Amendments to Rule 15c2-12 Coming into Effect in February

On February 27, 2019, two new required municipal securities disclosure events will come into effect pursuant to amendments to U.S. Securities and Exchange Commission Rule 15c2-12. The amendments apply to municipal securities issued on or after February 27, 2019.

Currently, there are 14 different events for which notices must be filed pursuant to Rule 15c2-12, which include events such as rating changes or events affecting the tax-exempt status of the security. The purpose of these notices is to provide certain information to investors. These event notices are part of the continuing disclosure obligations Rule 15c2-12 stipulates underwriters of municipal securities must ensure the issuer or obligated person will fulfill. In addition to the event notices, the rule includes other requirements, such as the filing of annual financial information. This continuing disclosure information is provided to the Municipal Securities Rulemaking Board (MSRB) on an ongoing basis and made accessible to investors through its Electronic Municipal Market Access website. 

As of February 27, notices will be required for two new events:

1. The incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material; and
2. A default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties.

As with the current list of events, notice of these two new events must be provided to the MSRB within 10 days of the event’s occurrence.

Standing to Appeal Requires “Continuous Participation”

Local appeals boards are usually in the habit of considering the particularized injury prong of the standing test, but often brush over the participation prong. The Lincoln County Superior Court recently issued a decision in Our Town, et. al. v. Town of Damariscotta, et. al. (Lin. Cty. Super. Ct. Dkt. WISSC-AP-2018-3), which serves as a good reminder to local boards of appeals that they have jurisdiction to review and determine whether the appellants before them have sufficiently participated in the hearing process. 

Most municipal ordinances allow for an “aggrieved party” to appeal local administrative decisions. To be “aggrieved,” a party must show that he or she participated throughout the administrative process, and that the decision causes him or her to suffer a particularized injury or harm. Participation generally requires the party to have attended the relevant meetings (whether in person or through written comments) and raised any issues he or she may have. When the appellant is an individual, participation is usually easy to demonstrate through examination of the meeting record. However, as discussed in the Our Town case, it can be more complicated when a group or coalition is appearing as an appellant. 

In Our Town, a group of affected individuals presented an appeal of a site plan approval issued by the Damariscotta Planning Board. When the Board of Appeals considered whether the group had standing, it noted that one of the members had appeared at a pre-application workshop, that none of the members had appeared at the Planning Board meetings on the application, and that one of the members had submitted written comments after the close of the hearing. Accordingly, it found that Our Town did not have standing because its members had not continuously participated in the review process. The Court agreed, holding that because it was the group that was asserting standing, the individual members had to have identified themselves as members of the group when they appeared. The Court also held that participation before and after, but not during the hearing, was not sufficient to demonstrate continuous participation. 

Appeals boards should, as a preliminary matter, evaluate both prongs of the standing test before proceeding to the merits of an appeal. If, on review of the record, it is clear that the appellant did not sufficiently participate in the review process, the Board is free to deny the appeal, and a court is likely to give that decision a good degree of deference.