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Continuing Disclosure & Arbitrage Rebate: Value of Meeting the Compliance Life-Cycle for Bond Issuances

What happens after the bond is issued?

When a municipality issues a bond, a significant amount of work is spent on the planning and issuance process.

A bond issuance must continue to meet compliance requirements through the life of the bonds – whether through maturity or until refunding – and many municipalities fall short in the financial stewardship of their agencies in terms of compliance responsibilities.

Disclsoure Graph

Current Securities and Exchange Commission rules and the Tax Reform Act of 1986 mandate that jurisdictions holding municipal securities comply with continuing disclosures requirements such as continuing disclosure annual reports, ratings monitoring, and arbitrage rebate liability calculations and filings. Failure to meet these requirements can result in fines, restrictions on future bond sales and impacts to the issuer’s credit rating.

In July 2014, the SEC expressed the intent to pursue violations of post-issuance compliance requirements, saying that they “…[intend] to address potentially widespread violations of the federal securities laws by municipal issuers and underwriters of municipal securities in connection with certain representation about continuing disclosures in bond offering documents.” The SEC subsequently ruled against a Northern California school district for errors in the district’s continuing disclosure reports, citing that those errors were in fact misrepresentations to investors.

A value-added approach to continuing disclosure & arbitrage rebate

A common approach to post-issuance compliance is as an additional administrative responsibility. But it is more akin to health insurance in that although it is compulsory, it is beneficial both to the individual and the community.

Continuing disclosure by nature is designed to provide operations-critical information updates to the investors who hold the agencies’ bonds. Thus, a comprehensive approach to continuing disclosure that is conscious of identifying opportunities for the issuing agency also provides an array of benefits to the issuer. The following are a few such benefits:

  • Improves internal reporting processes
  • Increases cost effectiveness of compliance and makes more efficient use of internal staff resources
  • Identifies bond issuance refinancing opportunities for savings on interest expense
  • Improves investor relations and market liquidity
  • Minimizes risk of penalty and non-issuance of tax opinions for new debt issuances

Compliance GraphUrban Futures Inc. (UFI) provides a comprehensive approach to compliance solutions that is grounded in compliance policies & procedures and includes ratings monitoring, arbitrage rebate, continuing disclosure, and five-year audits. UFI’s staff of experts offer full-coverage compliance solutions based on quality results with hundreds of clients since 1995 when continuing disclosure became a requirement. Clients not only rest assured that their reporting will be timely, accurate and in complete compliance with applicable regulation, but that UFI will identify the most cost-effective route for the issuer.

Those interested in learning more about UFI compliance solutions should contact James Lee at (714) 923-3565 or

Urban Futures, Inc. has been providing services to local governmental agencies for over 42 years. Recently restructured into three divisions – UFI Public Management Group, UFI Public Finance Group and Isom Advisors – UFI offers clients a growing portfolio of services and industry expertise that might otherwise be out of reach. Over 300 public agencies have benefited from partnering with UFI. UFI is based in Orange, CA with offices in Walnut Creek and Bakersfield. Visit their website at or call us at (714) 283-9334.

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