Exam Alert: SEC identifies good due diligence practices for municipal securities underwriters

On March 19, 2012, the SEC staff released a risk alert that reminds firms acting as underwriters for municipal securities of their due diligence and supervisory obligations under current rules. The alert then identifies specific examples of effective due diligence practices. Continue reading

On March 19, 2012, the SEC staff released a risk alert that reminds firms acting as underwriters for municipal securities of their due diligence and supervisory obligations under current rules.  The alert then identifies specific examples of effective due diligence practices.  Practices identified include:

-Clear explanation of regulatory requirements and firms’ expectations: detailed written policies and procedures that make clear how to conduct due diligence and include relevant rules and guidance

-Commitment committees: firm-wide, senior level committees that provide an additional step of review for various underwritings

-Diligence checklists: checklists to record which due diligence steps have been taken

-Due diligence memoranda: memos prepared by public finance bankers that describe any due diligence concerns and provide a review of the final official statement

-Outlines for due diligence calls: outlines prepared by underwriters’ counsel or issuer’s counsel that address disclosure concerns identified during due diligence calls

-On-site examination activities: on-site examinations to check the issuer’s fiscal prospects

-Recordkeeping checklists: checklists to make sure records of due diligence activities are made and properly stored

Source: SEC Release 2012-48

This alert applies to the Series 7, Series 79, Series 24, and Series 62.