City Council receives biennial training on municipal securities disclosure duties
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Summary
City Council members received a training session from the city’s disclosure counsel on federal disclosure requirements tied to municipal bond offerings, continuing disclosure obligations, and steps council members can take to limit personal liability when approving official statements.
At a City Council meeting (date not specified), council members received a training briefing on municipal securities disclosure responsibilities from disclosure counsel Brian Garzone of Hawkins Delafield and city staff.
The training reviewed the documents used to sell municipal bonds — including preliminary and final official statements — the city’s continuing disclosure obligations under SEC rule 15c2-12, and the repository used to publish filings (EMMA, the Electronic Municipal Market Access system). Garzone explained that the official statement must present “all factors that could affect the ability or willingness of the city to pay principal and interest on the bonds when due.”
The briefing emphasized three disclosure contexts: the primary offering (preliminary and final official statements), ongoing secondary-market disclosures required by continuing disclosure agreements, and voluntary filings the city may make. Garzone explained investors rely on the official statement and related filings; omissions or materially misleading statements can trigger SEC enforcement. “You must be providing true statements, and you can’t omit something that was, you know, a material fact necessary to make the statements in the document, not misleading,” Garzone said.
Council members were given guidance drawn from SEC case law and prior enforcement guidance — notably the Orange County matter — about when personal liability could attach. Garzone said enforcement actions can be brought against issuers and, in theory, individuals, and described the legal standards the SEC uses (negligence, recklessness, or intent). He noted most SEC matters against municipal participants are negligence-based and therefore easier for the agency to prove than intentional fraud.
To reduce risk, Garzone outlined the city’s disclosure governance: a written municipal securities disclosure policy, a disclosure working group, a designated disclosure coordinator, and periodic staff and council training. He told the council that policies and documented procedures can form a defense in enforcement matters and urged council members to either read official statements closely or to rely reasonably on trained staff and the working group, while still raising any known red flags.
City staff reiterated operational practices. Tim, a city staff member, told the council that the city completes training for staff and council every two years, maintains a disclosure coordinator (Cindy Augustine), and works with external vendors and counsel for filings. “We take this very seriously,” Tim said, noting the city uses an outside vendor (DAC) to assist with filings and relies on Hawkins Delafield for legal review.
Council members asked clarifying questions during the presentation about the role of audits and the effect of current financial statements on borrowing costs. Garzone said current audited financial statements and up-to-date continuing disclosure generally improve market confidence and can help lower borrowing costs for the city.
No ordinance, bond issue, or change to the city’s disclosure policy was voted on during the training presentation; the meeting recorded two procedural motions (selection of an acting chair to preside and adjournment), both approved by unanimous vote. The council did not take formal action related to bond issuance or to amend the municipal securities disclosure policy during this meeting.
The city’s continuing disclosure obligations discussed in the briefing include annual audited financial statements, periodic event notices required by continuing disclosure agreements, and other material event filings posted to EMMA. Staff said the disclosure working group reviews disclosure documents before publication and conducts an annual effectiveness review of the policy and procedures.
Votes at a glance
• Motion to elect an acting chair to preside over the meeting — passed unanimously (yes votes recorded: Hooton; Gill; Hampton; Wieger; Williams). Motion text and mover/second not specified in the transcript.
• Motion to adjourn — passed unanimously (yes votes recorded: Hooton; Gill; Hampton; Wieger; Williams). Motion text and mover/second not specified in the transcript.
