Municipal bonds, SEC, anti-fraud & Y2K ...
CITIES REQUIRED TO PRESENT Y2K REPORT CARDS
05/20/99 - American City & County -BY Margaret Simmons
Disclosure requirements instituted by the Securities and Exchange Commission and the Governmental Accounting Standards Board (GASB), as well as the audit issues raised by the American Institute of Certified Public Accountants (AICPA), have created a disclosure crisis for local government finance officials. Indeed, the Y2K problem is changing the way in which government accountants and auditors are required to report the financial activities of their particular entities.
A Y2K meltdown could wreak havoc on many government operations outside of
information technology systems. For example, local governments could feel the effects
in everything from transportation systems to elevators-anything that might contain date
recognition features that could cause machinery to cease working when it can no longer
properly interpret dates.
GASB's technical bulletin Released in October 1998, GASB Technical Bulletin 93-1, "Disclosures about Year 2000 Issues," requires specific disclosures in financial statements dated after Oct. 31, 1998. Financial statements for periods ending after Dec. 31, 1999, do not have to meet the requirement unless systems and other equipment are not Year 2000 compliant as of the report's balance sheet date.
The Technical Bulletin requires the government to describe any pertinent Y2K issues
and any significant resources committed to make critical computer systems and
equipment Year 2000 compliant. It also re-quires that the government declare the
phase or stage it is in regarding its solution to the Y2K problem ...
Securities and Exchange Commission releases The SEC's Interpretive Releases Nos. 33-7558 and 34-40277, "Disclosure of Year 2000 Issues" and "Consequences by Public Companies, Investment Advisors, Investment Companies and Municipal Securities Issuers" require issuers of securities to disclose Year 2000 issues. They cover government issuers, as well as public companies, investment advisors and investment companies that are issuing securities.
Congress exempted municipal securities offerings from the registration requirements and civil liability provisions of the Securities Act of 1933. It also exempted them from a mandated system of periodic reporting under the SEC Act of 1934. However, it did not exempt those securities from the antifraud provision of those acts. And that is where the Y2K disclosures come into play.
The antifraud provisions prohibit misleading statements in the offering, purchasing or selling of municipal securities. In addition, in recent years, the antifraud provisions as to municipal securities issues have been interpreted with increasing broadness. Basically, the provisions require all governments that issue securities to consider Year 2000 issues in preparing all disclosure documents, whether official statements, disclosure covenants that provide for continuing disclosure, or any other information that is reasonably expected to reach investors and the trading markets ...
Information on disclosure requirements can be found at
gfoa.org; at aicpa.org; or at gasb.org.
Full article can be found here:
greenspun.com
Cheryl
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