As of Aug. 1, 2014, public entities in Louisiana that issue municipal securities must be in compliance with recordkeeping procedures related to the municipal securities continuing disclosure rule.
Per the terms of Louisiana’s Act 463, which enacts R.S. 39:1438, originally drafted by state Sen. Eric LaFleur, D-Ville Platte, additional recordkeeping and audit procedures for compliance have been put into effect. In accordance with Act 463, all records that are required to be kept are also subject to inspection by an auditor.
Since 1989, when the SEC adopted a rule designed to enhance transparency within the municipal securities market, multiple smaller efforts have been made to help better regulate underwriters, sellers and brokers of such securities. In 2010, new disclosure requirements created ripple effects that complicated tax exemptions for bonds, and LaFleur’s rule was designed in part as an amendment to those changes.
Most notably, Act 463 mandates that every Louisiana public entity continuously maintain the following:
- A list of municipal securities for which the entity is the issuer or an obligated person
- A copy of any continuing disclosure agreements to which the entity is a party
- In the event that it is pursuant to a disclosure agreement to which that entity is a party, the organization or business is responsible for filing notices of changes to bond ratings and, if applicable, a list of current ratings for such securities.
Definitions and clarifications
Additionally, all kept records will be subject to inspection from a public entity auditor. The primary goals of the rule are to improve both the quality and timeliness of disclosures for municipal securities, while also providing enhanced information for investors through improved regulation, particularly of those who underwrite or sell municipal securities. There’s also a hope that existing requirements pertaining to the scope of securities being covered have been tweaked for the better, as further clarity will be gained regarding the nature of the events issuers must now disclose and, perhaps most importantly, the time period in which disclosure must be made.
Act 463 also revisits the definitions for a variety of key terms and concepts, all of which are laid out by the Louisiana Legislative Auditor. They range from simplified redefinitions for terms such as “auditor” and “municipal securities” to clarifications for what constitutes an issuer or a public entity.
For more information or guidance regarding the terms and conditions of Act 463, individuals and businesses can consult with a member of the LaPorte Public Sector Industry Group.