in doing so, the SEC urges municipal issuers to provide as much forward-looking information to the markets as possible.

    The SEC suggests types of information relating to COVID-19 impacts for disclosure.

    The Statement sets forth types of financial and operating information that could be of particular importance to investors in light of COVID-19: “Disclosures should reflect the issuer’s assessment of [the] state of affairs and outlook and, in particular[,] municipal issuers should provide information regarding: (1) their current operational and financial status, including decreases in revenues and delays in collection of revenues; (2) how their COVID-19 response[,] including efforts to protect the health and well-being of residents and employees[,] has impacted their operational and financial condition, including un-budgeted costs; and (3) how their operational and financial condition may change as efforts to fight COVID-19 evolve.”

    How can the Statement help municipal issuers?

    In addition to extending to the municipal securities markets the SEC’s prior guidance for corporate issuers, the Statement provides guidance specifically targeted to municipal issuers, described below.

    The SEC lists types of information relating to COVID-19 impacts that municipal issuers should consider disclosing.

    The Statement provides a non-exclusive list of the type of information that could be of particular importance to investors in light of the pandemic, whether in connection with a primary offering, a required disclosure, or a voluntary disclosure:

    • Decreases in revenues or delays in the collection of revenues.
    • Increases in unbudgeted costs.
    • Sources of liquidity (e.g., cash on hand and reserves), access to additional liquidity, and “whether current liquidity is expected to be adequate to fund essential services and make timely debt service payments.”
    • “A description of available federal, state[,] or local aid the issuer has sought or is planning to seek and the anticipated timing of such aid. In addition, if the municipal issuer has obtained any such aid, it should disclose the nature, amount, and other material terms of the aid if it materially affects or reasonably likely will materially affect its operational or financial condition.”
    • Reports prepared for governance purposes (i.e., not primarily for securities disclosure purposes), which “…could provide powerful insight into local, regional, and sector-specific strategies to fight and recover from COVID-19.”

    The SEC describes factors to mitigate perceived legal risk arising from voluntary disclosures.

    The SEC notes that “the issue of liability often is raised when voluntary disclosures—or the expansion of required disclosures—are considered.” But the SEC describes various factors that it believes weighs in favor of making such disclosures:

    • Robust disclosure will assist the general functioning of the municipal securities market and could assist issuers by enhancing their ability to refinance existing debt or raise new capital.
    • Accompanying disclosure with “meaningful cautionary language” (e.g., relevant facts or assumptions, information which may be complete or unknown, and a description of the methodology used to produce the disclosure) will improve the quality of the information and mitigate risks.
    • Information relating to the effect of COVID-19 on an issuer’s financial condition or operations may be furnished for purposes other than disclosure to the municipal securities market (e.g., a report to the federal government to assess the financial impact of the pandemic). Issuers should ensure that disclosures are “(1) consistent across all contexts, regardless of the purpose and (2) kept confidential until disclosed and, when disclosed, disclosed broadly….”

    The SEC specifically provides in the Statement, “[w]e would not expect good faith attempts to provide appropriately framed current and/or forward-looking information to be second[-]guessed ….” Thus, the SEC is focused on municipal issuers providing good faith estimates that are properly framed so that investors and the market understand the uncertainty inherent in those estimates and understand that many of those good faith estimates may prove to be significantly incorrect after the fact.

    Practices

    Corporate & FinancePublic Finance

    Insights And Happenings

    • Press Release

      Nixon Peabody serves as bond counsel on social bonds, helping to reduce homelessness in the City of Los Angeles

      Sep 29, 2022
    • Press Release

      Nixon Peabody recognized for ‘Excellence in Inclusion’ by nonprofit ChIPs

      Sep 8, 2022
    • Alert

      As Congress moves towards fixing the CARES Act, some borrowers seek relief from arguably invalid SBA rulemaking through the Administrative Procedures Act

      May 13, 2020
    The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

    Subscribe to stay informed of the latest legal news, alerts, and business trends.Subscribe

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    • Cookie Preferences
    • Privacy Policy
    • Terms of Use
    • Accessibility Statement
    • Statement of Client Rights
    • Purchase Order Terms & Conditions
    • Nixon Peabody International LLC
    • PAL
    © 2025 Nixon Peabody. All rights reserved