The MCDC Initiative: Round One Is Underway

The clock will strike on the first self-report deadline under the SEC's Municipalities Continuing Disclosure Cooperation Initiative (the "MCDC Initiative") at 12:00 a.m. EST on September 10, 2014. Under the MCDC Initiative, underwriters and issuers of municipal securities may choose to self-report any potential, materially inaccurate statements relating to prior compliance with continuing disclosure obligations in exchange for a recommendation of "favorable settlement terms." Under the terms of the original SEC announcement, the deadline for both underwriters and issuers was September 10. But the SEC announced a set of modifications to the MCDC Initiative on July 31, 2014, including a shift to a piecemeal approach whereby the deadline for underwriters went unchanged but the deadline for issuers was moved to December 1, 2014. This decision was admonished in an August 28, 2014 letter from U.S. Representatives Steve Stivers and Krysten Sinema to SEC Chair Mary Jo White, in which they "urge[d] the SEC to extend the self-reporting deadline for dealers to match the deadline for issuers" because there "simply is no justification for separate reporting deadlines."

Also on July 31, 2014, the SEC modified the structure for penalties imposed on underwriters, and adopted a tiered approach based...