Recently, the SEC settled with the City of Harrisburg (City)
over violations of Rule 10b-5 in connection with material misstatements and omissions
made by the City in its public statements and financial information, during a
This settlement underscores the increased focus by the SEC
on state and municipal governments in connection with the trillion-dollar
municipal bond market.
The SEC alleged that the City violated Rule 10b-5 as a
result of its repeated failure to provide financial information and material
events notices. As a result of the City's failure, investors only had access to
stale and misleading financial information. Further, the public statements that
the City did provide omitted material information regarding the City's
declining financial condition and credit rating downgrades. As a result,
investors and trading markets did not have material information regarding the
City's financial condition.
Settlement Demonstrates the Importance of Disclosure and
The SEC noted in the cease-and-desist order with the City
that the City's recent efforts to create policies and procedures to ensure that
its financial information is accurate were a contributing factor to the SEC's
willingness to settle the administrative proceeding.
During the relevant time period, the City did not have in
place policies and procedures to ensure that (i) the financial information it
was releasing to the public was accurate in all material respects, and (ii) it
was complying with its Rule 15c2-12 continuing disclosure undertakings. The SEC
noted in the cease-and-desist order with the City various corrective actions
taken by the City.
Foley Web Conference on Disclosure Practices
Foley will host an upcoming Web conference on disclosure
transparency as part of its next Access to Capital Web conference series. The
Web conference, titled, The Importance of Disclosure Transparency and
Procedures for Health Care Borrowers, will be held on Thursday, May 23,
2013 at 12:00 p.m. Central. Learn more about attending the conference here.
Read other articles by Foley & Lardner attorneys.
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