Bonds, notes, and other debt instruments issued by state institutions of higher education and other state and local governmental entities (referred to in this memorandum as “municipal securities” or “municipal bonds”) are closely regulated under federal securities law. The United States Securities and Exchange Commission, the Municipal Securities Rulemaking Board, and other regulatory agencies continue to steadily increase their oversight of the municipal bond industry through the proliferation of investigations, public pronouncements, and regulatory and rulemaking activity. In its 2012 report on the municipal bond market, the SEC highlighted a number of concerns relating the sufficiency and timeliness of disclosure in the primary and secondary municipal bond markets, and the SEC’s current chairman, Mary Jo White, has promised to address these and other securities law concerns through “aggressive and creative” enforcement.
The purpose of this Chapman white paper is to provide 1) public institutions of higher education that issue municipal securities and 2) nonprofit 501(c)(3) universities and colleges that borrow proceeds of municipal securities issued by governmental “conduit” issuers on behalf of such private institutions with a summary of, and practical guide to, the principal requirements of federal securities laws relating to municipal bonds. Armed with a greater understanding of federal securities laws, municipal issuers and borrowers will be better equipped to communicate thoroughly and effectively with counsel and other working group professionals during the bond transaction, thereby increasing the quality of disclosure and the likelihood of compliance with securities laws at the time of issuance and throughout the life of the bonds.
Much of the information discussed in this memorandum applies to both higher education bonds and other municipal securities, while certain sections (including, for example, “Disclosure Checklist for Higher Education Bonds”) focus on securities laws as applied to the higher education sector, in particular.
