By: Mark A. Imbrogno
During the COVID-19 crisis, municipal and other bond issuers and borrowers need to be mindful of information provided to investors and lenders. Given the rapid changes, it is difficult to assess whether the immediate impacts of the COVID-19 crisis will only affect an organization’s short-term outlook, or if the impacts will ripple through long-term operations. Issuers and borrowers will receive questions from investors, banks, and possibly others seeking to learn more about COVID-19’s impacts on finances and revenues. Issuer and borrower communications with market participants are subject to federal securities laws. Accordingly, those communications must be accurate and complete. Issuers and borrowers should consider these points in their communications:
- All issuers and borrowers should read Staff Legal Bulletin No. 21 authored by the SEC’s Office of Municipal Securities. This Staff Legal Bulletin discusses the applicability of the federal securities laws to public statements of issuers in the secondary markets.
- Try to have a single point of contact for inquiries and responses. If it is not possible to speak through only one individual, it is important that all of those providing public information and responding to inquiries routinely communicate with one another to ensure consistent messaging.
- Organizations should maintain a written timeline of the organization’s actions related to and impacts from COVID-19, including notes on inquiries received and responses given, as well as informational releases provided to the general public.
- Issuers and borrowers should maintain a bullet point list of talking points regarding the organization’s response to COVID-19 and its impacts. Talking points should be reviewed and discussed regularly by management and all personnel communicating with both investors and the public.
- Persons responding to inquiries should not speculate about potential impacts in oral communications and written materials, unless otherwise obligated to do so by any agreements or indentures.
- Organizations should consider providing a summary of the information being disseminated on websites or in voluntary disclosures to EMMA, so that information may be easily located and may reduce the number of different discussions had with investors and lenders. If information is posted on a website or EMMA, be sure that the information is dated and notes that it is voluntary and does not make a commitment to continue to provide updates.
Do not let your organization speculate as to the worst-case scenario or shade things with “rose-colored glasses”. Honest, accurate, and complete communications help appropriately inform the marketplace, as well as keep you and your organization out of harm’s way with any potential federal securities law violations.
Your organization is not alone in working through this crisis. All or nearly all issuers and borrowers are facing similar challenges. We will continue to stay abreast of development and will post any updates.